A rare event: Cyber startup closes, founders to return part of the money
Four years after raising $51 million in one of the largest seed rounds seen in Israel, the founders of Minimus (formerly Twistlock) decided to close the company and lay off its approximately 35 employees. After a change in strategy and unsuccessful attempts to find a buyer, the entrepreneurs took an unusual step: instead of continuing until the coffers were empty, they will return the approximately $10 million remaining to investors.
Israeli entrepreneurs Ben Bernstein, Dima Stupel, and John Morello sold the company they founded, Twistlock, seven years ago to Palo Alto Networks for $410 million, in what was defined at the time as the largest Israeli sale to the cyber giant founded by Nir Zuk. Based on that exit, the three raised $51 million four years ago led by Yoav Leitersdorf's cyber fund, YL Ventures, and with the participation of several Wiz founders — Assaf Rappaport, Ami Luttwak, and Roy Reznik; Talon founders Ofer Ben-Noon and Ohad Bobrov; former CyberArk CEO Udi Mokady; Transmit Security founders Rakesh Loonkar and Mickey Boodaei; and CrowdStrike CEO George Kurtz.
The massive round was raised at the end of 2022 for what was then defined as one of the largest "seed" rounds in Israel — a capital raising round for a company that had just been established around an idea and an initial team. The company they founded, Gutsy, went through upheavals and changes in focus and strategy, until yesterday (Sunday) the founders decided to inform the approximately 35 employees of its closure and the return of the cash remaining in the coffers to the investors.
About a year and a half ago, the founders changed the company's name to Minimus, changed its product focus, and laid off more than ten employees. However, when the market struggled to respond to the new product, they spent the last few weeks actively looking for a buyer for the company or the team of employees. Having failed to do so, they decided to close the company's doors and return the cash remaining in its coffers, about $10 million, to the investors — among them, besides YL, also the American fund Mayfield.
Complex market
What led to the unconventional decision to close the company prematurely? Others would have waited until the money ran out, while trying to sell the company or the team of employees at any cost. The company did not elaborate. CEO Ben Bernstein stated, after the announcement to employees and customers:
"After a strategic process that did not bear fruit, we decided to close Minimus in an orderly manner. This is not the result we hoped for, but I am proud of the team and what we built together, and I thank our customers and investors for their trust and partnership along the way."
Minimus developed a software development environment based on "containers" — independent environments for running software, containing everything the software needs to run, so that it would operate in exactly the same way on a software developer's computer, on a local server, or in the public cloud. This was done with the goal of reducing software developers' exposure to cyber vulnerabilities found in one of the code libraries or development servers they use. Instead of scanning software that was built in advance, as most software developers did until then, Minimus provided, according to its claim, a clean and secure software environment.
Bernstein and his colleagues operated in a difficult market where one central player is dominant: Chainguard, a company founded by Google alumni that has raised close to $900 million to date — and last year received a price tag of $5.4 billion, according to PitchBook. Just as Wiz operated in its market, Chainguard became a pioneer and the fastest-growing player in the market, distributing a kind of standard of its own, gaining the favor of government and financial entities in the US, and building a platform of additional cyber products around it.
