By Tova Cohen
TEL AVIV (Reuters) - Check Point Software Technologies co-founder Shlomo Kramer, a pioneer of efforts to protect businesses from cyber attacks, is betting on security in the cloud as the sector's next big development. Moving network protection to the cloud could ultimately replace the very firewalls developed by Check Point and eliminate the need for costly appliances, consisting of hardware and software, that are a $50 billion market, Kramer said.
After leaving Check Point in 1998, Kramer has used his fortune to establish and finance an array of start-ups and helped to set up California-based Imperva in 2002.
Imperva taps into a shift away from perimeter defenses such as firewalls to secure data and web applications by detecting and preventing attacks before they reach inside an organization. Now in a further evolution, the former member of the Israeli army's elite 8200 technology unit is launching Cato Networks with former Imperva colleague Gur Shatz.
Cato's software connects the elements of an enterprise's network -- branch locations, mobile users and data centers -- into an encrypted network in the cloud. "Business today is very fluid; it's not being done from a single location but from everywhere," the Tel Aviv-based Kramer, 49, told Reuters.
"Traditional network perimeter security was implemented using appliances, which are very location-bound."
WORK TO DO Today a retailer with thousands of branches has to place a stack of appliances in each store that are connected to headquarters, or relay store traffic to headquarters before connecting to the cloud. With Cato, the stores connect to the cloud directly for Internet access. Cato's technology is a departure from Check Point and Imperva, which are based on the appliances Cato seeks to replace. Kramer believes the simplicity and cost savings of cloud technology will win over businesses.
David Cowan, a partner at venture capital firm Bessemer Venture Partners in California, said the technology was "ambitious, difficult but interesting". He has not put any money into the company.
"You're not going to see big companies just moving their critical traffic over this hodgepodge network that they will knit together," Cowan said. "That's not to say they won't over time build something resilient."
What differentiates Cato from other cloud companies is that customers are being asked to move all their traffic on to the cloud. California's Zscaler, Cowan noted, carries mobile device traffic on its cloud.
Cato raised $20 million in financing led by U.S. Venture Partners and Aspect Ventures and expects to launch in the third quarter. Kramer, who invested $4 million, forecast sales "in the millions of dollars" in the first year.
Kramer has an enviable track record. Check Point is now Israel's largest tech company with a market cap of $14 billion and sales of $1.6 billion.
Kramer has sold his stake in Check Point, which last year bought two security companies in which he invested.
A deep sea diving and photography enthusiast, Kramer returned to Israel from California over a year ago and is married for the second time with five children.
The launch of Cato comes when many cybertech shares, including Imperva, have taken a hit on concerns over their valuations. Some expect industry consolidation in the next few years.
Kramer doesn't believe there's a bubble, though he admits many of the start-ups may not survive. In 2015 alone 78 Israeli cyber firms raised a record $540 million and there are 430 companies operating in the sector, of which only 19 are public, according to the Israel Venture Capital Research Centre.
Kramer says the threat from cyber attacks has become more sinister and challenging. "The security industry is facing a great challenge due to the changing threat landscape. Ten years ago networks faced generic broad attacks by kids," he said, noting the growing sophistication of attackers. "Today, it's nation state attacks on critical infrastructure and organized crime attacks on financial assets. This requires much more sophistication," he said.
(Editing by Keith Weir)