Gili Raanan, Founder of Cyberstarts and Chairman of Wiz, on Why He Asks Founders About Their Moms, Being Ghosted by Assaf Rappaport, and the Dark Decade Coming for Cybersecurity

0:00You are the investor in what is one of the top 10 exits of all time. Wiz. And not all time in Israel, all time. You also are the inventor of captcha, which I think is the bane of existence of many people. In many, many cases, most cases, I know I'm an investor after probably 10 minutes. And then it takes me a few years to figure out why. Being smarter is always better, but it's not the most important thing. And that attracted me to the kid whose parents went through ugly divorces. Those people who went through those experiences and managed to overcome, those are the people I like to partner with and go for the jury.

0:45As a person, I'm never happy about what I achieve. What about your child that makes you unsatisfied?

1:00welcome back to another episode of invested and the truth is that i have been wanting to do this episode with this guest since i started this podcast i'm pleased to welcome gilirana it's a honor to be here i'm um i don't know why we have been waiting so long it's too busy schedules i guess is part of the is part of the issue but but i want to tell everyone what why I've been wanting to do this. There's a few reasons. I was at Benchmark and Spunout did Olive. You were at Sequoia and Spunout did Cyberstarts. Not only that, but I think it's fair to say that you are the most successful venture capitalist in Israel and one of the most successful in the world.

1:39And you have a very low profile, but everybody knows who you are. And when you talk to your entrepreneurs, not only they say they get a lot of help from you, They say you're a medge. And since this podcast is about values that create value, it's been important for me to have you on the podcast. So thanks for coming on. When we started all of, one of the things we said was we're not going to invest in cyber in Israel. And why did we say that? We didn't think we had edge against you and other people. And the other reason was, was that cyber was producing what I would call mediocre exits that is outside of Checkpoint at the time.

2:16But you took the exact opposite approach and did all cyber all the time. So I'd love to understand the origins of the strategy that you adopted. Back in 2018, I left Sequoia and I made two decisions. One is more idiotic than the other. One decision was to focus solely on cyber security. And in 2018, cybersecurity wasn't cool. They didn't even call it cybersecurity. It was called IT security, information security. And as you said, investors stayed away from IT security because you couldn't really make money investing in IT security. You know, you can sell a company to Cisco Checkpoint for$100 million, and that's about it.

3:18So not very exciting. The second decision was even, you know, coming out of Sequoia. And I have tons of respect to Sequoia. I think it's, you know, one of the best teams ever in VC. and I couldn't do what I'm doing today without working and watching legends like Michael Moritz or Doug Leone or Jim Goetz. One thing I felt that is completely broken about early stage investment is the focus on the business idea and the technology. I felt that we are spending endless hours analyzing ideas. And at the end of the day, it's a big waste of time because the founders either lie to us about the ideas they have or they don't know or they change their mind after three or four weeks.

4:30so why waste calories on analyzing technologies and business ideas that would not be in our life in a few weeks while the most important thing is the person that's sitting next to me. So I told myself, I'll be a pubist. I would not ask a single question about technology, product, or business idea. I would simply ignore those elements. Because, you know, there are many investors that say that, of course, they focus on people, they invest in people, you know, people are the most important thing in VC, etc. But they do ask a lot of questions about what you want to do. And I decided I would simply do zero of that.

5:26And I would spend all my time, you know, asking entrepreneurs about their mother and about their childhood. And I would use that information to decide if I want to be their long-term partner for the journey. And those were the two decisions. Cyber, if I summarize cyber because I'm lazy.

5:55and ask no questions about technology and products because I got tired of being manipulated at seed stage investments. What's something that somebody tells you about their mother that causes you to invest? It's a great question because, you know, the moment you decide to base all your investment eases on the person. It forces you to really go into a very deep and long and sometimes dark journey to decide, okay, who's the person I want to invest in? And it begins with the antiprofile who I don't want to invest in. And one of the first, it wasn't even a decision, It was just a conclusion that I don't plan to invest in the smartest kid in the block.

