Merlin Ventures, an Israeli-American venture capital firm, has raised US$75 million for its second fund aimed at Israeli cybersecurity startups.

This fund will focus on supporting growth-stage companies as they expand into US 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.

Almog Golod has been promoted to Partner, and Tav Spector has been elevated to Operating Partner.

Founded in Israel in 2021, Merlin Ventures has achieved multiple successful exits, including InfoSec Global, acquired by KeyFactor, and Veriti, sold to Check Point.

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🔗 Source: Calcalist

🧠 Food for thought

1️⃣ Compliance has become a critical market driver for cybersecurity startups

Merlin’s focus on compliance certification assistance aligns with a broader industry shift where regulatory requirements are becoming mandatory gateways to enterprise deals.

The cybersecurity regulatory landscape is dramatically expanding, with five major new frameworks coming into effect in 2025 alone, including the NIS 2 Directive and EU’s Digital Operational Resilience Act (DORA)1.

These regulations are expanding beyond traditional sectors. For example, NIS 2 significantly broadens its scope to include many more organizations than previous frameworks, creating substantial new market opportunities for cybersecurity vendors1.

For startups specifically, this regulatory complexity creates both barriers and opportunities. Michel’s observation that “if you don’t have the right certifications, you’re simply not getting in the room” reflects how compliance capabilities have become essential qualification criteria rather than nice-to-have differentiators.

This compliance-driven market shift benefits Israeli startups that can leverage Merlin’s expertise to fast-track certifications that would otherwise take months or years to achieve independently.

2️⃣ Israeli cybersecurity ecosystem shows sustained strength despite market fluctuations

Israel’s continued prominence in global cybersecurity investment is notable, with the country maintaining its position as the second largest recipient of cybersecurity funding globally behind the United States since at least 20152.

This sustained strength has led to a specialization within Israel’s venture capital landscape, with several firms like Cyberstarts, Team8, and now Merlin focused exclusively on the sector3.

The success rate of Merlin’s previous fund (six acquisitions from ten investments) demonstrates the maturity of Israeli cybersecurity startups in delivering viable exit opportunities, particularly through strategic acquisitions by major security platforms.

Israel’s cybersecurity strength stems from its unique talent pipeline—combining military intelligence expertise with technical education—which continues to produce founders equipped to address emerging threats in areas like cloud security and AI security.

Merlin’s new Genesis Program represents an evolution in this ecosystem, addressing a gap between technical innovation and commercial readiness that has historically challenged Israeli startups entering global markets.

3️⃣ Evolution of cybersecurity investment models beyond traditional venture capital

Merlin’s approach reflects a broader trend of specialized cybersecurity investors offering more than just capital, with CyberArk Ventures’ $30 million fund similarly providing portfolio companies with technical expertise and go-to-market support beyond funding4.

The compressed development cycles enabled by AI are forcing investors to adapt their models. The acceleration Michel references when saying companies are “building at a scale and speed that wasn’t possible even five years ago” requires more hands-on operational support.

This shift toward more engaged investment models follows cybersecurity funding’s explosive growth period (234% increase from 2011-2015)2, which has matured into more strategic deployment of capital focused on commercial outcomes rather than just technology development.

National security considerations increasingly influence private cybersecurity investment, with government agencies like the CIA’s In-Q-Tel and Israel’s Libertad Ventures actively participating in the venture ecosystem to advance strategic security interests5.

The cybersecurity investment landscape now features multiple specialized funding models including traditional VCs, corporate venture funds like CyberArk Ventures, government-adjacent investors, and hybrid operational funds like Merlin that blend venture capital with active business development.

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