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

· startups · Source ↗

Summary based on the YouTube transcript and episode description.

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

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