The cyber market will reach $93 billion in 2017, and that investment in US cyber companies totaled $931 billion in 2013, up 41% over 2012, says Jerusalem Venture Partners (JVP) Cyber Labs partner Yoav Tzruya, moderator of the "Cyber innovation and start-up opportunities through the eyes of strategic investors" session the CyberTech 2014 conference in Tel Aviv today.
JVP, which focuses on cyber, says that the number of companies seeking investment rose by 31% in the fourth quarter of 2013, after stronger growth in the preceding two years. JVP, which has almost closed the $120 million funding for its latest fund, is a beneficiary of interest in cyber. A Cisco Systems Inc. (Nasdaq: CSCO) executive at the conference announced that the company would participate in the $60 million part of the fund that is designated for investment in cyber.
Despite the warm embrace of cyber at the conference, it is clear to everyone that it cannot last. "For years, investors avoided cyber. What has changed to cause the current romance?" asked Tzruya.
"Some will say that the romance is too much, but I think it's a good thing," replied Cisco head of investment and acquisitions in Russia and Israel Tal Slobodkin. "This is because the world has adopted a lot of new technologies in recent years and computer use has changed. These changes create options for start-ups. I'm trying to stay optimistic, but these companies should realize that the market is tough."
US Venture Partners partner Jacques Benkoski is less unequivocal, saying, "I think that the investors' romance has gone too far, because it is already too late." USVP's investments include Check Point Software Technologies Ltd. (Nasdaq: CHKP) and Trusteer.
As for the question whether company valuations were too high, the consensus was that while there is no bubble, valuations seemed unrealistic. "We're very sensitive to valuations," says Intel Capital director Merav Weinryb. "I've seen many companies hold their first financing round at a high valuation, but the question is what will the value be at the next round. I fear that a lot of companies will get stuck at the next round and hold them at declining valuations."
New Enterprise Associates partner Ravi Viswanathan agrees, saying, "In contrast to 2000, companies have real performance. It's very hard to believe in a company with high earnings multiples; you'd have to believe that the companies will dominate the market. I believe that valuations will fall."
Symantec Inc. (Nasdaq: SYMC), once synonymous with information security, realizes that that the market has changed and talks about "reimagining security". Symantec VP Information Security Group product management Samir Kapuria says that while new needs will create new technologies vendors, in the longer perspective, solutions will not come from "new and shinier technologies", but from better integration of products by vendors of general solutions".
Check Point Software Technologies Ltd. (Nasdaq: CHKP) chairman and CEO Gil Shwed agrees. Ironically, the firewall solutions company is totally absent from the government cyber initiative, including the Cyber Lab in Beersheva. Shwed's remarks may explain why. "The number of viruses rose by 87% from 2012 to 2013. Managers' natural response is to add security. But there are a lot of technologies and a lot of technology vendors. Does it work? Surveys show a 9% drop in security this year compared with the effectiveness of security systems in 2009. Today, it's harder to see the forest for the trees. Just adding technologies doesn’t work. You need a variety of vendors and technologies and to continue the merger of solutions."
Published by Globes [online], Israel business news - www.globes-online.com - on January 28, 2014
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