It’s been a good month for Israeli cyber funding. Will it continue to exceed expectations?
Marking the second funding round for an Israeli industrial cyber security company in the span of a month, Herzilya-based CyberX announced on Tuesday the close of their Series A funding round, bringing in $9 million in new financing.
Leading the round was Flint Capital, with participation from former investors Glilot Capital Partners, Shaul Shani’s Swarth Group, Leon Recanati GlenRock, and Gigi Levy-Weiss, as well as newcomer ff Venture Capital.
Co-founded at the end of May 2013 by Boston-based CEO Omer Schneider and CTO Nir Giller, who acts as the general manager at their headquarters and R&D in Israel, CyberX develops solutions for the industrial sector, working with a wide range of clients in the energy, water, manufacturing, transportation, chemical, and pharmaceutical industries. Including their May 2014 seed round that got the ball rolling with $2 million in the bank, this new cash injection brings them to $11 million in funding on record. They had previously taken part in UpWest Labs’ Silicon Valley accelerator before settling in the Boston area.
Protecting critical infrastructure
Their XSense platform offers a dashboard for managing alerts, giving their clients greater visibility and control of their operations. They utilize machine learning and modeling to detect attacks, running in the background in real time to help maintain continuity while providing security.
“Basically it’s a solution for every industrial environment,” Giller told Geektime, describing their service. “CyberX developed a solution for securing industrial environments that is based on Industrial Finite State Machine technology, which is the company’s proprietary technology for providing unprecedented detection capabilities for industrial environments. In order to be able to protect them, you need a holistic solution which can address every potential method of attack.”
In the years since news broke of the Stuxnet virus that attacked Iran’s centrifuges at Natanz, there has been an increasing awareness of the risks to industrial infrastructure.
“The entire industrial world is undergoing a major revolution where the technology has many advantages for control systems and there’s a lot of new connectivity and solutions for productivity for every industrial environment,” says Giller, “But with this advancement comes the cyber security risks, and this is what the company is solving.”
Giller says that attacks against infrastructure are on the rise and that, “We see the expertise required by attackers are becoming more common every day,” referring to how attacks on infrastructure are no longer a game of state actors.
One of the weakest points that Giller points out in the industrial infrastructure sector is the operational process monitoring controllers. If an attacker, again like in the case of Stuxnet where the virus attacked the PLCs on the centrifuges unbeknownst to the Iranians, can trick a monitor into believing that a device is working normally when it is working too fast, then they can do serious damage over time and the home team is none the wiser.
The addition of hi-tech controllers into the industrial process presents new challenges for the teams managing the facility or infrastructure. Criticism of the industry has mainly been directed at their slow rate of adoption in bringing in defensive measures to guard against attackers.
Giller is more optimistic about the understanding of the need for security in the industry, telling Geektime that, “Everyone is aware of the problem. It’s a question of providing them with the right solution, which is definitely innovative. Security is a gap in the industry and everyone understands that we need a leap forward in industrial IoT security.”
So far, they seem to be making progress, working with dozens of clients in North America, Europe, and the APAC region. The company’s research has also been recognized by the Department of Homeland Security, a body that has a clear interest in bringing better protection to domestic infrastructure.
Moving forward post-funding, Giller says that they are planning on ramping up their sales teams and bringing on more support staff to aid in the sales and deployment processes.
The infrastructure security space has been heating up, both in terms of the developing technology as well as the funding. In July, Indegy raised a $12 million Series A to push their expansion in the market. The one upside of the tardiness of the industrial sector to bring on security solutions is that there should be more than enough market space for these two startups, unlike some other parts of cyber which are fairly crowded.
Riding the cyber funding wave
Speaking with numerous investors, they tell Geektime that they are beginning to cool to the cyber sector, fearing a bubble. However the funding to cyber does not seem to be slowing down quite yet. In the past month, Geektime has reported on at least five funding rounds in cyber, and there have been three exits of Israeli companies, with CloudLock being sold to Cisco for $293 million and the one-year-old Fireblade going to StackPath for another $10-20 million. Controlling shares of vehicle security startup Arilou Technologies sold to NNF for an undisclosed sum, but you get the drift.
How long this trend of respectable to great funding and buyouts for Israeli cyber startups will continue is anybody’s guess. But even when a slow down finally does rear its head, we are unlikely to feel a jolt. Solid security companies that offer solutions and not just features will keep getting funded, even if other sectors start to feel their evaluations fall. The demand for security services is only on the rise as a greater global awareness of hacks has led the public and companies to expect better protection from attacks.
What will be interesting to watch is how the industry begins to diversify, addressing different needs that have been underserved. In developing solutions for industrial security and critical infrastructure, companies like CyberX and Indegy are creating new opportunities and should be a pleasure to follow as they grow.