North American VCs Flood Israel's Cyber security Scene as $32 Billion Wiz Acquisition Reshapes Industry

Foreign Investment Surge Prices Out Local Investors in Wake of Record-Breaking Google Deal

North American venture capital firms have dramatically increased their investment in Israeli cybersecurity startups since Google's $32 billion acquisition of Wiz earlier this year, creating an unprecedented funding boom that has simultaneously priced out local Israeli investors and reshaped the global cybersecurity investment landscape.

The surge in foreign capital has fundamentally altered deal dynamics in Israel's cybersecurity sector. According to industry data, North American investors now participate in more than half of all Israeli cybersecurity deals since 2023, while Israeli VC participation has been steadily declining since 2019. This shift has created what industry insiders call "the Wiz effect" – a phenomenon where the record-breaking acquisition has dramatically raised expectations and valuations across the entire ecosystem.

The Billion-Dollar Catalyst

Google's acquisition of Wiz in March 2025 for $32 billion marked not only the largest exit in Israeli history but also Google's largest acquisition to date. The deal has served as a powerful validation of Israeli cybersecurity capabilities, demonstrating that Israeli startups can achieve exits of unprecedented scale.

"It really is the Wiz effect," said Brian Sack, partner at Tel Aviv-based TLV Partners, according to PitchBook. "Everyone saw how big an outcome Wiz became in such a short period of time, and overnight ambitions grew very, very quickly."

The acquisition has created a ripple effect throughout the industry, attracting major corporations and private equity funds seeking their own "Google-like" acquisitions in the Israeli cybersecurity space.

Record-Breaking Investment Surge

The numbers behind Israel's cybersecurity dominance tell a compelling story. Israeli cybersecurity companies raised $4 billion across 89 funding rounds in 2024 – more than double the $1.89 billion raised in 2023. This dramatic increase represents funding equal to 40% of the total U.S. cybersecurity market, even as European and Asian markets contracted.

The growth has been particularly pronounced in early-stage funding. Seed activity reached record levels with 50 seed rounds totaling $400 million in 2024, while global VC seed investments in Israeli cybersecurity startups more than doubled from 10 rounds in 2023 to 22 in 2024.

Growth Stage Explosion Drives Valuations Higher

Perhaps most dramatically, Series C+ rounds experienced explosive growth, with 16 rounds in 2024 raising a total of $2.9 billion – a 300% increase from the $888 million raised in 2023. This late-stage funding surge reflects the maturation of Israeli cybersecurity companies and their ability to scale globally.

The sector's performance has been remarkable given broader market conditions. Despite ongoing regional conflict and global economic uncertainty, Israeli tech startups raised $9.3 billion in the first half of 2025, marking a three-year high and representing a 54% increase from the previous six months.

Local Investors Feel the Squeeze

The influx of foreign capital has created significant challenges for Israeli venture capital firms, which are increasingly being priced out of top deals.

"Founders know that the American VCs will give much more capital and a higher valuation," said Eyal Bino, founding partner at 97212 Ventures. "A GP friend of mine at a high-quality Israeli VC told me 'I don't even see the top layer of deals anymore; they just go directly to Sequoia or Andreessen. They skipped us.'"

This pricing pressure has compelled some experienced Israeli investors to completely overhaul their strategies. Yoni Heilbronn, managing partner at IL Ventures and a veteran of the Israel Defense Forces' elite Unit 8200 cyber unit, explained the difficult calculus facing local VCs.

"We may have a perfect background, but it doesn't really make sense to go into these crowded areas," Heilbronn told PitchBook. Rather than backing lower-quality companies in cybersecurity, he has shifted focus to other verticals like supply-chain technology, while noting other Israeli VCs are moving toward fintech and AI.

Ecosystem Transformation Beyond Funding

The Wiz acquisition has catalyzed broader structural changes in Israel's cybersecurity ecosystem. The deal has particularly benefited Wiz's main competitor, Orca Security, as many clients preferring independent providers seek alternatives to Google-owned solutions.

AI Security Emerges as Next Frontier

Israeli startups are increasingly focusing on AI security, developing both AI-powered cybersecurity platforms and dedicated tools to secure AI systems themselves. Companies like Zenity, Noma Security, Prompt Security, and Pillar Security are building solutions for GenAI identity management, permissions, and misuse prevention.

"AI security is not a future concern, it is a current market," according to Startup Nation Central's analysis. "Israeli startups are advancing on two fronts by integrating AI into cybersecurity platforms and developing dedicated tools to secure AI systems themselves."

Geopolitical Resilience Surprises Investors

The continued investment surge has occurred despite Israel's ongoing military conflicts, surprising many international observers. Foreign investors' initial concerns about regional instability have largely dissipated over time.

"Three years ago, you saw a country that was surrounded by some pretty well-funded and sophisticated enemies," TLV Partners' Sack explained to PitchBook. "Today, you're seeing a totally different landscape."

This resilience reflects both the strategic importance of cybersecurity capabilities and the global nature of Israeli cyber companies, which often serve international markets from day one.

Market Structure and Exit Dynamics

Israel's cybersecurity sector has developed a unique market structure centered on acquisitions rather than public offerings. While only 1% of cybersecurity companies go public, 11% have been acquired – a rate significantly above the broader tech average.

This acquisition-focused model aligns with global buyer demand for specialized capabilities. Over the past six years, cyber M&A activity has accounted for a large portion of Israeli exits, with notable recent deals including Talon ($625 million), Dig Security ($350 million), and Avalor ($350 million).

Ecosystem Maturation Drives Consolidation

The sector is also experiencing homegrown consolidation, with five Israeli cybersecurity startups acquiring other young Israeli companies in 2024. This trend signals ecosystem maturation and strategic consolidation as successful companies expand their capabilities and market reach.

Industry Outlook and Future Implications

The transformation driven by the Wiz acquisition appears to be just the beginning of a broader shift in global cybersecurity investment patterns. Industry analysts expect continued growth across funding stages in 2025.

"While the floodgates aren't going to crash open, expect to see more activity across the board: A and B rounds should become more accessible, C and later rounds larger and an increase in seed rounds," predicted Andy Ellis, Partner at YL Ventures.

The Israeli cybersecurity ecosystem now comprises over 500 active companies building next-generation solutions in AI security, cloud protection, enterprise browsers, and data posture management. Though representing just 7% of Israel's 7,000+ tech firms, cyber startups attracted 38% of all tech investment in 2024, underlining their strategic importance.

The dramatic shift in investment patterns reflects a fundamental recalibration of how global investors view Israeli cybersecurity capabilities. What began as the "Wiz effect" has evolved into a sustained transformation that positions Israel as an increasingly dominant force in global cybersecurity innovation, even as it creates new challenges for the local investment ecosystem that helped nurture these companies from their earliest stages.