Cyberstarts is looking for another Tel Aviv tower to house its growing startup empire
After leasing 15 floors at Landmark B for a shared campus for its portfolio companies, the $1.4 billion cybersecurity fund is now exploring options for a second location.
Cyberstarts’ appetite for real estate in Tel Aviv is not yet satisfied. After leasing 15 floors at the Landmark B Tower in Tel Aviv’s Sarona complex to create a shared campus for its portfolio companies, Calcalist has learned that the venture capital fund is now looking for another tower.
Gili Raanan, co-founder of Cyberstarts, and general partner Dor Knafo are in talks with several real estate companies to explore options for a second location for the fund’s portfolio companies. The fund, which manages $1.4 billion, is considering the possibility of a dedicated tower built for Cyberstarts, although vacant space is also available in nearby projects such as TOHA2 and the Spiral Tower, which is currently under construction.
Nine of Cyberstarts’ 25 portfolio companies are expected to move into Landmark B, which is scheduled to be occupied in about a year. The largest companies in the portfolio, including Island, Upwind and Cyera, will remain in their existing offices. Cyera is currently based in Landmark Tower A.
The companies moving to what Cyberstarts calls its “Cyber Campus” are primarily smaller startups with between 100 and 200 employees. They are expected to include Glow, Vega, A Security, Onyx, Surf and Spirit, all of which have raised significant amounts of capital over the past year and are now in periods of rapid expansion.
Cyberstarts itself will occupy part of a floor that will serve as a common area for the campus. It is expected to include shared facilities such as a gym and cafe. Each startup will design its own offices, while the underlying infrastructure will be standardized across the campus in an effort to reduce costs.
In April, Cyberstarts signed an agreement with real estate companies Melisron and Afi Properties to lease 15 floors covering 22,400 square meters. Another 13 floors in the tower are leased by Wiz, a former Cyberstarts portfolio company that was acquired by Google this year for $32 billion.
The upper floors of Landmark B will contain 116 residential apartments. The tower is scheduled to receive its Form 4 occupancy permit by the end of the year.
Landmark A already has a substantial cybersecurity presence, with companies including Cato Networks, Tenable and Cyera operating there. Once Landmark B is occupied, the two towers could effectively turn the Sarona complex into a hub for Israeli cybersecurity companies.
For Cyberstarts, the strategy is intended to address a practical problem facing fast-growing startups: finding office space as headcount increases. Rather than having each portfolio company repeatedly relocate or search for additional floors in the same building, the fund wants to create a pool of space into which companies can expand.
The arrangement also gives Cyberstarts greater negotiating leverage with landlords. Because the lease is signed with the fund rather than individually with each startup, the portfolio companies are expected to pay rents approximately 20% below market rates, according to estimates. The startups, however, will pay their rent directly to Melisron and Afi Properties rather than to Cyberstarts.
“We have made 35 investments to date, and the pace is four to five new companies a year, so the calculation is that many more startups will eventually need a real estate solution,” Raanan said. “From the moment we announced our plan for Landmark B, there was high demand among the portfolio companies, and not all of them had space.”
“Today, almost no one works from home, and AI has not yet dramatically affected demand for cybersecurity manpower,” he added. “We will eventually have several towers in Tel Aviv and become the largest tenant in the city.”
The strategy could also create a more concentrated talent market among competing cybersecurity companies. But Raanan and Knafo reject concerns that startups will be reluctant to share a campus because employees could be more easily recruited by rival companies.
“We believe in a free market, and even today, in towers with many high-tech companies, there is no problem approaching employees of competitors,” they said. At the same time, they argue that bringing companies together could make it easier for founders and executives to exchange advice, particularly when one company has already dealt with a problem that another is facing for the first time.
The longer-term ambition is therefore not simply to give Cyberstarts’ portfolio companies cheaper office space, but to create a network of locations where startups can grow without having to leave the fund’s real-estate ecosystem as they expand.
“Our expectation is that even the smallest companies today will be able to grow within the future campuses that we establish,” Raanan said.
