“I didn’t really have a choice,” says Ben Bernstein, the former CEO and co-founder of Twistlock (acquired by Palo Alto Networks in 2019) and the CEO and co-founder of a new cybersecurity startup that is still in stealth. “Building a start-up from the ground up is a roller coaster ride, in more ways than one. Once you get off, you want to get right back on again.”
Our data on funding trends in the Israeli cybersecurity ecosystem in 2022 shows that one-third of the startups launched last year were founded by seasoned, serial entrepreneurs with a track record of building and growing cybersecurity companies.
Considering the dramatic economic downturn of 2022, this data is surprising. These second timers have already survived the hectic, unforgiving and at times downright brutal entrepreneurial experience, some even thriving despite the challenges, so why would they willingly go through it again? We spoke to three seasoned founders from our own portfolio to gain insight into why they got back on the roller coaster and what their most important takeaways were.
We weren’t surprised that none of our founders mentioned the prestige of being a startup founder or the potential for future financial success. All three, however, mentioned their passion for building something new as being their chief motivator.
“After Twistlock, I still wanted to prove to myself that I was able to build something large and successful. There’s so much left to do in the cybersecurity space and I knew that I had to have a piece of the action,” Bernstein says.
Yoni Shohet, CEO and co-founder of Valence Security, his second startup adventure following the founding of cybersecurity startup SCADAfence (acquired by Honeywell this year), echoes that statement, and says that there’s “nothing quite like the excitement, passion and challenges that you encounter when building your own startup.”
The team-building aspect is another element that made Eran Barak, former CEO and co-founder of Hexadite (acquired by Microsoft in 2017), found another cybersecurity startup that is still in stealth mode. “It’s what I love to do—create things from scratch and make them scale, while bringing talented people together and working with them to build a robust, successful company,” he says.
Every entrepreneur wants their startup journey to end well, with either an impressive exit or as a respected category leader. Regardless of the outcome, building a second startup allows these entrepreneurs to get a head start by using tried-and-true strategies from their first startup and easily avoiding obstacles and hiccups along the way, the kind that first timers won’t see coming.
“As a first-time founder with Hexadite, I underestimated the need for a marketing function from day one,” says Barak. “Unfortunately, I wasn’t able to hire a marketing professional when our budget was tight and we were just starting out. That was a crucial lesson for us. This time, after learning firsthand how valuable marketing is for messaging, channel management, brand recognition and lead generation, marketing is a top priority.”
Hindsight offers second timers an opportunity to focus their valuable time, resources and focus on the most important elements of building a successful company in these early, volatile stages. Second timers are often psychologically ready for the startup journey, as they enter the new game with more maturity, confidence and focus—as well as the important ability to differentiate between what really moves the needle and deserves time and effort and what doesn’t.
Moving the base
Many Israeli startups are initially based in Tel Aviv, branching out to the US as it scales. From their own experience, however, our serial entrepreneurs suggest another approach.
Bernstein relocated to the US immediately after founding Twistlock in Israel and sees immense value in this approach. “That was a crucial strategy that I intend to repeat this time around. Being based in the US proved extremely useful for meeting customers, advisors and partners face-to-face, as needed.”
For Barak, the network he developed while in the US during his time at Hexadite and Microsoft served him well when building and developing his new company. As he is still based in the US, his proximity to customers is a force multiplier. “My ability to work closely with customers in the US market from day one allows us to develop our new product using real customer data and apply it to real problems at scale, which is something that wouldn’t have been possible if I wasn’t physically present in the US from the get-go.”
Tips for would-be founders
As early-stage cybersecurity investors, working with experienced entrepreneurs helps us improve our ability to guide first timers through the harrowing first steps of building their companies. We asked our founders to offer them tips from their own experiences.
“Founders should concentrate on finding the biggest, most acute problem space they can, instead of focusing on the solution itself,” says Shohet. “Customers need to be able to quickly understand why them, and why now.”
He also recommends keeping a cool head under pressure in the cut-throat cybersecurity market: “Don’t be afraid of competition, and don’t let it get to you. You’re either the first or the fifth company in your sector, but if you choose your idea wisely, at some point you’ll have strong competitors so you have to be ready to face them.”
Barak believes that the number one rule of building a strong company is building a strong team: “A good founder is a good recruiter. It doesn’t matter how strong a technologist you are, you can’t build a successful company without great people around you. Don’t rush to hire—prioritize finding the right people, as employee turnover early on is bad for morale and stability.”
Last year’s data on the rise in the number of second timers getting back on the startup rollercoaster despite the looming recession shows that building a cybersecurity startup during times of economic turmoil can have distinct upsides.
Founders can take ideation slowly, as the frantic rush of 2021’s tech bonanza has long dissipated and there’s less pressure to launch into the market before the company’s product is fully baked. Founders can spend more time building the foundations of their company, working diligently behind the scenes to secure design partners and launch when they’re ready.
Finally, the market continues to demand innovative cybersecurity solutions, as the urgency for solving the most acute security pain points is only increasing. With these factors in mind, we’re looking forward to seeing many more veteran players filling up the field.