Made in Israel: Startup Nation’s cyber sector draws billions as AI reshapes security

(Oct. 21, 2026 / JNS)

Israeli cybersecurity companies raised roughly $4.3 billion through the first three quarters of 2026, according to preliminary data from IVC-LeumiTech.

The figure represents roughly 39% of all Israeli tech funding, which totaled $11 billion over the period, up 50% from a year earlier. Not only is the slice of the pie sizable, but companies and investors are noting that money is increasingly flowing to address one industry pain point: securing artificial intelligence.

As capital continues to flow, Israel’s role in providing solutions for the next stage of AI is becoming clear. Pinpoint Search Group, which helps with industry recruitment and tracks funding rounds, counted $12.7 billion globally in cybersecurity capital for the first three quarters of the year. The datasets are not directly comparable, but IVC’s figure suggests Israel accounts for a substantial share—roughly a third by simple division.

The reason may lie in new kinds of risk emerging as enterprises embrace the technology.

Israeli solutions for global challenges

Consider a company that lets an AI assistant read customer records to answer billing questions. The same access could expose those records or trigger actions no one approved if the assistant is manipulated or corrupted.

Security companies can use AI to defend networks, or they can secure AI systems themselves. Several major funding rounds have backed companies expanding protection for the latter and the data they access.

Ofer Schreiber, senior partner and head of the Israel office at YL Ventures, which specializes in cybersecurity investment, told JNS in written responses that the shift is visible in his firm’s pipeline.

“Our data shows that security for AI is the largest category of new cyber companies this year by a clear margin,” he said.

Cyera, a data security company, illustrates that investment thesis. It argues that enterprise security was built for people and applications, not for autonomous software that uses identities, calls tools and acts at machine speed. In September, it announced a $400 million extension of its Evolution Equity-led Series G from the growth equity unit of Goldman Sachs Alternatives.

Cyera says its Agent Guardian product already tracks AI agents’ tool calls, database queries and actions. Its $1 billion acquisition of fellow Israeli company Oasis Security, announced in July and completed in September, aims to unify identity and data security and build “the trust infrastructure for AI.”

Another example is Zenity, which intends to “secure the era of 1 billion AI agents.” It announced a $125 million Series C in August and describes its approach as governing what an agent is permitted to do before it acts. Together, these megarounds signal where investor confidence is headed and the role Israel could play in enterprise AI as companies seek to integrate the technology safely into their workflows.

Cyera had not provided answers to JNS’s questions by publication. Zenity did not respond to requests for comment.

Why Israel?

The talent pipeline in Israel from soldier to founder is well documented. Many Israeli founders start with years of hands-on cybersecurity experience in the IDF, in both defensive and offensive operations, and then move into security companies that previous generations of Israeli founders built and scaled.

“From an investor’s perspective, that means teams who understand both the attacker and the enterprise buyer from the start,” Schreiber said. “The concentration of that talent and accumulated experience in building category-leading security companies in one small country is very hard to match anywhere else in the world.”

The results back him up. This year has seen the completion of historic acquisitions of larger companies, not just the funding of new ones. In the first three quarters of 2026, Google completed its $32 billion acquisition of Wiz, and Palo Alto Networks completed its $25 billion acquisition of CyberArk in February. Both deals were announced in 2025.

This month, Proofpoint agreed to acquire Varonis, an Israeli-founded data security company, for about $6.3 billion, while CrowdStrike is in advanced talks to buy Orion Security for about $500 million, in what would be its seventh acquisition from Israel. Together, they suggest that the remainder of the year could see activity similar to that recorded in the first three quarters.

Younger companies are raising funds and being acquired as well. Rein Security announced a $25 million Series A in October, and Pluto Security emerged from stealth with $42 million in total funding. Activity at earlier stages shows that vendors globally can look to Israeli solutions, however mature, as new categories take shape.

First-time founders and the early-stage bar

There has also been a notable change in the founders themselves. Whereas Israeli founders in the past were known primarily for their technological depth, today’s founders are increasingly general company builders and more business-oriented.

“This evolution is very attractive for global VCs, which are aiming to partner with the most ambitious founders in each category, who have the potential to build significant companies,” Schreiber said.

While investors still back newcomers, the standards are changing, with investors increasingly expecting paying customers or a product proven in real enterprise environments far earlier, he said. This means the first 18 months are more critical for this generation of cyber founders than in previous eras.

JNS reported in March that valuations for the most competitive pre-seed startups were up 17% to $13.5 million, but IVC subsequently reported that pre-seed through Series A funding across Israeli tech fell in the second quarter, with mid- and late-stage rounds capturing 83% of capital. That figure covers all Israeli tech, not only cybersecurity.

The booming numbers coming out of Israel’s cybersecurity sector may therefore disguise a different, more delicate race for capital among younger companies facing higher barriers, with the majority of capital going toward mature companies that scale independently or pursue an acquisition.

Does the value stay in Israel?

Large technology transactions do not necessarily preserve employment at the companies involved. CrowdStrike’s agreement to acquire XM Cyber’s intellectual property, announced in July, excluded its revenue and customers. Calcalist reported that only 50 of about 300 Israeli employees remained at the company.

Schreiber called the deal unusual: Germany’s Schwarz Group bought XM Cyber in 2021, and CrowdStrike is now acquiring only the intellectual property from Schwarz. He said he does not see it as reflecting how CrowdStrike, which has bought six Israeli companies, values R&D in Israel, and argued that each exit can give birth to the next wave of founders.

“Every acquisition in Israeli cybersecurity feeds the next generation of companies,” he said.

For those watching Israel’s cyber activity from the outside, perhaps the best test of its health is its independence.

“The indicator I’d watch most closely is our ability to grow real category leaders in Israel,” Schreiber said. “Companies that grow into independent leaders anchor an ecosystem for decades, through the talent they develop and the founders who come out of them.”

Funding totals have dominated headlines throughout 2026 and demonstrate investor confidence in Startup Nation, particularly its cyber sector. The next challenge will be whether Israel can turn a couple of record-breaking quarters into companies that lead their markets for years to come.