Transcript The Internet - ISOC-IL

The Internet – From where,
where to…?
Shlomo Kalish, founding partner
JGV
February 2002
All materials contained in this presentation are confidential and not intended for
distribution without the written consent of Jerusalem Global Ventures.
Agenda
• Overview of JGV
• What Was
• What is
• What will be
• Investment themes
CONFIDENTIAL
Overview of
Jerusalem Global Ventures
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Founded by Dr. Shlomo Kalish
VC fund focusing on seed/early stage Israeli startups
Focus on funding exceptional individuals
Strong GP’s and professional staff
Managing $200M from world players
CONFIDENTIAL
General Partners
Dr. Shlomo Kalish
Founding Partner
• Founder of Jerusalem Global Group which represented such
successful companies as: Amdocs, Orckit, Creo, Galileo
Technology, QXL, PictureVision, Memco, DSPC, Breezecom, ESC
Medical Technologies, and Xacct.
• General Partner in Concord Ventures I, LP (Saifun, Exent, Oridion)
• PhD from MIT, faculty member of the School of Management at Tel
Aviv University
• IDF Air Force fighter pilot
Jonathan (Yoni) Hashkes
Managing Partner – IT
• Co-founder of Magic Software (NASDAQ: MGIC)
• Co-founder NDS, a News Corp Subsidiary (NASDAQ: NNDS)
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Jerusalem Global Background
• Seven years of leadership in financing high
technology in Israel
• Highly recognized and respected name in Israel
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Limited Partners
Institutional & Strategic
Investors
•CTC Itochu Techno Science
•Africa Israel Investment
•DEP Technology
•Agilent Technologies
•ECI Telecom
•Time Warner/AOL
•Eurocom Communications
•Bank of America
•Motorola
•Bank Hapoalim
•NDS
•Bausch & Lomb
•Net2Phone
•China Development Industrial Bank
•Poalim Investments
•Clal Industries
•STI Ventures
•Conexant Systems
•Telecom Italia Lab
•Comverse
•Tyco
Executive Investors
•AMCC (MCC)
•Check Point
•Chiaro Networks
•Galileo Technology
•Merril Lynch
•Qualcomm
•Raza Foundries
•Saban Entertainment
•Texas Instruments
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IT Portfolio
• APPower Systems: Enabling software publishers to communicate
with their users (URM) and the users with other users from within the
application.
• Kashya: Storage Networking over WAN.
• LocatioNet Systems: Location-based services platform with unique
mapping and delivery services.
• Mobile Economy: Billing and settlement for mobile-Internet.
• Unicorn: Enterprise information unification.
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Internet: what was
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In the beginning: the original sin
– free for all
– anonymous
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Opened to everyone:
– Killer app: email
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WWW – presentation languages
– For publishing information/entertainment
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Commercial ISP’s: AOL, Compuserve, etc.
– Commercial access to email and information
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NetScape formed to commercialize WWW
– Quick time to billions $$$
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E-Commerce –Ebay, Amazon
The big bang…
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The Big Bang
• Virtual World – no need for physical anymore
– Ecommerce, entertainment, relationships, etc…
• Day traders and internet traders set the agenda
– Running stocks, rumors sites, breeds grid…
• Investors follow through
• Hundreds of billions $ invested in 1000’s of companies
• “The WorldWide Democracy – anyone can sell, advertise, no
entry barriers, quick time to $$
• Forget old economy – long live the new economy!!!
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Some Examples
• eToy.com, pets.com, anything.com
• Names selling for millions of dollars
• Internet VC’s
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Reality sinks in
• The dot-com death toll more than doubled this year,
with at least 537 Internet companies either going out
of business or seeking refuse in bankruptcy court...."
- Associated Press article, Dec. 28, 2001
• Hundreds of billions of $$ erased in market value
– CMGI from $40B to 400M
• Idealab from $4B IPO to being sued by investors
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Was vs. Is
• The world is not virtual
– Billing, Inventory, shipment, installation, returns, service, training
– People want some physical relationships
• Real people
• Real space
• Real time
• The world is not infinite:
– Finite number of people
– 24 hours in a day
– Finite amount of money
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Was vs. Is (contd.)
• Old Economy vs. New Economy:
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There is no free lunch
Value of a business is the NPV of cash flow
Can you generate profits?
You need to:
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Strong brand
Relationsips with customers?
Loyalty
Uniqueness
Premium value?
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Was vs. Is
• There is no democracy:
– One big player in every field
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eBay
AOL
Amazon
eTrade
Yahoo
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So if everything is changing
what’s constant?
• Homo Sapiens
• Have basic needs:
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Security
Communications
Entertainment
Etc. etc.
• Technology provides for:
– Better, faster, more powerful
• Question is:
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Are you supplying a basic need to someone?
Is this a pain factor?
Can you do it better/cheaper than the competing technologies
How do I develop an ongoing relationship with the customer?
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What is the internet
• New more powerful/efficient/quicker communications medium
• With good publishing/presentation capabilities (TV)
• With ability to switch to each one individually (Telephone)
• And….
