The billionaire founder of Palo Alto Networks started a new cybersecurity company. Here's why many people are calling it 'crazy.'

• Nir Zuk founded Palo Alto Networks in 2005, which now has a market cap of $125 billion.
• He retired last year and told Business Insider exclusively about his new startup, Cylake.
• It will protect highly regulated companies and organizations that cannot upload their data to the cloud.

After more than 25 years building Palo Alto Networks into a $125 billion security giant, billionaire Nir Zuk is making a contrarian bet again.

His new startup, Cylake, is rejecting the cloud-based model he once championed, instead building an AI-powered, hardware-based security system for governments, defense contractors, and other highly regulated customers that can't move sensitive data off-premises.

Backed by $45 million from Greylock, the same firm that funded Palo Alto in its early days, Zuk is betting that a third of the market has been left behind in the rush to the cloud.

"The industry has overrotated toward delivering everything in the cloud, and that has left many of the most important customers stuck 20 years behind," Zuk told Business Insider in an exclusive interview unveiling the new startup for the first time.

He's been here before. When he started Palo Alto Networks in 2005, he recalled, people told Zuk, "You're crazy, nobody's going to use the cloud to consume cybersecurity services."

Now, he said, he's hearing a familiar refrain: "You're crazy. Nobody starts a hardware company to run on premises in 2026 in any space, not just in cyber security."

Palo Alto Networks is now the biggest standalone cybersecurity company in the world. Zuk's stake is estimated at $1.4 billion, according to Forbes. After serving as chief technology officer for more than two decades, he announced his retirement last year.

Just as he was seen as a contrarian for starting a cloud-based cybersecurity company in 2005, he relishes going against the grain in 2026.

"I like to be crazy," he said. "I know there's a market out there."

As threats skyrocket because of the growth of bad actors using AI, cybersecurity startups are booming. They raised nearly $14 billion in 2025, according to Pinpoint Search Group. That represented a 47% increase from 2024 and the most funding since 2021.

Experts have warned that the war in Iran will lead to more attacks this year.

The same VC, 26 years later

It's not unusual for Silicon Valley VC firms to back a founder on their second or third company.

"When one's had a success as large as Palo Alto, that's a high bar," said Asheem Chandna, a partner at Greylock who has known Zuk for 30 years and served on Palo Alto Networks' board for 17 years. "The bar is not a small or medium outcome. The bar is, can we build something even larger?"

Chandna sees "a hundred billion dollar plus opportunity," pointing to what he estimates as a third of customers like defense, regulated industries, and sovereign nations that can never use the cloud for sensitive data. He calls Zuk "a magnet for talent," and "a brilliant technologist who's very competitive and very customer-centric."

Joining Zuk as cofounders at Cylake are Wilson Xu, who led the engineering team at Palo Alto Networks, and Udi Shamir, who co-founded SentinelOne.

Zuk said he got the idea for starting Cylake years ago and finally decided to strike out on his own again when he reached a point last summer at which he felt his work at Palo Alto Networks was complete after it acquired CyberArk, an identity security platform, for $25 billion.

"I heard from customers over the years that they wish they could use the products that we were pitching to them, but they couldn't because they were in the cloud," he said. "It's not something that a company that's built around delivering everything that it has from the cloud can solve."

At 54, already a billionaire, he says starting a new company is not about the money. "First, I like to build things," Zuk said. "And second, if I didn't do it, nobody would do it."