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How Eric Schmidt, Cisco, And An Israeli Spymaster Launched A New Cybersecurity Incubator

Nadav Zafrir, the former Unit 8200 chief, has brought many entities together. One partner calls it a “kooky structure” for a company.

How Eric Schmidt, Cisco, And An Israeli Spymaster Launched A New Cybersecurity Incubator
[Photo: Flickr user Tradlands]

A new cybersecurity incubator named Team8 Ventures that is exiting stealth mode today has an unusual pedigree: Co-founded by the recently departed chief of Israel’s cyberspy program, the incubator is launching with a $18 million funding round from Google executive chairman Eric Schmidt’s Innovation Endeavors, Bessemer Venture Partners, and Marker LLC, along with input from Cisco and Alcatel-Lucent. Team8’s apparent goal? To leverage the offensive and defensive skills of veterans of Israel’s cyberwar efforts to build new security startups which the company describes as “disruptive.”

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Team8’s foundation is also a striking example of how the cybersecurity field has begun to meld and merge with the global military-industrial complex. Indeed, just today, the White House announced the formation of the Cyber Threat Intelligence Integration Center, launching with a staff of 50 people and a budget of $35 million. “The cyberthreat is one of the greatest threats we face, and policymakers and operators will benefit from having a rapid source of intelligence,” Lisa Monaco, assistant to the president for homeland security and counterterrorism, told the Washington Post.

As for Team8, the incubator’s co-founder, Nadav Zafrir, headed Israel’s Unit 8200 (an elite surveillance unit roughly equivalent to America’s NSA) until 2013. Two of Team8’s three other co-founders, according to publicity materials, are also 8200 alums; the other, Ronni Zehavi, founded cloud app deployment firm Cotendo, which was sold to Akamai in 2011 for $268 million.

In a telephone conversation with Fast Company, Zafrir said that Team8 (get it: Teammate?) plans to raise additional funds in 2015, and has initial plans to launch between four and six cybersecurity companies.

The incubator’s first planned company, helmed by Ofer Israeli of security firm Check Point, is in stealth mode and focuses on mitigating targeted attacks on large organizations with more than 10,000 employees in the financial and retail spheres. Other companies are expected to focus on threats to data centers, utilities, and government entities. Zafrir added that, “It’s how we put the team together which is different than what you see in most startups. What you usually see is people with a long background of working together who are pretty homogenic, but we believe that to solve big problems you need people from different backgrounds who are divergent but can tackle them together. Actually, one of our assets as individuals is experience looking at problems that are considered unsolvable, and building resources and formulas to attack them. We don’t know if it will work, but we will try them.”

“A Kooky Structure”

Although Team8 exits stealth mode this week, the incubator has been in the plans for quite some time. Israeli financial newspaper Calcalist first announced their plans in summer 2014, and Zafrir has been embarking on a series of high-profile appearances including presentations at Davos and alongside former NSA director Keith Alexander at a Tel Aviv cybersecurity conference.

They also work on an extremely unusual model for an incubator. David Cowan of Bessemer Venture Partners, best known for co-founding VeriSign, characterized their model as a “kooky structure,” with Team8 functioning as an independent company with employees and assets of their own which will then spin off their talent into new startups as time goes by. Those employees appear to predominantly be veterans of Unit 8200 and similar Israeli cyber entities; Cowan confirmed that a large percentage of Team8’s talent comes from offensive cyberwar backgrounds.

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Team8 is also working with extremely large and well-connected tech giants to develop new projects. Alongside the involvement of Google’s Schmidt, Team8 is working on what the incubator describes as “strategic research and engineering partnerships” with Cisco and Alcatel-Lucent. Zafrir added the collaboration included work with Bell Labs on differentiated research and with high-level Cisco engineers.

What that means is that two of the world’s largest tech companies get to leverage the more cloak-and-dagger skillsets many Team8 employees have for projects of their own, and to provide input on needs they have where the 8200 veterans can help. Both Alcatel-Lucent and Cisco have extensive and expensive government and private-sector contracts related to both cybersecurity and surveillance. For instance, each company manufactures communication interception systems of a sort used by both sides in the Russia-Ukraine conflict to monitor civilian phone calls, email, and text messages through backdoors.

But the question remains: Why are the ex-Israeli spy chief and intelligence veterans transitioning to the startup world? The answer has much to do with cold hard cash—President Obama’s 2015 budget calls for a record $14 billion to protect against cyber threats—and with the endless opportunities for cyberwar veterans in the contemporary economy. Much like retiring high-level military officials in the Cold War graduated into comfortable executive posts at defense contractors, cyberwarriors leaving active service can now do quite well serving the private sector and government entities worldwide. Alongside Team8, Zafrir, for instance, also serves an advisor for automobile cybersecurity firm Argus. Alexander, the former NSA chief, now reportedly charges upwards of $1 million a month for his cybersecurity services; investments he made in various technology companies during his NSA tenure have raised eyebrows.

Entities like Team8 can succeed in the newly emerging cybersecurity version of the military-industrial complex, where private entities and government entities hire cybersecurity firms almost like mercenaries that can protect them from organized crime, hacktivist, military, and foreign government threats. Israel has one of the world’s strongest governmental cyberwar portfolios, as do China and the United States; and current events vindicate any company or incubator approaching large companies with cybersecurity protection. As long as there are hacks like Anthem and Sony, there will be eager buyers in search of safer systems, and enough smart white hat hackers to stay one step ahead of the black hats.

Correction: An earlier version of this article mistakenly identified Innovation Endeavors and Alcatel-Lucent as Innovation Ventures and Lucent Technologies.