Gili Raanan on Venture Entry Prices, Growth and Private-Market Liquidity

Cyberstarts founder Gili Raanan joins Harry Stebbings to discuss venture entry prices, startup growth, margins and private-market liquidity. Raanan is an investor in several companies he describes, including Wiz, Cyera and Island. His statistics, company figures and investment conclusions are his account and opinions, not independently verified results or individualized investment advice.

Raanan argues that venture returns are unevenly distributed and that success for a small group of firms does not mean the entire asset class will work equally well. He worries that rising entry prices and the volume of capital could lead to losses for many investors. This is his forecast, not a demonstrated outcome for a specific fund.

He says his perspective is concentrated on cybersecurity and estimates that roughly 350–400 new teams receive funding each year across the US, Israel and some European markets. His historical and future counts are rough estimates; the interview does not disclose the dataset, definitions or methodology.

Raanan recalls backing Assaf Rappaport’s earlier company Adallom at approximately a $15 million post-money valuation and contrasts that with higher current entry prices. He says his memory may not be exact. The example illustrates his concern about price; it does not establish returns or a market-wide valuation series.

He cites his count of Israeli cybersecurity companies reaching unicorn valuations in recent years, with 2021 as an outlier, and estimates one or two successes per roughly 150 new companies. The interview does not provide a cohort study or validate the count. Reaching a private valuation is not the same as a realized exit, and comparing companies founded in one year with unicorns in another does not by itself calculate a cohort success probability.

Stebbings offers a counterargument: larger markets and outcomes might justify higher entry prices. Raanan accepts it as a legitimate argument and agrees that cybersecurity needs investment, but maintains that uncertainty at the seed stage makes entry price important. Their difference concerns expected returns, not whether security innovation has value.

Asked whether larger funds can earn venture-like returns, Raanan says firms with established discipline and strong investment processes may continue to do well. He believes fast-growing companies can need substantial capital and encourages founders building at scale to raise it. His concern is the price paid, and his confidence in selected managers is a judgment rather than a guarantee.

Raanan says seed investors have limited information because teams, products and markets can change quickly. He describes himself as skeptical when an early investment in a team comes at an inflated price, although he considers other factors too. His characterization of investor ‘greed’ is his investment philosophy, not a rule that low price alone determines success.

He considers growth velocity an important signal but says investors should examine whether it arises organically or is engineered through spending. His belief that a rapidly growing company will often continue to grow reflects his experience, not an assurance; customer demand, competition, funding and markets can change.

Raanan describes Cyberstarts’ ‘Sunrise’ product-market-fit process as an attempt to align a customer pain point with a solution people use, buy and recommend. He cites early quarterly sales figures for Wiz, a Cyberstarts portfolio company, to illustrate rapid growth. The dates, numbers and definitions are his recollection and are not independently verified in the conversation.

Stebbings asks whether strong companies can still zigzag. Raanan describes Cyera, another portfolio company, as having early sales followed by two quarters without sales, then says the team made changes and sold $12 million of new business in the following year. He attributes the response to the founders; the company figures are his account, not audited disclosures.

Raanan says rapid growth can reflect product-market fit, execution, timing or weak competitors, but agrees with Stebbings that many companies plateau. His argument is that understanding the source of growth matters. It does not eliminate the risk that a previously successful product reaches a market limit.

He gives NoName, a Cyberstarts portfolio company focused on API security, as an example of a fast-growing business whose narrower market made a broader product transition difficult. He says it was sold to Akamai for roughly $500 million. The sales trajectory and transaction figure are his recollection, and should not be treated as independently verified realized fund returns.

Raanan contrasts that with Island, another portfolio company, whose enterprise browser targeted a market he says customers had not explicitly requested. He cites a private valuation of about $5 billion and customers in financial services. Both the valuation and customer characterization are his claims; a private valuation is not a realized exit.

He says competing against free browser alternatives makes the Island example unusual. His wider lesson is that venture outcomes are often exceptions, so investors should be cautious about applying a single historical lesson mechanically to every startup. That caveat qualifies his own growth heuristics.

Stebbings worries that too much funding can tempt young founders to expand products, geography and hiring prematurely. Raanan says he does not share that concern when a team has product-market fit and can use capital effectively. He distinguishes money as a cushion from spending inefficiently to manufacture growth.

Raanan gives an illustrative sales-and-marketing calculation: spending a dollar to generate only ten cents of new ARR would concern him, while a stronger and improving yield could support further investment. These numbers are examples with no standardized measurement period supplied, not universal thresholds for evaluating a business.

He says founders trusted with critical security products should also be trusted to manage a cash cushion, rather than having investors ‘babysit’ them. Stebbings’ counterpoint remains that rapid expansion can create distraction. The disagreement is about governance and capital allocation, and neither approach guarantees execution.

On AI inference costs and gross margins, Raanan says there is not yet enough history to know what a healthy mature AI company’s economics will look like. His experience suggests healthy cybersecurity businesses need strong margins, but he says he rarely makes margin optimization an early-stage discussion. He distinguishes prioritizing it later from claiming it never matters.

