New York turns to Israeli innovation to become capital of cybersecurity

Innovation: The concrete jungle with an Israeli state of mind

FEBRUARY 15, 2020 15:45

FOR NEW YORK City, the financial capital of the world, cyberattacks have always posed a major threat. (photo credit: LUCA RAJNA/PROGETTI FOTOGRAFICI) — FOR NEW YORK City, the financial capital of the world, cyberattacks have always posed a major threat.

(photo credit: LUCA RAJNA/PROGETTI FOTOGRAFICI)

When it comes to cybersecurity, the State of Israel is at the forefront of global innovation.

The nation’s development into a world-renowned cyber superpower has largely been born of necessity. With cyberwarfare disregarding borders and sovereignty and no shortage of potential enemies, Israel has been subject to the constant threat of attack, and has invested in protective measures accordingly.

Defense of the digital realm has also proved to be a lucrative commercial activity. Israeli companies – whether cyber giants or budding start-ups – have excelled in a wide range of fields, ranging from defending critical national infrastructure to protecting the imminent autonomous mobility revolution.

Approximately 20% of worldwide venture-backed cyber investments flowed into the Israeli industry in 2018, reflecting Israel’s commercial cybersecurity success. There are over 450 companies currently working in the sector across Israel, according to data from Start-Up Nation Central.

As expected, Israel’s success has drawn international attention, not only in terms of investment but also to discover how to replicate the success of Israel’s innovative cyber ecosystem.

For New York City, the financial capital of the world, cyberattacks have always posed a major threat. Hackers are often motivated by the potential riches and sensitive information enclosed within the perimeter of the world’s leading financial institutions and banks.

To both secure the mammoth commercial sector and create thousands of jobs, New York City launched an ambitious $100 million public-private initiative to transform itself into the global capital of cybersecurity. The New York City Economic Development Corporation (NYCEDC), responsible for economic growth throughout the city’s five boroughs, was tasked with executing the Cyber NYC project.

“We considered a number of different partners from various cities and countries,” said Wilson Lin, founding managing director of Cyber NYC. “As we got to know the teams and the different ecosystems, our focus was making sure to bring in the best partners for this city. Perhaps it was no surprise that we ended up partnering with a number of Israeli teams.”

A visit to Israel by NYCEDC leaders in November 2018 led to the selection of Jerusalem Venture Partners and SOSA to lead two of five hi-tech programs driving New York’s future cyber industry – a cybersecurity start-up hub and a global cyber center.

Last week, JVP inaugurated the International NYC Cyber Center, a spacious new home in the trendy SoHo neighborhood of Manhattan for the most promising cyber-focused start-ups worldwide. Among the first 28 start-ups already calling the cyber center home, half were founded in Israel.

“While we were in Israel, we had the tremendous opportunity to meet those who shaped the cyber ecosystem there. We went to Beersheba and Haifa, met corporate innovation teams, JVP and universities,” said Lin. “We saw firsthand the power of intentional collaboration.

“Coming back to the United States following the trip, we were even more convinced that we were going in the right direction and this was something the city had to invest in. It made no sense to not catalyze a movement in this industry with such a tremendous opportunity.”

JVP cyber center in New York (Credit: SHAHAR AZRAN)

WHILE ATTRACTING and growing cyber start-ups in the city alone might have its merits, building a thriving citywide ecosystem was always the focus of NYCEDC’s efforts – a wide-ranging collaboration between private employers, public authorities, the city’s leading academic institutions and the financial institutions.

Accordingly, for JVP – and especially its founder and executive chairman, Dr. Erel Margalit – the International NYC Cyber Center provided the first international opportunity to export the hi-tech ecosystem model that it has developed domestically in recent years. The center also offers proof that not only are Israel’s start-ups and services sought after, but so is the country’s holistic, ecosystem-based approach to innovation.

“In order to dare and innovate, it is very difficult to be alone. Entrepreneurs, like everyone else, need a community. They might invent the greatest things but sometimes get stuck on the more trivial things. They might get stuck on the ability to get through the door of Goldman Sachs or J.P. Morgan, or make a lot of mistakes in hiring the people to scale their operations in the US,” said Margalit.

“Israel has some of the best horizontal technologies – cybersecurity, AI, computer vision, IOT and semiconducters. These are core technologies that are very important. Yet the drama today is not in the core technologies alone, but how they are intersecting with vertical markets that are reinventing themselves. The financial services need a lot more technologies to be trustworthy.”

JVP’s efforts to build innovation ecosystems started in Jerusalem, but have enjoyed significant success in Israel’s South, with the JVP Cyber Labs in Beersheba, and in the North, with the current development of an agrifood tech hub in the Galilee.

“We took the ecosystem approach, just as we do in the Galilee and Beersheba, with the idea that if New York wants to give Silicon Valley a run for its money, it needs to partner with Israel in a big way,” Margalit said. “It’s true that Silicon Valley will probably always be the US technology center, but New York has the chance to become the international technology center. Israel is a very important ingredient in that.”

The cyber center, whose launch was attended by senior officials and business leaders from Israel and New York, promises to be the first of several international centers of excellence established by JVP. The evening, headlined by celebrated actress and Goop founder Gwyneth Paltrow, also featured the launch of the Margalit Startup City brand – a new JVP initiative to establish international innovation centers and create thousands of job opportunities worldwide.

Paltrow captured many of the inauguration event headlines, promising to visit “next year in Jerusalem,” but the launch of the Startup City brand promises to be a catalyst for international expansion far from Israel’s capital.

Dr. Erel Margalit with Gwyneth Paltrow (Credit: SHAHAR AZRAN)

Margalit said JVP has already been approached by authorities from several major European capital cities, all interested in establishing similar ecosystem initiatives. Margalit adds that he will always have an extra soft spot for New York, where he lived as a student and later with his family around the turn of the century.

“Berlin is inviting us; Paris is inviting us; London, too. Israeli companies need a strong beachhead in the United States and in New York, and then in Asia eventually as well,” said Margalit. “That’s the difference between an American start-up, which is strong in America, and an Israeli start-up, which strives to be strong internationally.”

While start-ups targeting US expansion often sought to swap Israel’s so-called Silicon Wadi for Silicon Valley, New York City’s growing hi-tech scene is proving an increasingly attractive magnet for Israeli entrepreneurs. The city is currently home to about 7,800 active start-ups, compared to a total of 6,000 in Israel.

Beyond the start-up scene, huge tech companies – including Amazon, Facebook, Apple and Google – are all now moving into, or expanding their offices in, Manhattan, giving the concrete jungle an increasingly hot hi-tech reputation. The East Coast presents geographical advantages for Israeli companies, too, with less severe time-zone differences than other locations in the US.

THETARAY, A Jerusalem-born start-up focusing on big data analytics and cybersecurity, is the largest company operating in the new cyber center. Headed by CEO Mark Gazit, a renowned cybersecurity expert, ThetaRay started at JVP’s capital city offices and has emerged as a global leader in the prevention of money laundering.

“As we all know, Israel is a world leader in cybersecurity, attracting a full 20% of global investment in the sector,” said Gazit, who is leading the company through a period of rapid growth. “However, the local market is regrettably small. The US is the largest market for Israeli companies, and any Israeli company that wants to be successful knows that they must open an office there.”

New York is “much more compelling” than Silicon Valley for start-ups focusing on cybersecurity and fintech, Gazit added, with the majority of financial institutions, government agencies and industrial organizations located in close proximity along the East Coast.

As well as offering a “very good landing spot” for wider North American operations, ThetaRay now aims to secure additional contracts with American banks from its new Manhattan home.

With offices in New York, Mexico, the United Kingdom and Israel, the company’s diverse mix of cultures offers a winning combination, Gazit believes.

“It is important to us that we enjoy the best of both worlds, maintaining our Israeli chutzpah and innovation while leveraging the scale, market opportunity and access to talent that we have in the US,” he said. “For us, being part of Margalit Startup City and the JVP International New York Cyber Center in the heart of New York City is a dream because it combines global reach, access to the US market and Israeli innovation, all in one place.”

Margalit emphasized that the West Coast remained the ideal destination for Israeli start-ups while “technology just served technology companies.” Today, however, “when technology is now serving every walk of life,” he cites far greater business opportunities along the East Coast.

“From a cultural standpoint, there is a lot going on; and a lot of the creativity in New York around culture and music has an affinity to Israel in different ways,” said Margalit. “Young people are not just horses that work and sleep. They need to imprint their creative selves in the cities in which they are involved.”

The author was a guest of Jerusalem Venture Partners at the International NYC Cyber Center.