#United States #Cybersecurity #San Francisco #YL Ventures #Israeli Cyber Startups

Major Shift in Israeli Cyber Startup Funding in 2025

A recent report from YL Ventures highlights a significant transition in the funding landscape for Israeli cybersecurity startups in 2025. This year marks a notable milestone: global venture capital has outpaced domestic investment for the first time. Since its inception ten years ago, YL Ventures’ annual "State of the Cyber Nation Report" has tracked the fluctuating trends in the cyber market, and the 2025 edition reveals impressive growth acceleration in various sectors of this industry.

Key Insights from the Report

The report indicates that Israeli cybersecurity companies saw funding rounds total $4.4 billion in 2025, a striking achievement reflective of a vibrant ecosystem. Notably, U.S. venture capitalists (VCs) became the dominant force in funding at all stages, leading 44 seed rounds compared to 35 led by Israeli counterparts. Moreover, 13 seed rounds were co-led, signifying a collaborative effort between local and global VCs.

"Israeli cybersecurity entrepreneurs are evolving, focusing on robust market strategies rather than rapid exits. This evolution indicates a maturing landscape, where startups are not only creating superior technology but also crafting category-defining companies capable of global scale," shared Or Salom, Analyst at YL Ventures.

Record Early-Stage Activity

2025 has proven to be a landmark year in early-stage funding, witnessing a remarkable 97% increase in seed rounds compared to 2023. In total, 71 seed funding rounds were executed—the largest number recorded to date, which represents a nearly 130% rise over the past decade. Additionally, the number of Series A rounds climbed to 33 and there were 17 Series B rounds. The trend highlights an environment where investors exhibit increased confidence in early-stage ventures.

Homegrown Consolidation

Within the domestic market, Israeli companies are showing a strong inclination to consolidate their holdings. During 2025, 12 local startups were acquired by established Israeli firms, an indicator of a maturing landscape focused on building robust platforms. Noteworthy acquirers include industry leaders like Check Point and Orca Security, enhancing the prospects for industry consolidation.

Major Funding Rounds Set New Records

Several enterprises made headlines with significant rounds of funding. Notably, Cyera raised a staggering $540 million in Series E funding, while Armis followed closely with $435 million. Cato Networks and Island also attracted extensive investments, underscoring the appetite for growth in the sector. The increased size of rounds captures the ambition of cybersecurity startups, pushing for innovations that redefine industry standards.

Emerging Investment Categories

The report identifies leading funding categories, with security for artificial intelligence taking front stage in the seed rounds. Notably, 12 companies focused on AI security were funded, highlighting an evolving industry that recognizes evolving cyber threats. Vulnerability and risk management dominated the landscape with 20 funded companies, demonstrating the pressing need for effective security solutions.

A Decade of Growth

From 2015 to 2025, the Israeli cybersecurity sector experienced an impressive funding surge of more than 500%, from $689 million to $4.4 billion. The average amount of seed funding rose considerably by over 230%, from $2.9 million to $9.6 million. As the data evolves, it confirms a consistent rise in both the quality and quantity of investment in the sector.

High-Profile Exits Validate Market Strength

The landscape has also seen high-profile exits that affirm the robustness of the Israeli cybersecurity sector. Google’s acquisition of Wiz and Palo Alto Networks' acquisition of CyberArk further emphasizes the momentum and maturity within the industry. Industry leaders recognize the formidable capabilities of Israeli companies, thus validating their market potential.

Conclusion

Yoav Leitersdorf, Managing Partner at YL Ventures, emphasizes the undeniable progression in the industry, noting, "Israeli cybersecurity now operates at a scale and pace that has never been seen before. The key question has shifted from how much growth is possible to how rapidly these companies can scale."

The complete YL Ventures "State of the Cyber Nation 2025" report will be published on January 7, 2026, with insights into current trends and future expectations in cybersecurity funding.