International VC Survey 2026
“The Israeli startups that will win are the ones building focused AI”
Canaan general partner Joydeep Bhattacharyya joined CTech for its 2026 International VC Survey.
“Even a very smart person will struggle if you put them in front of a highly complex cybersecurity environment without the right training, structure, and context. The same is true for AI models. A model without a proper harness and context will not be successful,” said Canaan general partner Joydeep Bhattacharyya.
When asked where he sees Israeli startups establishing a defensible edge as AI shifts from copilots to more autonomous systems, he explained that “Defensibility lies in how companies structure data, context, and workflows around it.”
“The Israeli startups that will win are the ones building focused AI: preprocessing data correctly, deeply understanding the domain, and creating systems that make AI much more useful in practice. That is particularly true in cybersecurity, where context matters enormously.
"Over time, some companies will also build defensibility through proprietary data, more customer usage, and increasing workflow stickiness. That combination of domain expertise plus compounding data advantage is where I think the strongest moats are emerging,” he said.
CTech reached out to Canaan to explore the evolving "remote" VC-founder relationship and the specific strategic markers that attract global giants to the Israeli market in 2026.
You can read the entire interview below.
ID CARD
Fund Name: Canaan Partners
Total Assets Under Management: $7B+
Notable Portfolio Companies: Novee, Dragos
Notable Exits: Aim Security (acquired by Cato Networks), Axis Security (acquired by HP Enterprise), Jina AI (acquired by Elastic), MachEye (acquired by Verint), SAVVY (acquired by Sailpoint)
As we move through Q1 2026, are you seeing early signs of the IPO window reopening for Israeli tech, or does M&A remain the more realistic exit path in the near term? What indicators are you watching most closely?
The public markets remain fairly volatile, aside from a handful of very large, category-defining IPOs. There are a few companies that are large enough, durable enough, and visible enough to potentially break through if the window reopens. But for most companies, particularly in cybersecurity, I think M&A will remain the more likely outcome over the next 18 to 24 months.
Large incumbents increasingly understand that AI is forcing them to reinvent themselves. Many of the capabilities they need are not being built natively inside large organizations, which means they will continue to look externally for innovation. We are already seeing that across software, infrastructure, managed services, and cybersecurity.
The indicators I am watching most closely are overall market volatility and the stabilization of public market multiples, particularly in cybersecurity. Since security is such a large part of the Israeli ecosystem, it tends to be one of the clearest signals for when broader IPO activity may begin to reopen.
Post-market correction, which performance metric is actually driving conviction in Israeli companies right now? Are investors prioritizing something specific to the current cycle?
At the early stage, I do not think conviction is being driven by a single performance metric. We still spend most of our time underwriting the team, the market, and the company’s ability to adapt.
What we are particularly excited about right now are AI-native company builders — founders who are using advances in model performance to make their products better, rather than trying to build foundational models themselves.
In cybersecurity in particular, both the offensive and defensive sides of the market are being reinvented by AI, so nearly every category is being reshaped. We are looking for founders who understand where the category is headed, where AI is changing the cost structure or workflow, and where there is an opportunity to build something that compounds over time.
The founders who stand out are the ones building products that improve as the underlying models improve, while also showing strong judgment around where to build proprietary workflows, context, and domain knowledge.
How are you currently pricing geopolitical and operational risk when evaluating Israeli companies?
What we have seen over the last two and a half years (in our portfolio and beyond) is that Israeli companies have continued to execute extremely well despite a very difficult environment.
For investors like us, who have been backing Israeli companies for more than two decades, the key is making sure companies have strong business continuity plans. That means having go-to-market and customer support teams also located in North America, ensuring geographic diversification across the organization, and maintaining contingency plans to relocate portions of R&D if needed.
If those things are in place, the geopolitical risk isn't nearly as difficult to underwrite as many people assume. In many cases, the quality of the talent, the culture, and the pace of execution more than offset it.
For foreign investors specifically, what has been the most persistent friction point when deploying capital into Israel recently? Is it regulatory clarity, talent mobility, capital structure, or something else?
For most investors, the main source of friction remains geopolitical uncertainty. Outside of that, regulatory clarity, capital structure, and talent mobility have not changed.
The important caveat is that we have been investing in Israel for more than 20 years, and more than 60% of my active portfolio is Israeli. So what may not feel like friction to us could still feel like friction to a generalist investor or someone without the same local network and familiarity.
Long-term relationships matter. When you know the ecosystem, the founders, and the operators, it becomes much easier to separate headline risk from actual company risk. The quality of the Israeli cybersecurity talent base remains extremely strong, and that has not changed. We remain very bullish on investing in Israel.
Israeli founders are often associated with speed and adaptability. In the current environment, does that still translate into an advantage, or are you seeing stronger outcomes from teams that skew toward operational discipline and predictability?
I still think speed and adaptability are enormous advantages, particularly in a market where AI is changing every few weeks.
Israeli founders have a unique ability to move quickly, talk to customers, make necessary pivots, and keep refining product-market fit as the environment around them evolves. In 2026, that is one of the most important characteristics a company can have.
The other major advantage is domain expertise. In cybersecurity in particular, many Israeli founders come from highly specialized military backgrounds and have dense networks built through those shared experiences.
That combination of domain knowledge plus agility is incredibly powerful. Operational discipline matters, of course, but in a market that is changing this quickly, I would still take the founder who can learn, pivot, and execute faster than anyone else.
Looking at deal flow today, where do you see the largest disconnect between perceived risk and actual opportunity in the Israeli market?
I think the largest disconnect is that many investors still overestimate the operational risk and underestimate the resilience of the Israeli ecosystem.
There is obviously a lot of geopolitical noise in the market, but when you look at the actual performance of many Israeli startups over the last several years, the execution has remained remarkably strong. The talent base is still exceptional, the cybersecurity expertise is still world-class, and the founders are still moving very quickly.
For us, the real opportunity comes from having spent years building relationships and pattern recognition in the market. When you know the ecosystem well, it becomes much easier to identify where the actual risk is overstated and where real opportunity hides behind the headlines.
That is also where having a dedicated operating platform team matters. We spend a lot of time helping companies with North American go-to-market strategy, customer introductions, and scaling GTM teams outside Israel. That support can materially reduce risk and help companies move faster globally.
