20VC: The Venture Model is Broken | You Need to be Greedy and Selfish to Win Early Stage Investing | Why Margins Do Not Matter for Early-Stage Startups | The Growth Rate that is Required in a World of AI with Gili Raanan, Founder @ Cyberstarts

What It Covers

Gili Raanan, founder of Cyberstarts and seed investor in Wiz and seven other unicorns, examines why venture economics are breaking down as cybersecurity seed valuations reach $100–150M post-money, while unicorn creation rates remain at roughly one to two companies per 150 funded startups annually.

Key Questions Answered

• •Venture market imbalance: In Israeli cybersecurity, representing roughly 40% of the global market, only one to two companies per 150 funded startups become unicorns annually. With seed entry prices rising from $15M post-money in 2012 to $100–150M today, the math structurally destroys returns for most investors. LPs allocating evenly across venture funds face serious capital destruction.
• •Growth velocity benchmark: Raanan's framework for exceptional companies targets 4x, 4x, 3x, 3x new ARR growth across the first five years of selling. Starting from $1M new ARR in year one, this trajectory compounds to $144M new ARR by year five. Wiz demonstrated this pattern in 2020, growing quarterly new ARR from $1M to $2M to $8M to $24M.
• •Gross margins at early stage: Founders should defer gross margin optimization entirely until later stages — Raanan explicitly tells early Cyberstarts portfolio companies to table the conversation until 2029. The priority is validating product-market fit and achieving a sales efficiency ratio where each dollar of sales and marketing spend generates at least $0.65–$0.80 of new ARR.
• •Employee liquidity as retention tool: Fully vested employees at high-growth private companies face structural pressure to leave for equity diversification. Cyberstarts created a recurring Employee Liquidity Fund that runs annual tender offers for portfolio company employees, replicating public market liquidity mechanics. The first program launched with Sierra, covering hundreds of employees across many millions of dollars.
• •Partner development framework: Building venture partnerships requires abandoning uniform operating playbooks. Rather than mapping each partner's gaps against a standard template and closing weaknesses, managers should identify each person's relative strengths and increase their exposure to those areas. Weakness improvement yields average-at-best results; strength amplification creates genuine competitive differentiation.