Tough Love for Israeli Cyber Start-Ups

There’s an awesome scene in an old Michael J. Fox movie where he’s asked if he’s ever been to Italy. His clever response is this: “Wear the shoes, eat the food, never been.” Such dialogue illustrates what can happen when a country like Italy becomes a stereotypical caricature of its better-known products. Just add olive oil to the shoes and pasta, and for many observers – this is the sum of the entire Italian economy.

I mention this because the accelerating stream of cyber security start-ups from Israel now runs the risk of similar caricature. For example, I am treated several times per week to the identical tale of some eager young Israeli entrepreneur, trained in cyber warfare during military service, and now ready to unveil an innovative new cyber security solution to the world (which usually means opening a VC-funded sales office in Manhattan.)

Don’t get me wrong: Many Israeli cyber start-ups are excellent, and are showcased in our advisory work at TAG Cyber. So, my quibble is not with what they do, but rather with whythey exist in the first place. I believe that there are only two good reasons to start a company: One is to exploit a unique opportunity, and the another is to express a deeply-held belief. Let’s spend time with both options, starting with the first:

When presented with a unique opportunity, many entrepreneurs do pounce quickly and dooften succeed in creating something meaningful: In 1967, for example, a farmer named JR Simplot got the idea to offer frozen Idaho potatoes to a restauranteur named Ray Kroc. If you’ve burped up McDonald’s fries during the past half century, then you know this decision turned out well (Simplot was worth almost $4B when he died in 2008.)

As successful formulas emerge, however, like hawking fries with burgers, duplicate companies soon follow suit. Just type ‘potato companies’ into your search engine, for example, and watch all the Idaho suppliers appear on your screen. There’s nothing wrong with following a safe and successful recipe, but if someone purports to have invented the fresh idea of selling Idaho potatoes to burger chains, then remind them of Mr. Simplot.

In contrast, when an enterprise is created as an expression of personal belief, the result is less predictable. Sure – there are failed businesses from sincere founders, but the likelihood of success increases when the drive comes from within. That’s why I always ask founders of Israeli start-ups why they created their businesses. And here’s what they tell me: “I learned cyber security in the military and wanted to commercialize my learning.”

This is certainly admirable, and I sure wish more countries, including the United States, would provide such an amazing training ground for its young people in technology. This is good public policy, and Israeli citizens are correct to be proud. But all founders learn the cyber security craft somewhere. Banking, academia, retail, auditing, and even consulting provide perfectly good foundations. Even musicians find their way into our trade.

My advice to these creative young men and women from Israel is to steer away from starting every engagement by citing your military service. The story no longer resonates with buyers as fresh and creative. In fact, I am willing to say that when you tell me that you learned cyber security in the IDF or Unit 8200 or whatever – you sound redundant. And when you’re talking about any tech start-up, being redundant is the kiss of death.

My suggestion is that you instead reflect honestly, perhaps getting a little Zen, about whyyou are in business. What have you sacrificed to start the business? Who are you passionate about helping? Why should anyone care if your business fails? And by the way, creating your company because other products in your category don’t have certain features is a horrible motivation for a new business. Why is different than what.

Here’s a question from TAG Cyber that can help you self-test your motivation for founding a company: If someone were to pass a law stating that you could no longer make another penny from your business, then would this change the way you spend your time each day? Think before answering: If you would honestly continue doing exactly what you do now for the rest of your life for free, then you are on the right track.

One more tip: When you are pitching your cyber security company to anyone, it’s nice to allow that person to discover some things about you later on through their own research or learning. Finding out about your military service in the context of an on-going relationship is a nice experience for a buyer. It highlights your fine background, but also shows that you don’t wear it on your sleeve as a marketing banner.

I have no idea how many Israeli start-up founders will actually read this article, but I can assure you that in the next few days, I will start my review with some entrepreneur speaking to me from Tel-Aviv or Murray Hill, and I will start by asking why they are in business. And you can be as certain as the sun will rise tomorrow, that I’ll hear this: “I learned cyber security in the military and wanted to commercialize my learnings.”

Sigh.