Cybertech Global 2023: “The way we look at budgets has changed, we’re a lot more conservative”
A special panel featuring the heads of Elron Ventures, Merlin Ventures, YL Ventures and Discount Tech looked into current cyber investment trends
Mandi Kogosowski
| 01/02/2023
Photo by Gilad Kavalerchik
What are the latest trends when it comes to investment in cyber, especially when considering the fact that money isn’t flowing as much these days as it has just over a year ago? A special panel discussion delved into this topic on the main Cybertech Global 2023 stage this morning.
Moderated by Aron Heller, the panel featured Elik Etzion, Managing Partner of Elron Ventures (Israel); Seth Spergel, Managing Partner of Merlin Ventures (USA); Yoav Leitersdorf, Managing Partner of YL Ventures (USA); and Dr. Guy Navon, CEO of Discount Tech (Israel).
“This is the first year we can see budgets freezing or decreasing. Cyber security isn’t going anywhere, but I think that this year CISOs will be looking to optimize their budgets,” said Etzion. “CISOs won’t go for a ‘nice to have’ like we had in the past decade, but only for the ‘must have’, and I would advise them to go wide rather than go deep.’
‘In some ways, for us this situation is an opportunity,’ said Spergel. “You see a flocking towards the government market when the commercial markets start suffering a bit. Our startups are commercially focused, but we think that in the long run, federal makes a lot of sense.”
“We currently have about 8 seed-stage companies in our portfolio, most in stealth,” said Leitersdorf. “I would advise them to have cash for at least 30 months. The way we look at budgets has changed since 2021. We’re a lot more conservative, focus a lot more on metrics, The thresholds have become much higher and harder for the startups to achieve."
Heller asked the panel whether the backlash some Israeli tech leaders have had against the government’s so-called judicial reform might impact investment in Israel. All participants said that it would not.
“From the business point, I think that the cyber ecosystem isn’t different than other parts of the tech system. When you have a tech edge, you will continue, irrelevant of Israel’s economic position and political situation, I believe in that,” said Navon.
“We believe in Israel and its cybersecurity and ecosystem. It’s important for Israel and the world that we export this know-how,” added Etzion.
For Leitersdorf, ‘It’s business as usual. We’re not investing in governments, we’re investing in people."
To conclude the session, Heller asked the participants about projections for 2023.
Navon: “Our basis is that 2023 will be worse for investment than 2022. But we see many portfolios with companies that have similar products, so we believe 2023 will be the year the market will clean itself.”
Leitersdorf: “People seem to have the impression that 2021 was normal and so 2022 was abnormal – but 2022 was great! 2021 was the actual anomaly, it’s not coming back. I feel that 2023 might be similar to 2022, I don’t think it will change anything on the scene.”
Spergel: “There is going to be a bit more rigor around how people are running companies, but you saw in 2022 that the strong companies were able to keep going, that the right leaders knew what to do. We set realistic expectations for the companies we invest in, and I think we’re in a pretty good spot with them.
Etzion: “I would advise startups that aren’t doing so well to pursue a dual strategy: try to raise funds, but also build relations with potential M&A buyers, this market is very active. Sometimes this is the right decision.”
A special panel featuring the heads of Elron Ventures, Merlin Ventures, YL Ventures and Discount Tech looked into current cyber investment trends
Photo by Gilad Kavalerchik
What are the latest trends when it comes to investment in cyber, especially when considering the fact that money isn’t flowing as much these days as it has just over a year ago? A special panel discussion delved into this topic on the main Cybertech Global 2023 stage this morning.
Moderated by Aron Heller, the panel featured Elik Etzion, Managing Partner of Elron Ventures (Israel); Seth Spergel, Managing Partner of Merlin Ventures (USA); Yoav Leitersdorf, Managing Partner of YL Ventures (USA); and Dr. Guy Navon, CEO of Discount Tech (Israel).
“This is the first year we can see budgets freezing or decreasing. Cyber security isn’t going anywhere, but I think that this year CISOs will be looking to optimize their budgets,” said Etzion. “CISOs won’t go for a ‘nice to have’ like we had in the past decade, but only for the ‘must have’, and I would advise them to go wide rather than go deep.’
‘In some ways, for us this situation is an opportunity,’ said Spergel. “You see a flocking towards the government market when the commercial markets start suffering a bit. Our startups are commercially focused, but we think that in the long run, federal makes a lot of sense.”
“We currently have about 8 seed-stage companies in our portfolio, most in stealth,” said Leitersdorf. “I would advise them to have cash for at least 30 months. The way we look at budgets has changed since 2021. We’re a lot more conservative, focus a lot more on metrics, The thresholds have become much higher and harder for the startups to achieve."
Heller asked the panel whether the backlash some Israeli tech leaders have had against the government’s so-called judicial reform might impact investment in Israel. All participants said that it would not.
“From the business point, I think that the cyber ecosystem isn’t different than other parts of the tech system. When you have a tech edge, you will continue, irrelevant of Israel’s economic position and political situation, I believe in that,” said Navon.
“We believe in Israel and its cybersecurity and ecosystem. It’s important for Israel and the world that we export this know-how,” added Etzion.
For Leitersdorf, ‘It’s business as usual. We’re not investing in governments, we’re investing in people."
To conclude the session, Heller asked the participants about projections for 2023.
Navon: “Our basis is that 2023 will be worse for investment than 2022. But we see many portfolios with companies that have similar products, so we believe 2023 will be the year the market will clean itself.”
Leitersdorf: “People seem to have the impression that 2021 was normal and so 2022 was abnormal – but 2022 was great! 2021 was the actual anomaly, it’s not coming back. I feel that 2023 might be similar to 2022, I don’t think it will change anything on the scene.”
Spergel: “There is going to be a bit more rigor around how people are running companies, but you saw in 2022 that the strong companies were able to keep going, that the right leaders knew what to do. We set realistic expectations for the companies we invest in, and I think we’re in a pretty good spot with them.
Etzion: “I would advise startups that aren’t doing so well to pursue a dual strategy: try to raise funds, but also build relations with potential M&A buyers, this market is very active. Sometimes this is the right decision.”
