The Israel Defense Forces’ famed 8200 intelligence unit, which has produced many high-tech millionaires over the years, added three more to the rolls this week, including two veterans who are just three years out of uniform.
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Hyperwise Security, a startup formed just 18 months ago, was acquired by Check Point Software Technologies. Check Point didn’t say how much it paid for the company but sources said it could have been as much $80 million.
Hyperwise’s principal shareholders are cofounders Aviv Gafni and Ben Omelchenko, aged 29 and 26, respectively, who completed their service in 8200 just three years ago, and Nathan Shuchami, 40 — Hyperwise is his second exit.
The three together hold half of Hyperwise’s shares, which means they could collect as much as $40 million, before taxes, for three years’ work. Another 40% of the company is controlled by Shlomo Kramer, one of Check Point’s founders; Mickey Boodaei, who sold a startup he founded called Trusteer to IBM in 2013 for a reported price of $620 million and investor Giora Yaron.
Employees hold the rest. The company never raised money from venture capital funds or other institutional investors.
“We bought a year-and-a-half-old company with no revenues because we believe in its technology,” explained Check Point CEO Gil Shwed.
Hyperwise, which employs about 20 people at its Tel Aviv offices, has been developing a unique technology for identifying and fighting the next generation of malware. Malware enters computer networks to use or relay information back to its creator and/or damage hardware.
Hyperwise’s advance is its ability to identify a malware threat before it has begun doing damage to the network by detecting cases of unusual activity, for instance entering files that are not usually active, collecting passwords or activating cameras or microphones attached to the network.
“Most existing technology in the field of information security targets known malware and is stored in databases. These programs are blocked by the usual safeguards,” Shwed explained. “The newest malware changes shape and conceals itself in more sophisticated ways.”
He compared Hyperwise’s detection systems with a doctor who detects disease-causing bacteria in the body before the patient has begun exhibiting symptoms.
Despite their short history as high-tech entrepreneurs, Hyperwise isn’t the founders’ first startup, said Omelchenko. “We founded Hyperwise only after we failed with our first startup and we learned what the market needs,” he said on Wednesday at a news conference at Check Point’s Tel Aviv headquarters.
Why did they choose to sell quickly and, unusually for an Israeli startup, to another Israeli company?
“Check Point’s suite of security products complements our technology and we valued its marketing ability,” he said. “Also the fact that it’s an Israeli company, which operates in Israel and can absorb us, influenced our decision to sell. From our viewpoint, the terms were very attractive.”
Check Point, which has a market capitalization of $15 billion and trades on the Nasdaq, plan to begin adding Hyperwise products to its line starting in the next quarter to buttress existing network defenses. Hyperwise’s staff will join Check Point’s research and development team in Tel Aviv.
Check Point plans other acquisitions of startups, mainly in Israel, as a way to spur innovation. The company is planning to add 300 people to its payroll of 1,500 as well.
Asked whether paying tens of millions of dollars for a company with no revenues reflected a bubble in the cyber sector, Shwed said that on the one hand there was a real need for better network security, which justified high valuation for companies with relevant technology; on the other, he said, there is an excess of investment capital, which raises prices for acquisitions.
“But still, I wouldn’t call it a bubble,” he concluded.