Raanan describes helping founders identify which problems must be solved now and which can wait. For an early cybersecurity business, he would prioritize the foundations of a healthy product and market before revisiting margins in later years. He explicitly says the timing may differ for AI businesses; this is a sequencing judgment, not a universal rule.

Asked whether expectations of growth have changed, he gives a hypothetical sequence in annual new ARR: fourfold, fourfold, threefold and threefold. Starting with $1 million of new ARR in year one, that arithmetic gives $144 million of new ARR in year five. He is describing new ARR added in each year, not total ARR or recognized revenue.

Raanan says exceptional teams may exceed historical growth benchmarks, but he would still consider slower illustrative sequences impressive. His examples are heuristics for discussing company building, not predictions that a particular business will sustain those growth rates or earn a given valuation.

Stebbings cites low public-market revenue multiples for software companies and asks how founders should respond. Raanan says he is not always confident he understands public markets; his guess is that investors anticipate slower growth or displacement by autonomous software. He predicts multiples could recover if strong growth persists, but does not establish that outcome.

Raanan considers longer periods in private markets functional and sustainable. He describes an IPO primarily as a signal to customers, employees and partners that the company is established, and says restrictions can limit immediate liquidity. This is his perspective: listing structures, fundraising proceeds and lockups differ, so it is not a universal description of every IPO.

He sees secondary transactions first as a way to retain employees. Early employees may be fully vested and have much of their family wealth tied to one private company; he argues that some liquidity can help them diversify without leaving. Actual employee outcomes depend on price, eligibility, taxes and the terms of a particular transaction.

Raanan discloses that Cyberstarts created an employee-liquidity fund intended to support recurring tender offers for portfolio-company employees. He cites a program involving Cyera and says management and investors negotiate the price. Other investors may participate, he says. This is his description of a fund in which his firm has an interest, not an independent assessment of its terms or fairness.

He adds that secondary sales can return capital to limited partners as well as provide liquidity to employees and founders. Raanan regards the development as positive, while recognizing that other approaches are possible. Liquidity and pricing are not guaranteed simply because a secondary program exists.

Raanan says Cyberstarts sold Wiz shares in secondary transactions and regrets each share sold because holding longer would have produced better performance in hindsight. He says the sales seemed responsible at the time and helped demonstrate liquidity to limited partners. The interview does not provide complete sale prices, dates or independently verified fund returns.

Stebbings raises a possible conflict: a general partner seeking distributions to support a future fundraise may sell earlier than a limited partner who wants continued exposure. Raanan says many of his limited partners welcomed the Wiz liquidity, while one or two preferred more risk. He still believes the decision was right for the firm at the time even though he regrets the foregone upside.

Reflecting on his development as an investor, Raanan says he has helped take dozens of companies from an idea toward a business and continues learning from founders. He finds venture difficult because the quality of a decision may remain unclear for years. He values the opportunity to become a better listener through repeated partnerships and setbacks.

Stebbings asks what younger investors should do when familiar growth and margin frameworks seem less reliable. Raanan advises learning from experienced investors while using one’s own judgment. He does not offer a replacement formula or claim that intuition removes uncertainty.

Asked whether he has a monopoly on Israeli cybersecurity deals, Raanan says he does not know and does not focus on it. He says there have been a few deals he did not see and others he regrets missing, but his recollection is not a market-share audit. He prefers to devote attention to the founders and portfolio companies he already supports.

Raanan acknowledges losing deals and says there are always ways to improve the firm. His standard is to focus on the quality of the next investment rather than trying to win every opportunity. That approach reflects his priorities and does not imply that any investor can reliably predict all future winners.

For building a venture partnership, he recommends allowing people to work from their distinctive strengths instead of forcing everyone into one partner’s operating style. In his view, improving a weakness to the market average may create less advantage than developing an exceptional strength. Stebbings reflects that imposing his own style has sometimes constrained colleagues.

In quick fire, Raanan says he has placed more emphasis on chemistry with founders and regards relationships between co-founders as extremely important. He looks for evidence that they know each other and have faced challenges together, while acknowledging that an investor cannot always know how a relationship will hold up.

He credits colleagues at Sequoia, including Doug Leone, Michael Moritz, Jim Goetz and Pat Grady, with helping him mature as an investor. He describes the difficulty of feeling outperformed by accomplished peers and says shutting down his first invested company was his hardest day. These are personal recollections, not an independently assessed record of those investments.

Raanan says the thrill of winning motivates him more than fear of losing. He recalls an unnamed founder who repeatedly proclaimed being the best; he did not invest, and says the company later went public. The anecdote illustrates the limits of a single first impression, not a rule for judging founders.

Looking ahead, he says he is excited to work with his team and develop investors who can continue supporting cybersecurity companies. The interview ends on that personal ambition, with the future fund performance and market outcomes he discussed still uncertain.