I'd like to call up Kobe Sersi, co-founder and managing partner of Gilo Capital, with many exits to their name, and Shlomo Kramer, who is co-founder and now CEO of Cato Networks, but co-founder also of Checkpoint and Imperva, and an investor in many successful cyber companies. The floor is yours.
Thanks NCI, thanks GY. Thank you, yeah, great to be here specifically in 2024 with everything going on. Special thanks to the organizers for setting this up, you know, totally not trivial. And thanks to all our friends from abroad that came over specifically this year. I'm super excited to start this session with Shlomo, who became, at least to me, an icon of the Israeli cyber ecosystem. You know, we started Gilo, it's already been 14 years, believe it or not, and we've been the first cyber-focused fund globally. But already when we started, Shlomo was a strong name already after founding Checkpoint of course and Imperva, and this was still before Cato. But not just this, you already were a very active investor. So when we looked into other investors in the space, there are not too many, but your name was always kind of surfacing as the person to look at, you know, what they're doing and maybe hopefully try to copy something. So super excited to be here. And maybe we'll start with a few comments about the early days of your career. You know, now starting a cyber startup, I wouldn't say it's trivial, but it's almost trivial. It's clear Israel, it's clear that cyber is huge, and it's clear that Israel is huge in cyber. But when you guys started Checkpoint, this was definitely not the case. So what can you say about those first years, those first days?
The huge difference, Kobe, was that there was no VC community, right? So we obviously had an idea, we really believed in that idea, it was a contrarian idea at the time. It was about the potential value of the internet to create a new market for new products. Back in 1992, 1993, it was a contrarian idea. But we needed funding. So I think that is the key difference today, that entrepreneurs have a very solid ecosystem, not only to get the funding but to get all the help they need in order to bootstrap and create their idea into a real company. We had to do without it, so it was much more difficult. We'll talk later maybe about the journey of the Israeli ecosystem in cyber, because to me this journey is amazing. You know, if you look at the first generation companies like Checkpoint, I think they started around a very strong technology but maybe did not have the funding or the power to really grow very aggressively. And you see the companies of this generation, at least some of them, running much more aggressively, thinking very big from day one, and growing at great pace. But we'll get to this later.
This mid-generation company, it's more the companies like Imperva that you started a few years after. What was different about Imperva? How do you compare the Imperva journey with the Checkpoint journey?
So I think as an entrepreneur, and I'm also an investor, but as an entrepreneur I did three companies, and every company had, if I'm trying to retrospect and think of a single thing, every company had a very unique challenge to it. So obviously starting almost bootstrapping Checkpoint without any funding or with very little funding was a huge challenge. And then hitting it with Sun Microsystems as the distributor and needing to build an organization in front of the demand was a challenge. I would say that Imperva was the opposite. Imperva was one of the world's first data security companies. Today data security is tens of billions of dollars in annual revenues, a very central category in security. But when we started at the beginning of 2002, there were no data security companies, no disclosure laws, PCI was not around yet. And frankly, when we came out with the product, nobody understood what we were talking about, and there were crickets. And there were crickets for a year, a year and a quarter, until PCI came. Then the market immediately took off. But the challenge of keeping the team together, keeping the vision together, keeping everybody believing in it, was the main challenge of the early days of Imperva. Kind of the opposite of what Checkpoint was.
No, I think it's amazing. I mean, when we see our journey, one of the things we're so happy about in the last couple of years is to have a group of second-timers to work with. And when you work with second-timers, you tend to think things will be much easier because they have all this experience. But it's kind of that on every journey you have your own challenges, and even when you're coming as a second timer, maybe the expectations are higher, so things are a little bit easier but they're not really easier.
No, it's you know, they are a little bit easier from the functional side, but a startup is a very human experience. It lives and dies by the psychology and the personalities of the founders, as you know very well, and what they are able to bring to the team. It is also harder. It's like the second record. Yeah, you had a hit record, and now you need to prove that it's not a one-time hit. You already have a personality, a way that people look at you, and you need to put yourself in a position where you can make mistakes, and you can fail, and you can be human. And that's kind of the opposite of having a persona. So this is something you have to shake off every day.
Interesting. And moving to Cato, and to me Cato represents this current generation of Israeli cyber innovation, so companies that think big, or which I would even say very big from day one. So not just about a technology solution but a platform that really changes the way you work, and I'm sure you know more than me. And also again, growing very aggressively, thinking of world dominance from day one. So what was different with Cato than with the previous ones?
It was very different. First of all, Cato was an idea that says, 'Hey, the cyber market is broken.' And specifically the part of the market that I've been very close to for many years, network security, is broken. You know, the first generation was Checkpoint. Checkpoint was not the first firewall. Before Checkpoint there were firewalls whose name got lost in history, like Raptor and Gauntlet, because they were very complex. It was multiple days of work, and you got three applications up and running to the internet. The revolution Checkpoint brought was an operational efficiency revolution more than anything else. A single floppy disc, if you remember what it was, you install in five minutes, you were up and running securely to the internet with any applications, current or future. So that created the whole market. And that was good for 10 years. But then there were a bunch of floppy discs running around with antivirus, URL filtering, and many different security capabilities, and things became complicated again. So there was the second generation of network security, which was Nir Zuk from Palo Alto, I was lucky enough to write the first check to and sit on his board, and Ken Xie from Fortinet really came out with a converged network security appliance, the UTM, which simplified things. Basically put all of that in a single appliance, throw the appliance on the network, and you're up and running again, presumably in five minutes. And that was a great revolution as well. Great companies came out of it, Palo Alto, Fortinet. And for about 10 or 15 years that was the solution. But then digital transformation came, and work from anywhere, and cloud data centers, and SaaS applications, and the physical perimeter built from these appliances dissolved. Appliances became part of the problem, not part of the solution. And what we came to do at Cato is come with the third generation. So for me it was kind of very clear: we did Checkpoint, what's next? Cato. The form factor is a cloud, it is as fluid as digital transformation. And unfortunately, it's a big idea. You need to build the cloud network all over the world. We have today 90 PoPs in every country that you can think of. You need to run both a stable network and a dynamic and great security stack, which is a challenge nobody did before. So when we came back in 2015, Gur Shatz and myself, to raise a fund as the two founders of Cato, both of us had good reputations for building. Some said, 'Hey, this is an ambitious idea,' which means, I guess, 'Go away' in VC language. But we got enough people to really believe in the idea and got it up and running. And today we are a leader in a category that is the future of network security. But we also did another thing which I want to emphasize: we decided that Cato headquarters was going to be in Israel, and essentially build an Israeli company. It's a global company, as I said, we are in 150 countries today serving customers. But the senior management, both on the go-to-market and product side, sits in Israel. And essentially that was a statement about the maturity of the Israeli high-tech community, which was very different from the two startups before.
