Valar Dohaeris*

Khaleesi, Deanerys Targaryen, Mother of Dragons (HBO)

Yesterday, LightCyber was acquired by Palo Alto Networks. This is my version of the story.

Ten years ago, I had a conversation with a mentor of mine, who was at that time Israel’s top venture capitalist. It was a cold day in September, the 2nd Lebanon war had recently ended and I had just returned from a long reserve duty and was looking for career advice. The seasoned investor who’s seen it all, told me about “growth-stage investment”, a term I knew little about at the time (and have been dealing with ever since). He was bullish about the tech growth segment in Israel and had two clear messages:

1. Unlike early stage VC investments — growth investing is about numbers, not people.

2. Don’t sell quickly. You invest to build a mammoth! (they didn’t call them unicorns back then…), we want an Israeli Nokia! (we all know how that went).

He gave me his third and last piece of advice, when I already had one foot out the door: “most importantly!” he said, “don’t pay too much attention to other people’s advice… go with your gut!”

Ten years have passed and over the past weeks I’ve been thinking about that conversation a lot, in the context of LightCyber’s acquisition by Palo Alto Networks. My relation to the deal is that I led LightCyber ‘s last financing round in the summer of 2016 and served on its board since.

It is common knowledge that early-stage investments are “all about the people”. You meet a couple of wide-eyed entrepreneurs with a PowerPoint presentation and you need to make a decision. Growth investments require a much more data driven decision process, as the target companies already have substantial metrics, historical revenues, P&L profile and a sizeable team in place. But once in a while, even in later stage investments, you come across an investment decision which is largely driven by “the people” element. For me, the investment in LightCyber was exactly that.

Yesterday

Yesterday, Palo Alto Networks announced it has acquired LightCyber. Palo Alto is one of the world’s leading cyber security companies. It was a successful deal for the founders, employees and investors. And it is just the beginning, because now LightCyber’s team has even better chances to make the world a safer place, protecting companies and organizations from malicious hackers.

20 years ago…

What most people don’t know is that the LightCyber story began over 20 years ago, at Boyar high-school in Jerusalem. Giora Engel, Michael Mumcuoglu and I met in 10th grade for the first time. Being much smarter than me (and to this day two of the brightest people I know), they both majored in Physics (I — in Geography). Despite being much smarter, they were still nice to me — and the three of us, together with a group of kids from our high school class actually founded our first company at the age of 15. Our company (creatively named Boyar Inc.) didn’t go public or get bought, but we won some prizes and came out with roughly $100 USD profit each, roughly 500X our capital invested, which is (still) my best investment ROI to date.

Years passed and Michael & Giora (M&G) started another company together (MeterLive — audience measurement for outdoor advertising). They didn’t invite me to join them that time, but were kind enough to come and talk to me about it every now and then. I even introduced them to one of the best VCs I knew — Battery Ventures (BV). BV didn’t invest in MeterLive, but a couple of years later, BV became the largest shareholder in M&G’s newest venture — LightCyber… and BV’s Itzik Parnafes joined its board of directors.

The call

When it was time for another investment round at LightCyber, Itzik called me. By coincidence, when that call came, I had just walked out of a meeting with Israel’s “Mister Cyber”, CheckPoint’s co-founder Shlomo Kramer. At that time, Kramer had just recently joined LightCyber’s board of directors and told me about his long relationship with Gonen Fink, LightCyber’s CEO. Gonen was one of the first employees at CheckPoint and spent years as a part of their senior management team. He was recruited by M&G and Glilot (LightCyber’s first VC investor) as a professional CEO to take the company to its next phase. I had met Gonen several times before and highly appreciated his leadership style and his strategic thinking.

And so, even before the due diligence started I had already made my decision regarding LightCyber. During the DD phase, my colleague Tomer Babai and I analyzed the market, competitive and strategic landscape. We consulted with subject matter experts and spoke to almost every player in the space. We met and spoke to many LightCyber’s customers who explained to us how superior the product was compared with any other network-based detection tool they had tested, specifically LightCyber’s ability to provide real threat detection with minimal amounts of false positives. The company already had real revenues and customers and we had a clear thesis on why it will be a good investment — but even with all that, at the end, the decision was based on the quality of people, whom I knew for many years.

The night is dark and full of horrors

Every Startup’s journey, even at growth stage, is a struggle. It is a rough trip through the snow desert north of the Westerose Wall and not a carefree tour of Disneyland. While the trip behind the wall can be difficult, dark and full of horrors, I knew that with Michael & Giora, Itzik & Shlomo and Gonen at the helm, it would be exciting to go for the scary & challenging journey, and I was willing to join them — frankly, anytime. So we (ClalTech) led the company’s last investment round and as an added bonus, I was joined by one of my favorite investors — Vertex’s Aviad Ariel.

It has been an intense but short journey… Claltech led LightCyber’s last investment round in July 2016, and today, roughly seven months later, we are parting ways.

Sale or Scale?

This brings me back to my old mentor’s second piece of advice — not to invest with an eye to a quick exit but rather with the aim to build a large company. That was indeed our intention when we invested, though we always knew that one of the leading security vendors could proactively approach the company in the near term with the intent to buy it for its great product and people.

Before investing — we all knew that the area north of the wall is dangerous. It is full of wildlings and giants and if you are not careful you can run into White-Walkers. But neither the competition nor the need to educate the market scared us. We were more than willing to continue to trudge through the snow and to fight and support the company through the next steps of its journey. But then came Palo Alto Networks- the mother of dragons… and we quickly realized it was the leader we wanted to align with, the true heir to the Iron Throne… Palo Alto Networks, led by the Israeli Nir Zuk, is a $14B market cap emerging leader in the cyber security world; with technology, vision and growth that are second to none. Under Palo Alto’s dragon wings the amazing LightCyber team will be able to move onwards and upwards faster and stronger than before, fighting harder to make the world safer against cyber villains.

To avoid any misunderstanding, my old mentor was right: when you invest in more mature companies the metrics become critical. He was also right in saying that you should never invest in a company just looking for a quick exit. But sometimes a unique opportunity comes, which is fantastic for all parties — providing a promising future for the company’s employees and vision, a great outcome for all stakeholders. When that happens, my rule is to follow the entrepreneurs and join them in whichever direction they choose. At the end of the day — the keys to the company’s future are in their hands. When a great company wants you to join forces with it — it’s a badge of honor and a reason to be proud, and by no means is it a thing to apologize for.

Should we build multi-billion companies in Israel? YES, of course. But it is NOT the only way to go. Once the founders and management communicated their view to the board — we gave them our full support and rolled up our sleeves to execute the best deal we could.

The North remembers…

A big thank you to my old friends for including me in this journey north of the wall. Good luck, and always looking forward to joining you again for another adventure.

— — — — — — — — — — — — -

* Valar Dohaeris is a common greeting in Braavos, meaning “all men must serve” in High Valyrian. It is the common response to the greeting Valar Morghulis (“all men must die”) — meant in the sense of “all men must (eventually) die,” sooner or later, somewhat like the Latin saying “memento mori”. This has absolutely nothing to do with my story, but I always wanted to use it as a headline, because I think it’s cool.