JERUSALEM (Reuters) - Israeli cybersecurity firms raised $4 billion in 2024, more than double that of 2023, led by firms seeking to protect the cloud along with a surge in artificial intelligence, global venture capital firm YL Ventures said on Tuesday.

Cybersecurity has become a fast-growing segment of Israel's high-tech sector, which is a key economic growth driver accounting for 20% of economic activity, 16% of jobs and more than half its exports.

In its State of the Cyber Nation Report, YL said that despite geopolitical instability, it foresees Israel's cybersecurity influence expanding "from a hotbed of exceptional security solutions to widespread recognition of Israeli cybersecurity startups as dominant global market leaders".

YL noted that there were 89 funding rounds in Israel in 2024 and 50 of them were seed, or early stage rounds, raising a total of $400 million. The report said global VCs more than doubled their funding rounds in 2024.

In growth stages - so-called C and higher rounds - there were 16 rounds raising $2.9 billion, up 300% from $888 million in 2023, YL said. In all, Israeli cyber firms raised $1.89 billion in 2023.

"The changes we're observing in 2024 - global VCs investing earlier in companies, an opening up of the seed and growth round markets and more acquisitions, especially by Israeli companies -signal a rising tide for 2025," says Andy Ellis, partner at YL Ventures.

"While the floodgates aren't going to crash open, expect to see more activity across the board: A and B rounds should become more accessible, C and later rounds larger and an increase in seed rounds."

Ofer Schreiber, senior partner and head of YL's Israel office, credits Israel's elite military intelligence units for its success by creating "a no-nonsense, hands-on entrepreneurship culture".

He added that the war that began after Hamas militants attacked Israel on Oct. 7, 2023 had forced cyber founders into a new reality as many in the tech sector had been called into military service.

"Founders needed to rally to ensure business and operational continuity in uncertain economic conditions and with a concerned customer base," Schreiber said.