From Cybersecurity to Privacy-protection: Israeli Technology's Growing Sector

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Asking for information about privacy-protection (not including identity management and data-protection) startups in Israel raises some eyebrows. ‘’Israel has privacy-protection startups??”someone asked. Can a country so strong in cybersecurity also sprout cyberprivacy? “Is that even a thing”? Someone else asked. “Aren’t the two almost oxymorons of each other?”

If we say that cybersecurity is about protecting organizations from hacking, then how do we classify cyberprivacy?  On Start-Up Nation Finder we tag as privacy-protection companies whose chief product/service is software that enhances users’ online privacy.

Choosing that tag brings up 57 currently active companies (we have mapped 78 but some of these are not active). These 57 include companies working in things like public key identification, secure messaging, VPN, personal P2P clouds, digital footprint management, permissions control, mobile apps to keep children safe from online dangers, and even discreet dating apps.

There’s been a steady increase of companies in privacy-protection, which in 2011 had 10 startups, growing to 63 in 2017 (again, some are not active as of the second week in January 2018). The majority of these are small startups with up to 10 employees, and most are bootstrapped.

In terms of funding, the 4th Quarter of 2017 saw the highest VC-backed financing into this sector for at least 2 years, with $13.5M in some 30 funding rounds. So while this is an increase since Q4 2015 ($4.8M) it is still a very small piece of the larger Israeli tech investments pie, which in Q4 2017 was over $1.15B. Cybersecurity companies, for instance, raised almost $214M in the fourth quarter of 2017 alone.

Why is this market becoming more important now? Why should we keep our eyes on what’s happening in this small, yet growing sector?

For one, the growing threat to privacy online –from the way corporations, criminals and governments alike access, gather, and use our personal data –is becoming one of the central issues of our age: how do private citizens live their lives in today’s digital world and still maintain the right to privacy?

Second, and more concretely, the European Union’s General Data Protection Regulation (GDPR) takes effect this year, and any Israeli companies wanting to do business with some of the 500 million EU citizens must comply with the tough new data privacy laws. Privacy-protection, in its many forms, could become a burgeoning industry.

The DataNation series is published in collaboration with Start-Up Nation Central and is based on information and insights collected and analyzed by the organization. Start-Up Nation Finder maps the Israeli high-tech industry and connects the world to Israeli start-ups, investors and innovation programs