Why Margins Don't Matter for Early-Stage Startups | Gili Raanan

Gili Raanan of Cyberstarts argues venture economics are broken for most LPs, margins don’t matter early, and secondaries are the fix for talent retention in long-private companies.

• In Israeli cyber, only 1-2 out of 150 funded companies become unicorns annually; 2024 produced just one.
• Cyberstarts Fund 1: 19 companies, one decacorn (Wiz), seven unicorns, three acquisitions — unusually high hit rate.
• Wiz’s first year of selling: $1M Q1, $2M Q2, $8M Q3, $24M Q4 — Raanan benchmarked it against Sequoia’s PaloAlto and ServiceNow records.
• Island (enterprise browser, $5B valuation) was built in a market that didn’t exist in 2019; Raanan compares early CISO demand to pre-iPhone consumer demand.
• Raanan never discusses gross margins with early-stage portfolio companies — he defers that conversation to 2029, treating it as a 2027-28 problem, not a seed-stage one.
• Cyberstarts created an Employee Liquidity Fund that runs annual tender offers across portfolio companies to retain fully-vested key employees.
• Raanan regrets selling Wiz shares early in secondaries; says it looked responsible at the time but he would hold if he knew the outcome.
• Founding team chemistry recently surpassed product and market as his top investment criterion after changing his mind in the last 12 months.

2026-03-28 · Watch on YouTube