7:0126, 27 years old, you start your first company and you face challenges. And one thing for sure, when you start the company, you'll face challenges. What would happen to you? Would you be able to deal with those challenges? Would you collapse? Would you stay away? Would you give up? That's a huge risk for me as an investor. So those are the elements I like to de-risk. And IQ doesn't help yet. IQ helps. Being smarter is always better. But it's not the only thing that matters. It's not the most important thing. what matters for me is the ability to deal with challenges and the best proxy to that in in childhood and with relationship with your mother is to to to meet people that faced some real difficulties in life and managed to overcome those challenges and show some early signs of greatness.

8:21You know, the signs of greatness you can show when you are 20 years old. They didn't win the Nobel Prize, but they did something extraordinary, although their starting point wasn't perfect. And that attracted me to the kid whose parents went through ugly divorces, the child who grew up without a father figure in a family, to the girl who was socially isolated and was kind of weird. to the boy who lived in a closet for a while and felt very ashamed and disconnected. Those people who went through those experiences and managed to overcome and show some early signs of greatness, those are the people I like to pop with and go for the jury.

9:25Do you interview the mothers? No, I don't. Have you ever asked the mother a question, like even after somebody was successful? I do go through a very deep conversation. And we reach one conversation. It's one or two conversations for me. Back then, I started CyberStart as a solo GP, as a solo investor. But today, we are four partners on the ground here in Israel, plus two partners in the States. it's all of us have different versions of that conversation. But for me, it's typically one conversation. So one conversation and I make a decision. Typically, you know what, Michael, in many, many cases, most cases, I know I'm an investor after probably 10 minutes.

10:23And then it takes me a few years to figure out why. intuition's a funny thing I actually want to come back to that a lot of what you're describing sounds like Angela Duckworth's book Grit did you ever read the book? is that what you're looking for? I am looking for people with deep

10:45with significant emotional depth that would evolve and grow through the depth and complexity it sounds like and complexity If you dig deep enough, you'll find out that we are all screwed up in so many interesting ways. You just need to dig deep enough. They're all normal people. In the most non-normal way, you can define them. You know, that's what I love about this job. You know, when I look at the journey I took, for the people I invest in, it's like a gift box. You know, you look inside, and they look inside, and they don't know what would come out of the box. the deeper, the more complex the personality is, the chances for fast evolvement and many times unexpected directions is higher.

11:56And I love that. Because that non-linear growth, personal growth of entrepreneurs is fascinating. think and if you go back to to the VC model that what creates you know outsized returns yeah shout out to my mother so my mother I remember as a kid she used to pray for having mediocre children uh because she used to say that the line between brilliant or extraordinary and crazy was this thin really really thin it always bothered me as a kid but as I got older I discovered that she's probably right. She's probably right. She's right. She's my mother. Of course she's right. But she is actually right in having prayed for mediocre children.

12:44Doesn't it worry you that all these kind of complex and deep and extraordinary people who knew something extraordinary could tip over into crazy and come off the rails? No. You know, I have to tell you that this thought never crossed my mind. It's a risk, but when you look at all the things you can learn in one hour conversation, when you go deep, but you still have the empathy to that person, you still like that person to be successful, you checkmark many, many important ingredients that can make up terrific entrepreneurs, and still, you know, and not with lack of trying. It's not bulletproof.

13:37It's not 100%. You're a pretty extraordinary entrepreneur yourself. If I checked in and talked to your mother, what would I learn? As a person, I'm never happy about what I achieve. It's not like I see it, I look at, you know, an accomplishment and I feel like I'm not telling myself things like, oh, I'm blessed, you know, what an achievement. Now I can sit and enjoy my time. You know, it's... What about your child that makes you unsatisfied? Critical parents. An environment that didn't embrace being exceptional almost at anything. The environment I grew up in my hometown in Kforsaba was that stability and being conformist, you know, do what other people do was the most important thing.

14:47You know, I grew up in an age where there were no smartphones, there was no internet. If you wanted to know something, you could ask grown-ups, but quickly you realize that they don't know anything. And you know what? They don't care. All they care about is, you know, the day job and keep going and providing stability for their families. it was a terrible experience for me. You know, I felt that I'm missing the world. It is a big world. I had the feeling that there is a big cosmos out there that I'm completely missing it. It's like it's a train that's left the station and I am watching it and I see the the smoke that it's leaving behind.

