Merlin Ventures raises $75 million to back next wave of Israeli cybersecurity startups
New fund targets growth-stage startups as AI and compliance reshape market dynamics.
Israeli-American venture capital firm Merlin Ventures has raised $75 million for its second Israel-focused fund, aiming to accelerate growth-stage cybersecurity startups and help them penetrate U.S. and global markets. The fund will be managed by Shay Michel and Seth Spergel, Managing Partners at Merlin Ventures, along with David Phelps, CEO of the Merlin Group.
As part of the new fund, the firm announced the promotion of Almog Golod to Partner, after serving as Director, and the promotion of Tav Spector Levi, formerly Head of Business Development and Strategic Partnerships, to Operating Partner.
Merlin’s previous $53 million fund, launched four years ago, invested primarily in Israeli cyber startups. Of the ten companies it backed, six have already been acquired, including high-profile exits such as Talon Security and Dig Security, both snapped up by Palo Alto Networks.
The fund's advisory board includes a number of high-profile figures from Israel’s cybersecurity and tech ecosystem, including Ofer Smadari, founder of Torq; Ofer Ben-Noon, founder of Talon Security (acquired by Palo Alto Networks); Dan Benjamin, founder of Dig Security (also acquired by Palo Alto Networks); and mentalist and entrepreneur Lior Suchard, who joined as a LP in June.
In an interview with Calcalist, Michel said this is the firm’s first independently raised fund. “From the moment we began managing Merlin’s capital, we wanted to establish an independent vehicle. Merlin remains our anchor LP, but we saw overwhelming demand from other investors as well, so much so that the fund may expand beyond $75 million.”
Michel points to heightened interest in Israeli cybersecurity as global corporations scramble to comply with increasingly complex regulatory environments. “Until last year, few startups asked for help in securing compliance certifications. Now, it’s a major barrier to entry, especially for working with large enterprises or the U.S. government. If you don’t have the right certifications, you’re simply not getting in the room.”
According to Michel, government-grade compliance has become table stakes even for startups not directly working with federal agencies. “Most Fortune 100 companies have government contracts. If you want to work with them, you need the licenses they require, even if you never interact with the government yourself.”
This regulatory shift is being driven in part by second-time founders, who learned the hard way how difficult it is to scale in highly regulated environments. “Many of them now prioritize compliance from day one,” Michel said. “Once you’ve cleared that hurdle, a massive new market opens up.”
Since establishing its Israeli presence in early 2021, Merlin Ventures has enjoyed a strong track record. Recent exits include InfoSec Global, acquired by KeyFactor, and Veriti, which was sold to Check Point. The new fund has already made two investments in partnership with Lightspeed Venture Partners and Norwest Venture Partners.
“After four years of investing in cyber, we’ve realized the traditional venture model needs to evolve,” said Michel. “Startups today, especially in cybersecurity, need more than capital. They need infrastructure, relationships, and strategic support from day one. Our new model is closer to private equity in its level of engagement.”
Merlin Ventures is also launching the Genesis Program, a new accelerator-style initiative designed to help portfolio companies move from idea to revenue faster, especially in an era where artificial intelligence is compressing product development timelines. The program offers practical guidance, early-stage resources, and U.S. market access powered by Merlin’s presence in the federal sector.
“We’re seeing a new generation of AI-native cybersecurity startups emerge,” Michel added. “They’re building at a scale, and speed that wasn’t possible even five years ago. Our job is to make sure they’re ready to take full advantage of that.”
