The success has been fuelled by what one Israeli CEO described as ‘an ecosystem that feeds itself’
By Victor Ferreira, FINANCIAL POST
In 2011, Israeli Prime Minister Benjamin Netanyahu made an ambitious promise to turn a country with less than a quarter of Canada’s population and GDP into a top-five global cybersecurity power within five years.
Now, less than a decade later, Israel has far outstripped those goals: it is recognized worldwide as a cybersecurity innovation hub that continues to produce not only some of the best products and services — but the best minds.
Israel currently has 450 cybersecurity companies, some of which are publicly traded in North America, and approaching US$10 billion in exports in the sector, according to Israel Export and International Cooperation Institute chairman Adiv Baruch.
The success has been fuelled by what one Israeli CEO described as “an ecosystem that feeds itself.” The government, the education system, the military and the commercial market all work in unison to power a multi-year cycle that sees the government heavily invest and then profit from the services and the exports they’re generating internationally.
For Canada, which is looking to make a mark in innovative industries such as artificial intelligence, it’s a model that some say is worth studying.
“It’s a massive machine,” said Tyson Johnson, the chief operating officer for CyberNB, a government of New Brunswick agency working to help the cybersecurity sector grow in Canada. “That level of integration should be imitated here in Canada.”
Canadian cybersecurity firms got the chance to meet some of their Israeli counterparts last week, when an Israeli delegation visited Toronto to attend the Canada-Israel Business Forum. Many of the Israeli firms already have contracts in Canada, but with exports always in mind, expressed the need for further collaboration between the two countries.
While Canada’s cybersecurity industry has not seen anywhere near the same level of government or military co-operation, it has also lacked the same motivation that has been the driving force behind Israel’s transformation.
Geographically, Israel is surrounded by enemies. Iran, in particular, Netanyahu has said, launches cyber attacks against his country every day.
“We have a beautiful house in a dangerous neighbourhood,” said Baruch, who is the former president of Israeli cybersecurity firm Nyotron Information Security Ltd.
One of the program’s hallmarks has been the government’s emphasis on developing human capital and not just companies themselves.
The process begins at a young age — kindergarten classes involve lessons in computers and robotics. By Grade 4, students are learning computer programming and in Grade 10, they’re learning the coding and encryption skills necessary to stop hacking attacks.
The goal is to encourage them to think outside the box, Baruch said. For those who are successful and show promise, there are government-sponsored after-school programs that can advance their training before they take the next step and enter the military.
Military service is mandatory for all Israelis at the age of 18 but instead of serving as infantrymen, some are funnelled into Israel Defence Forces Unit 8200. The cyber intelligence unit which acts as an incubator where they spend three years learning on the job about how to attack Israel’s enemies and protect it from threats.
When their terms are over, they can continue their education in university; Israel was the first country in the world where students could obtain a PhD in cybersecurity as an independent discipline. Otherwise there are two choices, according to Asher Abish, the regional director for marketing and sales of ELTA Systems Ltd., a subsidiary of the government-owned Israel Aerospace Industries, which provides cybersecurity defence services.
“They go out from the military and they either join the industry or they develop their own startups,” said Abish.
If a young recruit joins a company immediately after serving in the military, the government already begins to recoup its initial investment. That person will already be contributing to Israel’s growing cyber exports while adding to the pool of talent and products the government can call on for its own defence.
But for those looking to launch their own startups, the government is still willing to double down on its initial investment. Between 2015 and 2018, Israel’s National Cyber Bureau and the Office of the Chief Scientist distributed more than US$37 million to cyber firms developing what it considered to be groundbreaking technology. In August, it booked another US$25 million in funding over three years for companies in the early stage of funding.
Israel spawned 60 new cybersecurity companies in 2018 alone. With assistance from the government, these companies have been allowed to continue to grow to a point where they’re attracting the interest of international venture capital funds. Last year, Israel’s cyber companies raised more than US$1.03 billion across all stages of funding. That accounts for 20 per cent of the total venture capital funds invested in cyber companies worldwide, second only to the U.S.
Tal Bar Or co-founded Octopus Systems six years ago and while he didn’t use any government funding to start his company, he immediately drew attention from international venture capital firms, including one based in Toronto where the company has since opened an office. Octopus focuses on developing software that fuses how companies respond to both physical and cyber threats in order to lower response time. Bar Or’s company already has contracts with Brookfield and the York Regional Police in Canada and others in Singapore and India.
In Israel, Bar Or is one of many executives hiring young talent directly out of the army. He spent five years there himself before moving on to the Israel Security Agency.
“We welcome it because it’s giving us the ability to get great people coming with experience, doing it in a large scale for a large organization and embedding them inside our company in order to have the ability to grow and be more sophisticated,” Bar Or said.
“All the Israeli companies are competing for those brains.”
Bar Or will put potential recruits, whether they’re coming from the army or from another company through a rigorous testing process that examines both their knowledge and their response time in handling simulated threats.
The transition isn’t always smooth, Abish said. In particular, IAI and Elta have to push their military recruits to focus more on development of new products and services than simply deploying them. IAI and Elta have a cyber academy which it uses to train its own recruits, Abish said. Its usefulness doesn’t end there. The company also provides its training services to any interested international parties, once again finding a way to boost Israel’s exports.
It’s the constant addition of new talent that allows IAI to continue to innovate. Abish, for instance, mentions taking the algorithms for early warning aircraft, which have systems that can detect threats from a long range and direct strikes, and incorporating them into cyber early warning systems. When young engineers and programmers are in a position to offer up these kinds of ideas, the Israeli government begins to recoup its investment.
This isn’t just done through exports, Abish said. The country’s top companies have been known to temporarily put competition aside when the government calls on them to solve an internal problem.
Asked how each company is able to put their own interests aside, Abish’s answer was simple.
“It’s Israel,” he said.
Israel’s ability to defend itself is being hampered by meddlesome judges and government lawyers, “peace” advocates, and a Byzantine bureaucracy with no interest whatsover in the nation’s security. Whoever heard of a country where the customs department would hold up a vital shipment of arms for lack of payment of customs dues by the government’s own armed forces? Madness. And countries run by loonies don’t survive.