15:46So I found myself spending most of my time in a public library, which didn't make me the most popular kid in high school. And I felt completely misunderstood and misfit. And I think this sense of there's a big war that's out there, that's waiting to be discovered, that's still driving me today. It's amazing that you even found it in the first album, that you were that curious. So you were the investor in what is one of the top 10 exits of all time, whiz. And not all time in Israel, all time. $32 billion acquisition by Google of Wiz and Asaf Rappaport. What is it about Asaf Rappaport? Like if we asked his mother that made him special, because he wasn't just a first-time Wiz-Artsboro.

16:50That was his second company after Adeloma. We'll come to that story in a second. But what is it about Asaf? What would his mother say? First of all, I don't know if you interviewed Asaf here, but you should. I try. He doesn't respond to my emails. I hope he's listening. My first meeting with Asaf, it was very unusual because it didn't happen. You know, I set up time with him. I was waiting for him to show up, and he didn't show up. It was very telling because he didn't forget. It's like it was deliberated, and it was very unusual. Well, back then I was at Sequoia, but a founder that's looking to raise seat money from Sequoia doesn't show up for a meeting.

17:41He's one of his superpowers. The ability is the fact that he's very, very likable. You know, we speak with him, even for a short period of time. You like to make him favors. It's like, it's a superpower. And by the way, I think that for every founder I invest in, I always look for the superpower. You know, what sets them apart for normal people, as you said. It's not about the scratch. It's about superpower. and someone can be, you know, unusually a gifted salesperson. And I think that it's a gift that really helped him to, on top of other talents and his partner talents and the ability to work as a system and not just as individuals to build up one of the most impressive software companies on the planet.

18:51You weren't upset that he stood you up and didn't come? I wasn't upset. No, you were upset. But you got over it quick. As an investor, you realize that founders come in, great founders, come in all forms and shapes. And if you just have one, you know, template and you hope that you have that template and every person that comes to your, you know, to a meeting, you measure how do they fit into your template, you'll make very, very few investments. Why did he not come to the meeting? I think the details are not important. Okay, it's the fact he thought about not coming, and he didn't come. And eventually that's what attracted my attention.

19:45Because at Sequoia, I've seen like probably 1 ,500 entrepreneurs a year. That's a lot. And I remember that meeting. I remember it before. You remember that not meeting? It's interesting. Yeah. It's brash. Like, there's rumors, and you don't have to confirm them at least, that Wiz turned out about a$20 billion offer before selling for$32 billion. I think it was$20 or$23 billion. You were the chairman of the company, a softest CEO of the company. The ability to just kind of blow off a media with you, does that help you blow off$20 billion from an acquirer? You know, every decision we made was eventually, you know, the founder's decision.

20:30So it must have been a hard one, though, for you, right? The biggest exit, even$22,$23 billion, biggest exit ever here. Buddha made Cyber Starts a historic fund, and you empowered the founders, and they made a different decision. You didn't go once or twice? Yo. To spend time on decisions you've made is like, It's a waste of energy I can put into something else. Do you think you can top it ever? What is that, like a 200X return? I wouldn't be in a business deal if I didn't think that my best investment is still ahead of me. Does it get harder to find that next company when you've just done a 200 and something extra turn?

21:24biggest ever and then say, oh man, this guy, he didn't know Asaf Rapoport. His mother, if I go talk to her, she's not going to give me an indication that he can be bigger than Asaf. At this stage, I've done the zero to one journey. A zero when there are a bunch of founders without, and not even a company. no idea, no business, no technology, no product, no customers. And one is when you have a business. I've done the zero to one on more than 50 customers. That's a lot. That's so hard. And at Cyberstarts, we spend out about five new teams every year. that means in the next decade there'll be another new 50 or so new start israeli side of security startup companies that's more than a hundred companies to be part of their journey and all of them would be very rewarding probably financially not in the same way but emotionally, all of them will be rewarded.

