ISRAEL’S arms exports fell last year. Cutbacks in the defence budgets of many Western countries pushed the global sales of Israeli weapons systems down to $5.7 billion, $1 billion less than in 2013. Unexpectedly, another security-related industry took up the slack. For the first time, the country sold more cyber-wares than arms. According to figures published recently by the cyber-task-force in the prime minister’s office, in 2014 Israeli companies sold around $6 billion of internet-security software, equivalent to about a tenth of the entire worldwide sales of such stuff.
Nevertheless, a few Israeli entrepreneurs worry that the cyber-startup boom may be turning into a bubble. “Every kid who leaves Unit 8200 [the Israeli forces’ electronic-intelligence operation] thinks he’s going to be a cyber-millionaire, and then some of the startups are immediately evaluated at $5m without having done anything,” grumbles an Israeli venture capitalist. “There is a bit of a bubble vibe” to what is happening, says Yigal Erlich, one of the pioneers of Israel’s venture-capital scene. “There could be a limit to this cyber-market. But on the other hand, for Israeli technology this is a perfect niche-market in which local companies can become world leaders.”