Cyberstarts, an Israeli venture capital firm focused on cybersecurity, has raised US$300 million to buy shares from employees of its portfolio companies.

With the latest funding, Cyberstarts’ total capital raised exceeds US$1 billion.

Founded in 2018, Cyberstarts has concentrated on seed investments in cybersecurity startups, such as Wiz, Island, and Cyera.

Its investment in Wiz, acquired by Alphabet in a US$32 billion deal, is anticipated to yield US $1.3 billion return, according to reports.

Co-founder Gili Raanan said that this initiative aims to provide long-term employees with predictable opportunities to sell vested shares.

🔗 Source: Bloomberg

🧠 Food for thought

1️⃣ Employee liquidity programs are becoming a strategic retention tool in the extended private company lifecycle

The liquidity fund from Cyberstarts addresses a growing trend in the venture ecosystem, where privately-held companies stay private much longer than in previous decades.

Data shows that employee liquidity has evolved from being viewed negatively to becoming a crucial recruitment and retention strategy for innovative companies 1.

This shift is particularly important as research reveals that 82% of private equity firms face challenges retaining talent, with 27% losing key recruits to competitors 2.

The high cost of turnover, estimated between 50-200% of an employee’s annual salary, makes retention strategies like predictable liquidity programs increasingly valuable for growing companies 2.

Survey data has demonstrated that employees at companies allowing stock sales perceive their equity compensation as fairer and more valuable, reporting higher satisfaction with their career growth 3.

2️⃣ Structured liquidity programs offer a solution to the “golden handcuffs” problem

Cyberstarts’ approach addresses what investment professionals call the “golden handcuffs” dilemma, where valuable employees become fully vested but cannot realize gains without leaving.

This creates the “vicious cycle” that Raanan describes, where companies lose their most experienced employees precisely when they need them most for scaling operations.