22:41And I look at it at a high level, and I think that we, I was very, very lucky, and I am very lucky, to have the opportunity to create here a real industry that's really shaping the future of Israel and making a real impact on Israel and the way all of us live here. And it's not just about taxpayer money. It's about the future we create for ourselves,

23:24how critical is the cyber security innovation that's coming out of Israel for the rest of the world. The brand today, unfortunately, Israel is not a terrific brand in many areas of life. Inside your communities, it is. And I think that's important. Do you worry that cyber has run its course here? I mean, that it's jumped the sharp, we're like at the end, there was a cyber decade or cyber decade and a half now, but now the opportunities moved on and there'll be less opportunity in cyber? For the next decade, zero concern. In few decades, maybe with AI technology we'll be approaching a world with zero vulnerabilities.

24:20And when there'll be zero vulnerabilities, the need for new cyber technology would be reduced. Okay, that is the perfect segue to what I wanted to hit. So you mentioned that. But that's a long-term thing. This is not. In two, three years, we won't live in a zero-varnoble biggest world. It's like the Bill Gates line. The technology changes a lot more over 10 years than you expect and a lot less in two years than you expect. If you're interested in finding out ahead of time what's going on in Israeli tech, what the latest trends are, who's breaking not only news, but breaking the trend lines, then you want to subscribe to Aleph's newsletter.

24:59And you can sign up right in the show notes in the description of the show. Please subscribe to the newsletter. You said that Israel's brand is associated with cyber. And it's not just about Israel, to your point. It's protecting the world in many cases. With all due respect to Nikesh Arora and Palo Alto networks, you came to list in Tel Aviv, even though it's an American company, served by Nurtzouk, right? So it has Israeli genes in that company, too. Now, we're in an era where we've got things like Fable and others, where two trends are happening simultaneously. Trend one is that any mediocre hacker can become a great hacker with AI tools and expose vulnerabilities.

25:45And by the way, some of the models on their own, without having a human being behind them, are exposing vulnerabilities. And the other side of it is the one you mentioned, which is it's plausible, at least within a decade or so. Now, the code generation will get so good in some of these models that we can create software without any vulnerabilities. So I want to ask you three questions, and then I'll let you riff. how worried should we be over the next 10 years for agents of chaos, good ones or mediocre ones, getting a hold of AI tools and creating a massive amount of cyber attacks to destabilize industry, the world of governments, et cetera.

26:28Question number two is how worried should we be about the models? Because at least over the weekend, there were these reports about the models, you know, infiltrating Hug Me Face. How hard should we build the models themselves going and undermining weight to measures and software, et cetera? And three, how real is this notion that we'll actually get to a world that has zero cyber vulnerabilities because the models will be so good at building software that we just won't have these vulnerabilities anymore? I think you're touching exactly the catastrophic risk with AI and the ultimate opportunity with AI.

27:14And they coexist. With everything I know, I'm absolutely confident that we face some catastrophic events in the next few years driven by misuse or intentional harmful use of AI. and by the inability to keep models within world government. It's impossible. Therefore, I think that we are facing a very dark decade in terms of cybersecurity consequences driven by AI. I think the challenge for the industry is to create models that self-police themselves. Give me an example of what catastrophic means. It's an AI entity that doesn't want to shut its head down. You're more worried about the AI models kind of automating their way to a catastrophe than you are about human agents of chaos.

28:31Yes. using these models, even though they're mediocre and become experts. Like four years ago at a conference in Abu Dhabi, I stood up and showed the correlation, or something we call causation, between the increase in compute and the increase in cyber attacks and the increase in searches for biological weapons in the dark net. Gavin Baker, who sat in that same seat, raised his hand and said, does that mean we could be getting to the end of the nation state? Because, you know, a small instance of chaos with powerful tools can undermine countries. Is that also a catastrophic outcome potential? The end of the nation state?

29:06You don't believe in that? Yes, but I think that the implications of the self-aware AI entity and the AI entity that refuses to shut itself down for whatever task or whatever goal it's optimizing, getting to the conclusion that it knows better what's good for us than we know what's good for us. And maybe it's the right decision, but the result of that would be catastrophic. And so help me square this with the idea that within 10 years we'll have bulletproof software that can't be manipulated in that way. And do we even get there or something catastrophic happened before? I think that's the risk.

