It’s no secret that cybersecurity is a growth industry today – unfortunately, as hackers seem to be a step ahead of solutions constantly. The old models of cybersecurity do not seem to be working well, and there are many new challenges, including preventing ATP attacks on SCADA and IoT installations.

What’s needed to defend systems is new, innovative thinking – the kind of thinking you get with a start-up. Investors around the world realize this, which could be one reason investments in Israeli cybersecurity start-ups rose significantly in 2016, according to a free new report by Start-Up Nation Central, which seeks to tell the story of Israeli start-ups to the world.

According to the report, cybersecurity start-ups saw Round A investments rise in 2016 by 44% over a year earlier, indicating that investors were becoming more aware of the opportunities in Israel. Also, of the 65 start-ups founded in 2016, a quarter successfully raised a Series A round or seed funding, with an average investment of $1.6 million each. Overall, 2016 set a record for capital raised among Israeli cybersecurity start-ups, with a total of $581 million raised, 9% more than in 2015 – second only to the amount raised by American cybersecurity firms during the year, the report showed.

Cyberdefense’s future: Self-driving vehicles and IoT

That investors see Israel as a hotbed of innovation is evidenced by the growth in “new” applications of cybersecurity technology – in the IoT and Automotive Security sector, both of which grew significantly in 2016. Fourteen new companies were founded in 2016 to deal with the new threats in these advanced areas, where risks are set to become even more acute, as billions of IoT devices come on-line in the next few years, while self-driving cars become more advanced and ready for deployment.

Another area of innovation is in the OT/ICS security subsector, which protects OT, SCADA, critical infrastructure networks and industrial control systems. Four major investments netted $55 million for companies in this subsector. Another opportunity for Israeli firms was in companies offering solutions for automated security operations, where seven companies raised $43 million in 2016.

Seeking the Silver Bullet that beats the Golden Rule

2016 was a turbulent year for cybersecurity, with numerous breaches that compromised billions of user accounts, put tens of billions of dollars at risk, and possibly even influenced world politics. With such a successful year under their belts, it is unlikely that they will scale back their operations; quite the opposite. There’s a golden rule in cybersecurity: The hacker has to figure out the defenses only once, but the defender has to be successful every time. So far, that equation has worked out for hackers, as the experience of the past few years has shown.

Commerce, business, and online activities must continue – and grow, and as a result, companies everywhere are seeking the “silver bullet” that will for once and all end the malware threat. Is such a solution available? We don’t know yet – but without question, if it is possible, it will emerge in an ecosystem that is already well-experienced in developing technology to fight hackers, like that of Israel’s. For Israeli cybersecurity start-ups that bring fresh, new ideas to the table, this represents an important opportunity – and investors seeking opportunities for themselves would do well to pay attention to the cybersecurity innovation emanating from Israeli start-ups.

Download the report here.

Nir Falevich is the Cybersecurity Sector Lead at Start-Up Nation Central. His aim is to connect business and government leaders with the people and technologies in Israel’s Cybersecurity sector that can solve the most pressing challenges. Prior to his role as a research analyst at Start-Up Nation Central, he was Business Intelligence Developer at Ginger Software, a US and Israel-based ed-tech software company. Prior to that, Nir served in several positions in IDF’s Technology & Intelligence Unit 8200. Nir holds a B.A. in Philosophy, Political Science and Economics (PPE) from the Hebrew University.

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