• Also allowing computers to communicate….
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Communications
• Past:
– Mail
– Phone
– Fax
• Internet
– E-mail
– Instant Messaging
– Video/Voice
• Cellular communications
– Mobile email
– SMS
– MM Comm.
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Business and the Internet
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Each business provides customer with a service
Customer is willing to pay for service:
– Killer problem
– Able customer
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HW components, information components, human components
All businesses have to have phones!!!
However, need to remember:
– Customer –micro marketing
– Relationships
– Feedback
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Higher the information level – the more “internetti…”
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Newspapers –
Entertainment –
Banking
On Line trading
WSJ, Venture Wire
Napstar,
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Business Models
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No free lunch – pay per use and per quality
– Develop the infrastructure to support this
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QOS
Security
Billing
Customer relationships
Information: Subscription for defined segments
– WSJ, VentureWire
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Advertising for mass market communications
– Yahoo, CNET (portals)
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eCommerce:
– Existing brands and stores have to use internet
– One key pure play player in each category
• eBay
• Amazon
CONFIDENTIAL
What will be
• Bright future – great efficient communications and publishing
medium
– Communications
– Entertainment
– Information
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Changes the way we interact and do business
Every business must have it
Most people will have it
However, it enhances what we do, not replace
CONFIDENTIAL
2002 Positive Trends in Israel
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Technology based vs. e-commerce, dot.com
Fundamentals are strong:
– Highest rates of VC/GDP (USx3)
– Highest rate of Engineers/Capita (USx2)
– More experienced entrepreneurs
– Entrepreneurship spirit high
Labor, rent & services costs are falling
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Lower prices
Better people
Better due diligence
More time to build strong companies
Less competition in seed
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What makes a success
• Great leadership
– A leader is someone that people will follow (Drucker)
– Experience, salesmanship, charisma, integrity,
dependable, motivated, energetic and agile
• Customer focus
– A specific customer (with ability to pay)
– Identify a real painful problem
– Position a solution to solve problem
• Cost cutting
• Increase efficiency
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JGV Focus
• Focus on infrastructure & enabling technologies
• Looking for network infrastructure and
middleware platforms
• Serve as basis for operators to deploy revenue
generating applications / services.
• Leveraging changes in the market and/or new
technology.
• Two existing investments:
– LocatioNet
– Mobile Economy
CONFIDENTIAL
Happy Purim!!
• Mishenichnas Adar Marbim Besimcha!!
CONFIDENTIAL
Thank You
Dr. Shlomo Kalish
Jerusalem Global Ventures
Is the Internet Good or Bad
• Technology is neutral
• Depends what you use it for..
– Help the needy
– Educate the remote
– Or
– Promote hate and Nazism
– Teach terrorism
• It is another little world:
– You decide if it is going to be good or bad
CONFIDENTIAL
Success (Contd.)
• Leverage the strengths of others
– Work with the giants
– Outsource everything
• Money makes the world go around
– Raise when you can and always more
– Maximize your LT value, not your percentage
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The Mobile Market
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The Cellular Market opportunity
• 770 million wireless subscribers currently
• 12.6% of the world’s population
• Penetration to double in next 5 years (Yankee Group)
Millions
Total subscribers
Penetration
1,200
1,000
800
Source: UBSW
25.0%
20.0%
15.0%
600
400
10.0%
200
5.0%
0
0.0%
95
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99
00
1E
2E
9
9
9
9
9
0
0
0
1
1
1
1
1
2
20
20
1/
1/
1/
1/
1/
1/
/
/
1
1
Q
Q
Q
Q
Q
Q
Q
Q
Source: UBSW
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Subscriber Growth Is In Developing World
Cellular operators in the US and W. Europe need to look
beyond total subscriber numbers for future growth
Growth In Subscribers By Region, 2002E
40%
35%
30%
25%
20%
15%
10%
5%
0%
Latin
America
Eastern
Europe
Asia
Pacific
World
North
America
Western
Europe
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Source: UBSW
Opportunity To Leverage Subscriber Base
• Developed world - High penetration
• Opportunity to sell new handsets, services and
applications
2Q01 Penetration Rates
70%
60%
50%
40%
30%
20%
10%
0%
World
W. Europe
Japan
US
Source: ML & GS
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Future Revenue Drivers
Market inflection points drive new opportunities
• New network / handset technologies
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2.5G - GPRS, EDGE and CDMA 1XRTT
802.11x
3G – CDMA 2000, W-CDMA
Java enabled handsets
• Enabling New Services
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Mobile access to business applications
Messaging
Gaming
Location Based Services
Video and imaging
Billing
CONFIDENTIAL
Models for the future?
• Asia leads wireless data penetration.
• Japan has by far the highest wireless data
penetration of subscriber base.
– Japan: 69% of cellular subscribers
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NTT DoCoMo (I-Mode) – 27.8m
J-Phone (JSkyWeb) – 8.5m
KDDI (EZWeb) – 8.6m
Java handset users 75% higher ARPU ($32.5)
• Korea has more than 2.5m wireless data
subscribers (8% penetration).