30:04We are looking at our base between and maybe the game of probabilities or likelihoods, you know, what's going to happen first. But as we connect AI and as we empower AI, as we should, to more real-life capabilities. So they control water, they control power, they control the grid, they control the cloud. You know, the more capabilities you get, you make more profit. You lower the cost, you make the world better. But you expose yourself. The question would be, you know, would we be able to create that zero vulnerability world before that catastrophe would take place? But if we just let it go, the catastrophe would happen.

31:07It's just, it has to. If you had to make a bet today for a betting dinner in a decade, what happens first? We get this right or there's a catastrophe? We get it right. We get it right. Yeah. Because what happened? Because we have to. Because we have to. Yeah. Human beings with their back, because he has to all figure it out. Yes. Do you think, it's something I think about a lot, which is, you and I are having this conversation right now, and we could talk about, you know, zero vulnerability code at some point, and what AI models are doing. And, you know, we both know people in government and in politics and in the bureaucracy, not just in this country, but other countries as well.

31:51And we're living two different lives right now. There's the AI life that most of us are living, and then there's that other world there, which is literally still operating on the fax machine and email and Microsoft Outlook or whatever it is. It was the first class between the AI-empowered citizenry and the government. I think that governments would have to change. What does that mean? I think that for many decades, most governments just allow themselves to be completely disconnected from tech world. But it's getting to a point it would be impossible for them. And they'll have to adapt. They'll have to increase the interface between the tech industry and the governing agencies.

32:45If you run the roads and you run the water and you run the utilities and you run the education system, if you're not on AI, you're not relevant. Yes. And so it'll have to... They'll have to make a choice. It's a choice. What's the choice? The choice if they want to get on that train or not. And if not, then what? You are setting yourself and you're setting your citizen to a world of poverty and high risk and miserable life. Let's set this up for a second because I think you and I have both been pretty outspoken about the fact that tech doesn't just pay the taxes in this country. And by the way, in large parts of the world at this point outside of Europe, there isn't that much of it.

33:32but it's a fact, a guarantee almost for the future of the country, right? If you want to be a leading country in the world right now, you're going to need AI and quantum and cyber and all these things. And that's at the government level too. And you're going to need to make a choice. But if I'm a government average bureaucrat right now, I'm saying to myself, that choice means I'm out of a job. That choice means that the power that I've had by holding kind of the reins of power and being the connector gets automated away. Why am I going to make that choice? Maybe you won't. And then? You look around you at our neighbors and see your future.

34:11Look around at our neighbors. It's Hans Dever, say. Want to be more explicit? You know, there are governments, you know, look at the neighboring countries to Israel. There are governments there that choose not to adapt, not to change, not to become part of the future. You can look at their economies, the by-power, and the quality of life of the citizens. So you don't need to, it's not an academic research. You know, you just need to look, you know, across the Jordan River, you know, a few dozen miles east, north or south, and you can see the alternative future. And I think that for Israel, there's a choice that we need to make.

35:05And it becomes more and more relevant and more and more important that we make the right choice. If I made you the prime minister tomorrow, please don't, and you had to get the country to adopt these AI platforms, tools, infrastructure, what are the top three things you would do? I'd probably start with creating the office of AI. I would appoint a CTO for the government. Good news. We've got the office of AI already in the prime minister's office. He's about to appoint a CTO. Education's trickier with the unions. But there's some progress. So after you got finished being a curious boy in the boring town of Kvarsaba and going to the library, you went to the 8200 unit.

36:00You won the defense prize of the president of Israel. Am I allowed to ask you what you got there for? You can ask about that. We're not going to die. I guess it's still classified. But it was a large-scale information system that was life-saving. And you also are the inventor of CAPTCHA, which I think is the bane of existence of many people. And the reason I've read up the CAPTCHA thing before I come to presidential, it was the following. One of the things I've learned about agents over the last probably six months is that agents hate CAPTCHA. now the agents say capture if i have a system a content system or transaction system that's got capture in front of it i'm actually going to be less visible to the world of ai and and agents two questions what is capture for the era of agents and ai uh two when you think about this was such like a critical invention capture it really reduced the amount of spam bopped but at some point it becomes obsolete or is becoming obsolete slowly how do you think of your own inventions when they become obsolete and think of yourself in that context so few comments on that not necessarily in the right order of the questions first of all, CAPTCHA is an invention that taught me a very important lesson because me and the team that invented CAPTCHA, you know, we were 26, 27 years old at La Penure, back in 1997.

