YL Ventures To Devote $400 Million Fund To Israeli Security Companies

Venture capital firm YL Ventures is doubling down on its support for Israeli security companies with a new $400 million Fund V that will invest specifically in such companies. The money will be used in what the company says is the largest seed fund ever raised for cybersecurity. The fund will invest in founds of 10 startups three times per year.

“We only invest in Israeli seed stage cybersecurity companies,” explained John Brennan, a partner in YL Ventures with offices in Mill Valley, California and Tel Aviv, Israel. Brennan said that YL Ventures is deeply involved in the operations of the companies in which they invest.

“For us as investors, what our key differentiators are is you’d like to really work deeply in the weeds doing operational support for our founders, and a lot of them have to go to market and that’s why we have a presence here in the US.”

Brennan said that the focus on security companies is tied to the direction of the market. “We’re observing trends in the market, from the business perspective, so business drives where the market is going,” Brennan said, “And then very often security is an afterthought or kind of a reaction to link where a lot of these trends are pushing the industry.”

“We would argue that things are getting more complex and that’s really why we’ve decided as a firm to double down and triple down on a couple of examples.”

Brennan said that a major factor in this growing complexity is the cloud. “But very few of these macro trends are forcing enterprises and small businesses to think more about data security and risk associated with that,” Brennan said. “So it’s no longer just that, the big businesses think of that as their oil and their ability to generate revenue and monetize it. But there’s a lot of sensitive data, it’s sprawled across the organization, and what you end up having is actually a pretty complex ecosystem.”

No Silver Bullet

“You’d have security stakeholders, IT stakeholders, engineering stakeholders, privacy stakeholders, so lots of different parts of the organization thinking about where the risk associated with this data is, and the more complex the environments get, and the more strong and diverse those data types become, the more opportunity there is for startups and for data security that the place will focus in and it’s probably not an area with a silver bullet.”

The lack of a “silver bullet” means that organizations will find that they will need to bring in small specialized companies that can help them mitigate the risks associated with their sensitive data.

Brennan said that the expanding complexity coupled with the what he calls sprawl in the cloud also tends to have businesses trying to use legacy solutions that don’t translate well to the cloud. The result is that organizations frequently don’t even know where their data is, and they’re finding that they can’t protect what they can’t see.

To make matters worse, Brennan said, even the best tools for protecting that sensitive data degrade over time.

“You need to think about best of breed solutions,” Brennan said. But he added that because security is so dynamic, you must cannot believe in any sort silver bullet. Security, he said, will always be complex.