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16 Jul, 2022
2 min time to read

In an interview to Israeli newspaper CalcalistTech Yoav Leitersdorf, Managing Partner at YL Ventures, the world's largest cybersecurity-dedicated fund, predicted all Israeli cyber giants would lay off staff this summer.  

In his opinion, the decline in inflated values will affect the entire industry, but will not end the boom:

Demand is still high. Those who sell hype and air are the main ones who will be hurt.

Layoffs

"This summer, there will be no less than 12 large Israeli cyber companies that will lay off employees," stated Leitersdorf in a conversation with CalcalisTech which took place a week ago. His words proved to be true as a number of Israeli cyber-unicorns, like Cybereason, Snyk and Transmit, who until recently were vigorous recruiters, have announced layoffs. Leitersdorf is convinced that this is just the beginning.

Salaries are the biggest expense for unicorns, and that's where the biggest pressure is. When they raised the money, they were explicitly told it was meant to fund hyper-growth. How do you produce hyper-growth? By recruiting in bulk and that's what happened. Now the boards are pressuring management in the opposite direction.

Even though many people will be fired Leitersdorf is convinced this will not produce a manpower crisis in Israeli cyber sector. In his opinion, all the laid off will immediately find work in the smaller companies or in the companies that have been run more smartly in recent years.

Currently, there are about twelve Israeli unicorns in the cyber field, so Leitersdorf's prophecy will most likely not skip any large cyber company.

What to expect from the future?

What we are seeing now is a general slowdown, but not a burst of a bubble. This is a worthy and reasonable correction for a market that has lost proportions over the last two years.

According to Leitersdorf, the global cybersecurity will most likely stay intact by the upcoming economic meltdown. Cyber is not so sensitive to the economy and changes in macro conditions, as changes in interest rate policy do not reduce hacker attacks. At this stage, Leitersdorf emphasized, American companies that are most actively preparing for the crisis, do not reduce their cyber budgets.

The damage done to companies from attacks, such as what happened in March to Okta (a cyber company, that developed an identity and access management solution for organizations, whose platform was hacked to infiltrate its customers), is huge. That is why budgets for cyber products are rising.