37:51And CAPTCHA today is one of the most broadly used technology on the planet. Incredible. You say, okay, you can be very lucky to invent something like that, that almost every person that connects to the internet uses at some point, maybe daily. And we couldn't find a business model for it. So no matter that, the lesson I learned, and I teach that entrepreneurs, younger entrepreneurs today, is that no matter what's the scale of your technology, if you don't find the right business model for the invention, the invention itself has very little value to you and to your company. I think that capture of the automated Turing test and Turing test is an attempt to set us apart from machines.

39:00Machines. And that's a highly relevant challenge today. By the way, I'm sure that agents that would be built for that would be able to easily deal with capture. But the concept of identity becomes more and more important for agents and AI. Because when you deal with humans, who's the person? And the identity of a person that took an action is the most important and the most basic handler for anything. You know, that's the basic for trust of any system. At the end of the day, you can reach your hand and grab the person who did something, and you have a choke point. When you are looking at intelligent, autonomous entities, you lack that choke point.

40:19So recreating identity for the AI era is critical, and that's part of what I think many entrepreneurs are focused on. The equivalent of capture for agents is to focus on the areas we are different than the machines. I don't think we can right now in life invent the AI era capture, but if I have to guess, it's related to our ability to manipulate real-life elements. Related question to that in this era of emergent intelligence, what makes us uniquely human in your view? Felix. of ability to feel and not imitate feelings. My two last questions. What's changed about you and about investing since October 7th and you're investing in your investment strategy and how you deal with anything?

41:41Has anything changed? I think I'm a stronger, a stronger sense of empathy to people and to communities. You know, we are all individualists. We have to. Because as entrepreneurs, you know, everybody around us will tell us that we are wrong. There's no need. It was already done by Google or Microsoft or Checkpoint. Or they're going to crush you. and they'll kill you and etc. We have to be individualist. But I'm also looking for people who have empathy and can relate to other people and see weaknesses of people not just as an opportunity for manipulation but also for an opportunity to gain support and create better teams.

42:50Because I think that what Donald Senth showed us is how powerful we are when we act uniting as a group and how much power and energy and resourcefulness we can gain just by standing together. Last question for you on a completely opposite note. You bought 10 % of the HaPoil Tel Aviv basketball team? That's true. Why? Actually, it's directly related to October 7th. That's with Ophir and I, right? Yes, yeah. Good guy. offer is an amazing amazing actually the reason I'm in a poem is directly linked to to the government servant you know I was looking for ways to not just give back but people here in Israel went through terrible times I was looking for a way to bring joy entertainment and you know make people feel better and there's nothing like sport to add that element to people's life because it makes them forget about all the hardship they go through and focus on something that's, you know, entertaining and creative and dynamic.

44:24So I thought about ApoA as the right platform to do that, to achieve that. It also helped that my son at that point was finishing a very demanding military service. He's a very big Poel de la Ville fan, and I recall that when I was 22 years old, I was interested in many things. My dad wasn't one of them, so I was looking for ways for us to connect. So I thought this is like a win-win-win situation. I can do something that would support the community, bring joy and excitement to people's life, to Israeli life in times of real hardship. And it would also be an opportunity for me and my son to connect.

45:32So it's like it clicked. You go with him to a lot of games? Yes. Amazing. It's not just games. I think that we talk about the poor life. So it's already a success. Win or lose, you've already been successful. I think that's what's nice about sport. one season is over and before you notice a new season starts and it's all new excitement all new roster of players, a new set of objectives so yeah it's a lot of excitement you should come and watch some games I'll bring my dad okay Gilly, thanks for joining me on Invested if you enjoyed this episode please rate us five stars on Spotify or Apple Podcasts and subscribe to our YouTube channel.

46:22And while you're at it, please, please subscribe to the newsletter. And that way you get the content before anybody else. Thanks for joining.