An Israeli military intelligence unit is leading the way in identifying high-tech startup entrepreneurs.

In particular, Google’s parent company, Alphabet Inc, is in advanced talks to buy cybersecurity company Wiz for $23 billion from its founder Assaf Rappaport, a former officer from the famous military unit 8200, which has achieved an all-time record in highlighting technology entrepreneurs.

As the war in Gaza squeezes Israel’s economy, the deal underscores the resilience of the technology industry, which accounts for about 20 percent of the country’s output and about 15% of jobs. It also highlights the military’s role in the development of one of Israel’s most successful sectors.

Along with universities, Israel’s military intelligence and technology units, such as the 8200, have turned heads into hundreds of tech startups, helping to turn Israel into what is widely regarded as the world’s No. 2 tech hub after Silicon Valley.

Check Point Software Technologies ( CHKP.O ), Nice , Palo Alto Networks ( PANW.O ), CyberArk ( CYBG.F ), Wix ( WIX.O ) and Waze — bought by Google for $1 billion — are some of the companies whose founders have military roots.

Rappaport credits the Israeli military with his success, describing Unit 8200 as “the best business school».
He served there with his “army buddies” Yinon Costica, Roy Reznik and Ami Luttwak, with whom he founded the previous cloud cybersecurity company Adallom in 2012, which they sold to Microsoft three years later for $320 million.

In 2020, at the start of the COVID pandemic, the four started cloud cyber security company Wiz, quickly taking it off the ground as its value was estimated at 12 billion dollars.

“In some ways it’s like raising tigers and then releasing them into the wild,” Gilly Raanan, founder of venture capital firm Cyberstarts and general partner at Sequoia Capital, said of the intelligence units.

The success of the graduates of the 8200 unit

Raanan said it is not a requirement for him to be from an elite intelligence unit when investing, however, “90% to 95% of the groups I see are made up of 8200 unit graduates».

One of the reasons for the success of military units is their free, merit-based nature, which allows their graduates to transition smoothly into the startup world after their service ends, said Raanan, who was the original investor in both Adallom and and Wiz – now based in New York.

Rappaport was initially reluctant to accept money from Sequoia for Adallom in 2012 and declined a series of requests to meet with Raanan.

Raanan persisted and finally agreed to meet at a gas station about 40 minutes north of Tel Aviv. “We basically signed the terms on a napkin at a gas station.”

While Israel has mandatory military service after high school, intelligence units, however, have the right of first refusal so “they can for the best,” said Dror Bin, chief executive of the Israel Innovation Authority.

Unit 8200 is the Army’s primary intelligence gathering unit, where 18-21-year-old soldiers develop and use intelligence-gathering tools, which they pass on to higher officials. It is the Israeli version of the US National Security Agency.

Less well known is his Technological Unit 81 Intelligence Corp which supplies cutting-edge technologies to Israeli soldiers in combat.

Rappaport also served in that unit, which spawned several cyber, artificial intelligence and fintech companies when soldiers left the military.

Starting power

Despite the cloud over the economy since the Gaza war, Israeli companies have been among the most important in terms of demand for cloud security and have benefited from several and strong funding rounds.

The industrial group Startup Nation Central said on Wednesday in a report that private funding in Israeli startups rose 31% to $5.1 billion in the first half of 2024 from the second half of 2023, with cyber security garnering 52% of funding.

If the acquisition of Wiz goes ahead, will eclipse Intel’s $15.3 billion purchase of Mobileye ( MBLY.O ) in 2017 and will add at least $1 billion in tax revenue to Israel’s coffers.

Amiram Shachar, CEO and co-founder of Israeli cloud security company Upwind Security, said Google’s potential purchase of Wiz is the “best thing” that could happen to both the cybersecurity and cloud industries.