Why we created Merlin Ventures
There are 607 venture capital firms operating in Israel. (Trust us. We had our poor analyst count them.) Of those, 146 do cyber investments. So clearly what Israel, and the world at large, needs now is pretty much anything other than one more cyber-focused VC.
Given what some might perceive as a glut in the VC market, one may ask, “What drove us to create yet another cyber-focused VC? Why not just take the money being invested in this effort and put it into something useful, like Dogecoin?”
To answer that, let’s start by taking a step back and looking at where Merlin Ventures came from. Our story begins 25 years ago, when our fearless leader David, drawing on experience gained from his time in the Navy as well as with various defense contractors, decided to start a new company. Over those 25 years, Merlin International did many things, including software development, government services, and software sales.
As the company grew, the Merlin team realized that they excelled in bringing the best cybersecurity players in the commercial market into the U.S. federal market. By helping them navigate the federal market, Merlin International (by now renamed Merlin Cyber) brought the federal government best-of-breed solutions from companies that otherwise might never have been ready to operate within the public sector.
That brings us to today. Merlin Cyber continues to work with some of the most successful software companies in the world, helping them to solve the critical cybersecurity challenges of one of the most important customers in the world. But larger, established players are only part of the cybersecurity ecosystem. Many of the most forward-looking solutions come from startups unencumbered by existing business models and the need to support legacy products. Such companies bring together the best and brightest minds from industry, academia, and the military and create truly amazing solutions that federal customers desperately need.
I saw this first-hand during my five years at In-Q-Tel, a VC firm stood up by the U.S. government to help bring the most innovative startup technologies into the Intelligence Community (IC). But IQT focuses on just bringing capabilities to the IC. As a result, most of its efforts focus on U.S.-based startups. IQT is also a non-profit. While they do their best to help startups meet the needs of their customers, there are legal limits as to what they can provide in terms of helping such startups to sell products.
Thus, when Merlin approached me about building up a new VC that could leverage the capabilities of Merlin Cyber to help bring novel technologies into federal agencies, something clicked. Here was a chance to work with companies from Israel and other allied nations that had amazing capabilities and actively help them to succeed in a market that desperately needs their innovations.
To be clear, Merlin Ventures is not looking to bring early-stage startups into the federal government on Day One. A company that has just raised its Series A funding typically needs to focus on building commercial traction before it can invest the resources needed to successfully tackle the federal market. But having the right guidance at that stage to know where and when to invest to prepare for the massive federal and broader public sector market is key.
That’s where the Merlin Ventures’ model comes in. We are looking for emerging startups that are going to turn the cybersecurity world on its head. We want to find them before they are ready to tackle the public sector market, serve as an advisor to help them succeed in the commercial market, and, when they are ready, equip them with resources that will help them accelerate into federal far faster than they’d be able to do on their own.
So that’s why there are now 607 VCs in Israel. Because with 606, there was still a gap that needed to be filled.
For more about Merlin Ventures, watch my recent interview with Gartner Israel: