Cyber CEOs Decoded Podcast Season 1 Episode 5

Dror Davidoff: Aqua Security Co-founder and CEO

In this episode, Marc and Dror Davidoff, Aqua Security Co-founder and CEO, discuss his passion for his home country of Israel’s prominence as a global technology hub and how it led to his founding of one of the most successful security startups of recent years.

You’ll also learn about:

  • How Israel’s dominance in the technology sector and development of some of the best tech talent in the world has helped shaped the country’s culture
  • The current state of the cloud native threat landscape
  • Why responsible management and responsible hiring is critical for business leaders
  • Why social impact is core to Aqua’s values and why giving back is a responsibility of the tech community
Transcript

Marc Van Zadelhoff: Welcome to «Cyber CEOs Decoded,» where we speak with CEOs from established giants to up-and-coming disruptors, getting the inside track on what makes a cybersecurity company tick. I’m your host, Marc van Zadelhoff, the CEO of Devo. And today, my guest is Dror Davidoff, co-founder and CEO of Aqua Security. Dror, welcome to the show.

Dror Davidoff: Thank you. Good to be here. Thank you for inviting me, Marc.

Marc Van Zadelhoff: As always, excited – this is, I think, going to be a pretty active conversation. Where you’re from and some of your experiences are very much related to my areas of interest, so I think we’re really going to enjoy this conversation. And you are also often in the Boston area where I’m based, so we’ve gotten to know each other a little bit over the time here. But I love to go back always to the beginning of people who are writing security companies. One of the things I think is fantastic about these podcasts is getting CISOs and customers to understand the people running it – where they’re from, what motivates them. So let’s start with the real basics. Where are you from? Where’d you grow up?

Dror Davidoff: I grew up in Israel – it’s already put certain colors on things – then actually was not on a technology path. You know, many Israeli entrepreneurs, they start their technology path in high school and then into technology units in the army. I did not do that.

Marc Van Zadelhoff: Right.

Dror Davidoff: I served in a combat unit in the army. And then after that, actually thought that I want to do investment banking.

Marc Van Zadelhoff: Yeah? Oh, wow. The Israeli «Wolf of Wall Street.»

Dror Davidoff: Yeah, you know, some version of that. You know, it looks interesting, you know, business making, deal making. I really like the international aspect of that. I was, you know, always intrigued with the, you know, global culture and languages. And so I thought that doing international investment banking could be something very interesting for me. So I started in that direction, that path. And – but very quickly – actually, after school – I did my first degree in Israel in economics…

Marc Van Zadelhoff: Yeah.

Dror Davidoff: …And then did the MBA in New York. And after my MBA, I worked for a couple of years, you know, relatively mid-sized investment bank that doesn’t exist anymore. But back in the days, I learned – what does it mean to be an investment banker? And I figure it’s not for me, and I was looking to do something else. But what I was doing as an analyst, I was covering technology companies and Israeli software and cyber companies. So that was my first time that I got introduced and learned closer about software as a world and then cyber within that. And I figured this could be very interesting. And then very quickly, after – maybe two or three years after school, I find my first job in tech.

Marc Van Zadelhoff: Yeah.

Dror Davidoff: It was a software company, and then from there, you know, it was always tech.

Marc Van Zadelhoff: Always tech – so I want to pause on Israel for a little while here. And I want to talk to you about what it’s like to grow up in Israel because, you know, those of us who are in cybersecurity, we run into people from Israel all the time. And when I ran IBM Security, we acquired a few companies in Israel. I think I had 400 employees on my team at the time, and I got to go to Tel Aviv a lot. Israel was founded in, I think, May 14, 1948, so it’s existed 74 years. It’s fought a number of famous battles to preserve its existence. You only have to go back in the history books to know that that part of the world has changed hands many times. But in that context, 74 years is a relatively short period of time, right?

Marc Van Zadelhoff: And I always just wonder – there’s a link to cyber. But maybe just starting as just a kid growing up in Israel, do you feel that history right away as a kid or is it like many kids when you grow up, you just are oblivious? – because, you know, I was born in the Netherlands. I grew up in Boston. You just kind of – you know, you’re oblivious to really – you only really understand your own experience. But what is it like in Israel to grow up? Are you aware of this history as you’re growing up?

Dror Davidoff: Number one, yes, you are aware. We live in a hostile environment in such a short period having so many war. And fighting for our pure existence in the region is something that we all live or experience through growing up and then, of course, going to the army, which is mandatory in Israel. So I have to say that Israel as a nation and as economy have gone through a dramatic change from where it was 30, 40 years ago when we grew up to where it is today.

Marc Van Zadelhoff: Yeah.

Dror Davidoff: As a child, being a small kid in the 73 world, this was a existential threat. People thought that this is the end of the state…

Marc Van Zadelhoff: Yeah.

Dror Davidoff: …I mean, existential moment for us. Many people back then thought this would be the end of the state of Israel.

Marc Van Zadelhoff: Yeah.

Dror Davidoff: And I don’t think many people in the Western world have experienced something like this in our generation, Marc…

Marc Van Zadelhoff: Yeah.

Dror Davidoff: …Right? So it’s definitely there. But if you look at the younger generation, then Israel is now a much more stable – again, as a country and as an economy, right? I don’t think that we feel existentially threat. There are threats. There are, you know, conflicts that we manage. But it’s more managing the conflict where they’re existential. I think the only threat that is now in the air is, of course, the Iranian – and the nuclear threat that they’re making. And listen; we’re the only country in the world that there are other countries that part of their policy or part of their ideology is to wipe out Israel.

Marc Van Zadelhoff: Yeah. Right.

Dror Davidoff: I mean, I don’t think any other country in the world experienced that. Well, maybe now in the Russia and Ukraine conflict, but…

Marc Van Zadelhoff: I was going to bring it up.

Dror Davidoff: Yes. But I don’t think Russians want to eliminate Ukraine. They maybe want to, you know, make it go in a different direction.

Marc Van Zadelhoff: Right.

Dror Davidoff: But they don’t want to eliminate it. But the reality is that it’s changed dramatically in the last 30 and 40 years. And a lot of this change, in my humble opinion, has to do with tech.

Marc Van Zadelhoff: OK, that’s an interesting angle. So why do you see that linkage?

Dror Davidoff: Because tech opened up an unbelievable opportunity for Israel, its economy, from being a very dependent economy – remember, in Israel, it’s a small country surrounded by hostile – in a hostile environment with no natural resources whatsoever. And then there are two turning – this story. No. 1 was technology. So suddenly, technology – what is the natural resource you need for technology? Human resource, right? Highly skilled, educated human resource. And for that, we have quite a bit in Israel.

Marc Van Zadelhoff: Right.

Dror Davidoff: That’s No. 1. And then in the last decade, there was also the very surprising discovery of the natural gas resources that we find in the Mediterranean, which also had a big impact. But technology have changed the economy entirely…

Marc Van Zadelhoff: Yeah.

Dror Davidoff: …And in turn changed entirely the ability of Israel, the way we think about ourself. And now Israel is a serious regional power, right? It’s not a country that is fighting for its survival. It’s a country that has a lot of influence in the region. And I would even say, globally, have influence, definitely compared to its size.

Marc Van Zadelhoff: Yeah.

Dror Davidoff: By the end of the day, we have less than 10 million people living in Israel…

Marc Van Zadelhoff: Yeah.

Dror Davidoff: …Which is a small state, smaller than any state in the U.S., right?

Marc Van Zadelhoff: Most, yeah. And as they say here, you’re punching way above your weight as a country, I would say. And what I discovered as I was traveling to Israel – and we acquired a couple companies there – that quite a few of those hostile states around you are using Israeli technology and happily, right? They don’t talk about it.

Dror Davidoff: Yes, yes.

Marc Van Zadelhoff: And so that’s one thing that surprised me.

Dror Davidoff: They can’t really talk about it because it would be a complete contradiction to their foreign policy.

Marc Van Zadelhoff: Yeah.

Dror Davidoff: But I think that tech opened up – for Israel as an economy – made macro changes in the way we position ourselves in the region, in the way the world look at us, and we’ve been very, very successful. Now, why are we successful in tech? I think it’s a combination of three – maybe more but three main reasons. No. 1, like I said, there are no other option to be globally successful out of Israel.

Marc Van Zadelhoff: Right.

Dror Davidoff: You know, there is no industry. There is no history. It’s a young country. So there is no history of heavy industry.

Marc Van Zadelhoff: Right.

Dror Davidoff: Right? We don’t have that. We don’t have natural resources. So what is the thing that – and we have very limited internal market, right? So we have to go out, right? There is no market in Israel. So if you want to scale up, you immediately have to go out of the country.

Marc Van Zadelhoff: Yeah.

Dror Davidoff: And you have to go far because the surrounding is not a friendly environment.

Marc Van Zadelhoff: Yeah. Can’t go next door, yeah.

Dror Davidoff: So you immediately go – have to go overseas to Europe, to North America, to the Asian markets. Then a very, very good education system in technology – English is mandatory. Everyone in Israel speaks English, you know, good enough English. And then if you’re professional, you will have good English. So we are tuned internationally, right? And then the third element is what in Israel we call the chutzpah, right?

Marc Van Zadelhoff: (Laughter).

Dror Davidoff: This is the Israeli attitude to life, that you have to try.

Marc Van Zadelhoff: Yeah.

Dror Davidoff: Worst case, someone will say no, but you have to try. You have to ask. You have to not agree with the rules and try different ways to do things. And again, it’s a combination of the geopolitical situation that puts us under a lot of pressure. So we always have to look for shortcuts and different ways of doing things and be very resourceful in the way we do things. And you still see a lot of that in the startup culture in Israel. I mean, what you will achieve with five or 10 engineers in Israel, you will probably need triple that in any other country…

Marc Van Zadelhoff: Yeah.

Dror Davidoff: …Because it’s a little bit of a curse because when you try to scale up, you know, it’s like herding cats, right? It’s very, very difficult to scale an Israeli-style operation.

Marc Van Zadelhoff: Yeah.

Dror Davidoff: So I think those three – and maybe a fourth incredibly important element is the army service.

Marc Van Zadelhoff: Yeah.

Dror Davidoff: It’s really the melting pot of the Israeli culture…

Marc Van Zadelhoff: Yeah.

Dror Davidoff: …Because everyone go in at the same level. There is no, like in other countries, different people with different education and skill sets will go into a different level. Everyone from the chief of staff of the highest-rank officer in the army started in the same place that everyone starts. Everyone have to go through the grinder – right? – this army service and the basic training and all that.

Marc Van Zadelhoff: And especially in an immigrant country, where you have Russians and Europeans and Americans and Africans all – and that is the melting moment it has to be for that immigrant experience, if you haven’t melted already.

Dror Davidoff: Opens up opportunities for many, many people. And it really levels up. I think it’s a very important part of the Israeli culture experience, which gives us a lot of these cultural…

Marc Van Zadelhoff: Yeah.

Dror Davidoff: …Virtues that I was talking about before. And then within that, the Israeli army – again, because we are inferior in number and in resources from the very early days – had to rely very heavily on technology because this is where we had an advantage. This is where we could close a lot of the gaps. So we invested very heavily in technology in the Defense Forces, extremely heavily.

Marc Van Zadelhoff: Yeah.

Dror Davidoff: You know, in the civil market we enjoy when people come out of the market. And then within that, you have the cyber world, which is – again, Israel, for many years, a lot of the warfare investment was in cyber just because it has the ability to leverage…

Marc Van Zadelhoff: Yeah.

Dror Davidoff: …A lot of the skills and capabilities. So put all that together, you get a very unique opportunity that the Israeli economy got when high tech became a thing…

Marc Van Zadelhoff: Yeah.

Dror Davidoff: …About 30 years ago. And that completely transformed us as a society, as an economy, as a country. And today Israel is an incredible technology hub. It’s just unbelievable the number of startups, the number of technology companies. You walk around Israel, there is presence from any leading technology company in the world. Again, it has huge impact on the social structure…

Marc Van Zadelhoff: Yeah.

Dror Davidoff: …Because high tech also opened opportunities for many people for great success, like in other places.

Marc Van Zadelhoff: I could talk about this topic – and I, you know, often I joke because in the Netherlands, we’re called very direct. And I always say, well, I’ve spent some time working with Israelis, so I think we have to compete on which culture is more direct and blunt between the two. But I think you guys might win if I’m honest. But, Dror, within that amazing context, how did you grow up? You grew up in a regular house, just normal life?

Dror Davidoff: Yeah, regular house, four siblings, big happy family. Yes, you know, in Israel, we’re very family oriented.

Marc Van Zadelhoff: Yeah.

Dror Davidoff: So I had, I don’t know, like, 16 cousins all living in the – you know, not in the same neighborhood but not far from each other. You know, I was into, you know, a lot of sports. I did track and field. And as a young teenager, I used to do, like, semi-professional.

Marc Van Zadelhoff: Oh, yeah?

Dror Davidoff: I was really like – I got a couple of medals. Yes, I could really…

Marc Van Zadelhoff: Like running, long-distance running and…

Dror Davidoff: Yes.

Marc Van Zadelhoff: Yeah?

Dror Davidoff: Not long distance, short distance. I used to run hundred meter at 11 seconds, which is not bad for a 14-years-old boy. My record in long jump was 6.8 meters. I don’t know how much would that be in…

Marc Van Zadelhoff: A good long way, is what I would say. Yeah, that’s impressive.

Dror Davidoff: (Laughter) Yeah, so – yes, and I loved to play – soccer and basketball are the two most popular sports in Israel, so I love to do that with friends. And, you know, like locally, there was a local league that I was playing in…

Marc Van Zadelhoff: Yeah.

Dror Davidoff: …And doing a lot of that. So quite competitive and, you know, loved sports and trying to keep a very good sport lifestyle. And then schooling – I didn’t go the usual path. I was actually quite bored in school. So I decided to leave school when I was in 10th grade and then just went off and did my own thing before I joined the army.

Marc Van Zadelhoff: But not Team 8100 or some of these things, right? I feel like half of the entrepreneurs I meet, they’re bragging about Team 8100 and – yeah, you know…

Dror Davidoff: Yes, so it’s more than half. Like I said, those people have incredible advantage because they get the best-in-class training in the world in technology.

Marc Van Zadelhoff: Right. Yeah.

Dror Davidoff: So they have a very unique advantage. And more than half, Marc – I would say probably about 70% of entrepreneurs will come from technology units in the Israeli army…

Marc Van Zadelhoff: Yeah.

Dror Davidoff: …In the Israeli forces. Most of them 8200 but not only. There are other technology units in the army. I did not work that path. I was in a combat unit and, you know, worked my legs much more than I worked my brain in my army service.

Marc Van Zadelhoff: Wow. Are those good memories of that time, or was that a really difficult time?

Dror Davidoff: Both, you know, good memories and difficult memories. Being attacked was, you know, reduced by 50% just in the last six months.

Marc Van Zadelhoff: Wow.

Dror Davidoff: Right? So there’s more and more things that are happening. That’s No. 1. So in the runtime – the attack surface in runtime is growing significantly, and there are – more and more organizations realize that they need to protect the runtime as much as they protect their infrastructure, right? There is another angle that is becoming – awareness is growing at a very good pace, which is the supply chain. So looking at your developer and what’s happening there and the immediate impact that has on your cloud environment, right? So we look at this as one type, right? So if you’re not securing your beginning of the pipeline, you’re just as exposed, right? So we really believe that you have to do end-to-end work if you want to improve your security posture.

Marc Van Zadelhoff: Cool. So I want to cover a couple other topics, but I’m going to summarize. You guys have had an amazing run. You’re doubling your revenue every year. Your unicorn valuation, you’ve raised $135 million in your last round of funding. And I would guess, as a fellow CEO, that you’re on an IPO path yourself. So that is an amazing position to be in. And I’ll pause there, but then I wanted to go back to something you did at the beginning of the founding of the company and ask you about that, which is the commitment to a charity – I believe it’s called the Shanti House. And I wanted to ask about that. But maybe you can correct any mistakes I made in my sentence of the momentum that the company has and the trajectory you’re on. Then I want to go back to that moment.

Dror Davidoff: Happily, yes. Actually, that’s even more important. But I think that, yes, we’re growing at a fantastic pace, doubling the business year after year. And we see incredible market opportunity. So we feel very strong with our technology and the product and the offering that we have in the market. And the addressable market we go after – the market opportunity here is very significant. And we’re building this company to stay around. I mean, IPO is on the plan. I cannot, you know, put a timeline for that, but it’s definitely on the plan. And we’re scaling. We’re now 600 people strong and many hundreds of customers. We have more than 30 of the Fortune 100 as customers.

Marc Van Zadelhoff: Wow.

Dror Davidoff: So doing well on multiple fronts. So that is going well for us. I don’t like to call it charity; I like to think of it as social impact. I feel that you, me, all of us, we are on the fortunate side of life, right? We have this amazing opportunity. We work in those great places – and not only you and I. I’m thinking the royal we, right? The, you know, technology sector as a whole is the leading force in many economies, not only in Israel but in many economies, including North America and many other countries. The thing is that right now, at least, it’s a very small segment of the population that enjoys this – maybe 10%, maybe 15% if it’s very successful. So it’s still a very, very small percentage of the population.

Dror Davidoff: And I think that we are part of a community. We are all a part of a community. And we – I feel we have the responsibility to share that with as many people as possible in many, many ways. So when we think about social impact, we think about multiple programs. We think about how do we bring people from places – geographically or socially – that do not have access to high tech and open the door and give them an opportunity to access. So we have probably six different programs running now in Aqua, whether it’s an internship or an education program for high schools, training program for people that do not have technology background, et cetera, et cetera., where we try to open the door for more people to have an opportunity and enjoy this good fortune that we have. So that’s one thing that we do.

Dror Davidoff: And in some of those programs, we work in cooperation with non-for-profit organization that help weak populations. So we have that with the young people – again, are simply not fortunate foundation. Opportunity, it starts with a good foundation to build themself and, you know, trying to give them an opportunity and help them. We – you know, we just announced a beautiful sponsorship of Pascale Bercovitch, who’s a Paralympian, an athlete, and she’s kayaking, and she is practicing for the Paris ’24 Paralympic Games that are coming. So we try – you know, there are multiple programs that we do in order to have social impact, to impact the communities that we live in, whether it’s in Boston or in India or in Tel Aviv, Israel, wherever we are, wherever we have offices, wherever we have presence. We try to do that. And it’s a big part of the Aqua culture.

Marc Van Zadelhoff: That’s amazing. Hugely inspiring, Dror, to hear that. And I know just having met many of your team members that that’s a big part of the ethos of a company. So I think that’s fantastic. Maybe a last piece of advice from you for aspiring leaders, you know, people who want to have Dror’s job someday, CEO of a company. What’s your advice for aspiring leaders?

Dror Davidoff: In the spirit of today’s – you know, the last few months’ economic climate – and I just wrote a couple of blogs about this. I think responsible management, responsible leadership is something that pays off in the long term, right? So sometimes you look and you want to do the shortcut or you want to have a quick win.

Marc Van Zadelhoff: Right.

Dror Davidoff: But if you really want to build a serious company for the long term, you have to take responsible hiring, spending, building – you have to make responsible decisions and really think about – we see so many companies that have got themselves into a very difficult situation just because they were tempted with high valuation and too much money, and now they find themselves in very difficult situations. So being responsible on front is not very rewarding short term, but it is very rewarding long term.

Marc Van Zadelhoff: Yeah.

Dror Davidoff: So if you want to build a real business, long-term business, stick to responsible values.

Marc Van Zadelhoff: Well, you remind me of my grandmother’s favorite expression, which was – being normal is crazy enough.

Dror Davidoff: (Laughter).

Marc Van Zadelhoff: Being responsible in this market and running these companies is crazy enough. And I think that’s a great piece of advice for aspiring leaders. So, Dror, thank you so much for joining us on «Cyber CEOs Decoded.»

Dror Davidoff: Thank you for having me here. Thank you, Marc. And we will have to continue over a beer someday.

Marc Van Zadelhoff: I’m looking forward to it – and right here, locally. And thank you to our audience for listening. Hope you enjoyed this discussion. We covered a lot of grounds, from the beautiful country of Israel and Tel Aviv as a great city to a wonderful company called Aqua. So, Dror, thank you again. And be sure to join us for our next episode of «Cyber CEOs Decoded.» Thank you.