Merlin Ventures Secures $75 Million to Invest in Israeli Cybersecurity Startups

Merlin Ventures’ first fund raised $53 million and saw six of its 10 startups acquired by other companies.

By Shula Rosen

Merlin Ventures has established its second fund, focusing on Israeli startups, and has raised $75 million so far.

The new fund will focus on growth-stage cybersecurity startups, helping these companies expand into the US and other 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.

Merlin Ventures’ first fund, which was also focused on Israeli startups, raised $53 million and saw six of its 10 startups acquired by other companies, most notably Talon Security and Dig Security, both of which were bought by Palo Alto Networks.

Speaking to Calcalist, Michel said the new fund will be independently raised.

“Since we began managing capital for Merlin, we have intended to build an independent investment vehicle. While Merlin remains our anchor limited partner, the interest from other investors has exceeded expectations. Given the strong demand, we’re now considering raising the fund beyond the original $75 million target,” he said.

The fund will stand out because of the assistance it provides to startups facing challenging regulatory environments.

“Until recently, few startups prioritized obtaining compliance certifications. Today, it has become a critical hurdle—particularly for companies looking to work with large enterprises or the US government,” he explained. “Without the proper certifications, you’re often excluded from serious consideration.”

He added that understanding how to navigate regulatory hurdles is essential even for startups not working directly with the government.

“Most Fortune 100 companies hold government contracts, which means that to partner with them, you’ll need to meet the same licensing requirements—even if you never engage directly with the government.”

According to Michel, the new fund understands that startups need more than funds, but assistance and support.

“After four years of investing in cyber, we’ve realized the traditional venture model needs to evolve,” he said. “Startups today, especially in cybersecurity, need more than capital. They require infrastructure, relationships, and strategic support from the outset. Our new model is closer to private equity in its level of engagement.”

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