Microsoft and Qualcomm invest in Israeli startup foundry Team8

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Major tech firms regularly fund startups with technology relevant to their market or strategic goals, but it’s much rarer to see an investment in a venture capital firm.

As a result,  Israeli security incubator Team8 attracted quite a bit of attention today after revealing that it has raised an undisclosed amount of financing from Microsoft Corp. and Qualcomm Inc.’s investment arms. The two tech giants join an already formidable list of backers that includes Bessemer Venture Partners and Innovation Endeavors, the personal venture fund of Alphabet Inc. Executive Chairman Eric Schmidt (above, second from right). They have together funneled more than $92 million into Team8 since its inception in 2014.

The reason for the interest in the firm lies with its unique operating model. Whereas conventional venture funds seek to back startups that have a working product or at least a value proposition, Team8 forms its own cyber security teams internally. Then once a project has reached a certain stage of maturity, its members are spun off into a new company and provided with resources to commercialize their technology.

Team8’s approach has already produced a number of promising startups, most notably Illusive Networks Ltd., which develops so-called deception-based security software. Its platform can create mock systems inside a company’s network that are designed to divert attackers’ attention from the real infrastructure. In addition, each such honeytrap contains false information that can make it incredibly difficult for hacker to plan out their next step.

Team8 claims that Illusive Networks and the other startups in its portfolio have generated over $22 million in revenue during 2016. According to Bloomberg, the firm will launch two more companies this year using the funding from today’s investment. Team8 also plans to hire about 100 additional workers to bolster its internal venture team, which currently consists of about 180 people based mostly in Israel.

The reason there are many employees on staff is that the firm provides much more than funding to the startups it creates. Team8 supplies the capital alongside business guidance, networking opportunities and other assistance that will be bolstered by a partnership with Citigroup Inc. announced in conjunction with today’s investment. Nadav Zafrir, the fund’s chief executive, said the alliance will “dramatically improve our research capabilities and access to the world’s biggest enterprises.”

Image courtesy of Team8