CONFIDENTIAL
Trends
• Lots of Startups
– 4000 per year in Israel
– Over 100,000 on a worldwide basis
• Lots of Money and Investors
– $40B rate/year in US alone
– A lot of non-institutional money
CONFIDENTIAL
Extreme Competition
• Need to assume there are many others like
you
• Problem – you don’t even know who and
where
• What to do?
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Critical Success Factors
• Time to Market
– Better to be quick to market with an OK product
• Perfect Execution
– Can’t afford trial and error
• Partner with the Giants
– Develop relationships with market leaders to rise above
the noise
• Global from Day One
– EC and Japan are not followers any more
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Time to Market
• Time to money
• Buy versus build – money can buy time
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Manufacturing
Site building and E-Commerce backbone
Distribution and sales: OEM, Private Label
R&D
Operation
• Parallel everything
• Get customer involvement from day one
• Other
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Perfect Execution
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Need to hire experienced executives
Seek on-line coaching by experts
Get customers to design your service/product
Use professional assistance to maximize
efficiency
– Lawyers
– Head hunters, etc.
• Have global help with local expertise
CONFIDENTIAL
Partnership with the Giants
• Building brands becomes too expensive and risky
• Develop relationships with entities who have the
connections/network
• Formulate business models that win/win/win
• How to work with:
– LP’s that are giants
– Bring in the giant investors
– Management that “know the giants.”
CONFIDENTIAL
Global from Day One
• Used to be – USA, ROW follow
• Major trends:
– GSM
– Imode
– EC Unification
• How can a startup be global?
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Cellular market food chain
Network operators
Network Infrastructure vendors
Middleware vendors
Application vendors
Consumers
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Infrastructure Vendors
• Infrastructure improvements
– Antennas, base stations, indoor coverage
• Smart components
– Amplifiers, Modems
• Security and Authentication
• Interoperability between different wireless
standards
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Network Operators
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Billing – mediation, content based
Network Management
Profile Management
Differentiated service/QoS
Application enabling platforms
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Middleware & Application
Vendors
• Platforms:
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Gaming
Messaging
Location
Voice recognition
Video and Imaging
Enterprise App Access
Billing
• Applications:
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Multi-user interactive
Teenage communities
Fleet management
Call center
Sports video clips
Field Workers
Mobile Commerce
CONFIDENTIAL
Killer applications beyond vanilla voice?
• Voice is still an opportunity for cellular operators
• New voice driven applications
– Best interface for wireless applications
– Cellular voice converts downtime into uptime
• Car phones, hands-free etc
– Voice recognition technologies maturing:
• Semantic based Natural Speech Recognition overlays
• Security – biometric identification / authentication
• Voice enabled portals / call centers
• SMS – has shown to be a killer app
• What's next? Multimedia messaging? Unified
messaging?
CONFIDENTIAL
Wireless broadband data without 3G?
• Wide scale 3G deployments not for many years.
• Emerging med/high bandwidth wireless standards:
– 802.11b – 11Mbs
– 802.11a/g – 54Mbs
– Bluetooth – short range up to 723 Kbs
• 22m WLAN enabled devices by 2006 (Forrester)
• 802.11x / Wireless LAN
– Mobile data hot-spots (airports, hotels, restaurants etc)
– Enterprise networking – rich wireless functionality
• Additional data business for cellular operators?
CONFIDENTIAL
JGV In The Wireless Arena
CONFIDENTIAL
JGV in the wireless arena:
‘Advanced
data-billing infrastructure enabling operators
to offer flexible pricing structures for Internet content
and data services.’
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Real-time telco-grade billing platform
Signed contract with NetCom (Norway) for full deployment
Late stage discussions with other European operators.
Platform enables service driven billing, first application:
– Mi-800 - Mobile-Internet subsidized-access service similar to the wireline 1-800 / 0800 free-phone.
• Strong management team led by Ofer Bengal, CEO - Founder of RIT
Technologies.
CONFIDENTIAL
JGV In The Wireless Arena
Mobile Economy’s technology forms a
new a layer above existing IP Mediation
and Billing Systems
IP mediation
Turn
Turn-key datadata
-billing
solutions
Turn-key
data-billing
solutions
IP mediation
Comptel
Comptel
HP
HP
Xacct
Xacct
Narus
Narus
IP mediation
IP mediation
data--billing
data
platforms
IP mediation
IP mediation
IP
mediation systems
Billing systems
(pre/post paid)
Ericsson
Ericsson
Comverse
Comverse
Portal
Portal
Amdocs
Amdocs
Lucent
((Kenan)
Kenan))
Lucent (Kenan
Sema
Sema (LHS)
(LHS)
Logica
Logica
CONFIDENTIAL
Thank you
Contact Information:
Shlomo Kalish
Phone: +972-2-572-2222
E-mail: [email protected]
Micah Avni
Phone: +972-2-572-2230
e-mail: [email protected]
CONFIDENTIAL