For the last 30 years, Israel has produced more startups per capita than any other country outside of the U.S. It has contributed innovations such as the firewall, the USB flash drive, the VoIP protocol that underlies many of our voice calls today, Waze, FaceID, and more. It's precisely this innovation engine that's being put at risk by the government's proposed "judicial reform."
The legislation will deprive investors of the necessary protections against government abuse. Without those protections, investors will be more cautious about putting their money in Israel, depriving Israeli startups of the fuel they need to succeed. In short, it will set us back 30 years.
In the early ‘90s, I co-founded my first cybersecurity company, Check Point Software Technologies, one of the first cyber security companies in the world and a pioneer of the network security category. Back then, there were virtually no startups or funding available in Israel. Our first office was the apartment of my late grandmother. We worked hard to scrape some funding to develop our product: the first commercial firewall. We managed to bring it to beta in the U.S. but were advised not to speak Hebrew and pretend we were an American company. There was a shocking nervousness around our accents.
Essentially, Israel was seen as an engineering center for U.S.-based tech companies. If the company was founded in Israel, they were advised to have a U.S.-based CEO. There was absolutely zero trust in Israel as an environment to successfully invest in, both directly into companies and indirectly through funds. There was very little understanding in Israel of how to grow a company beyond engineering. We were very good at engineering–but had little knowledge of the go-to-market strategy, commercialization, and legal structure needed to grow a company.
Fast forward to early 2000, when I founded my second company, Imperva, a pioneer in data security, a category now worth tens of billions of dollars annually. We were the first to market and had developed a groundbreaking technology but were still advised to register the company and all intellectual property assets in the U.S. Again, the Israeli operation was just the engineering subsidiary of the U.S. company.
By that time, there were a few Israeli venture capitalists interested. Some of them were small local firms, and a few were branches of global firms, so progress was being made. They didn't insist on a U.S.-based CEO–but they did insist on me relocating to the U.S. So, while the funding alternatives for Israeli startups were growing, the expectation was that the company headquarters with all of its business operations and IP will move to the U.S. Israel still gained limited benefit from its startup community.
In 2015, when I co-founded my third startup, Cato Networks, we boldly decided to build the company in Israel with all the functions headquartered in the country. It was a pioneering decision then, to the point that I vowed not to relocate and to hire all my senior team from Israel. We'd have a global field team–but everything else would be based in Israel. Eight years later, our senior management, legal team, accounting team, etc. all are based in Israel, and we've been going tremendously well.
We've done this because the world now has confidence in the Israeli high-tech industry. We no longer have to hide who we are. In my field, cybersecurity, Israel is a brand producing the leading cybersecurity companies in the world. All of that is down to a 30-year journey of hard, entrepreneurial work–but it wouldn’t have been possible without the trust foreign investors have in the skills, legal system, tax structure, and stability of the country. Undermining these foundations threatens to disrupt our hard work and success.
Giving any government full control over the judicial system is dangerous. Even the mere prospect of such a development is already undermining the basic trust needed to attract investors. Investors must feel confident their money and IP are safe and know nothing untoward would happen to their investments.
It took me and thousands of entrepreneurs like me 30 years to create one of the strongest high-tech industries in the world. But now, we are seeing our life’s work teetering on the edge of disaster. We're in a dangerous position where we could quickly lose everything we worked for. And that will take weeks–not years–if we don't act responsibly.
Shlomo Kramer is the co-founder and CEO of Cato Networks.
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