A key aspect of the Israeli hi-tech dream these days is “the exit” – finding a
foreign (preferably American) company to buy your hi-tech idea or technology.
For the owners, it really is a dream come true: stock options in a NASDAQ-traded
company; maybe a vice presidency; a wad of cash and lots of trips (business
class, of course) to and from “the coast,” either east or west. Ditto for the
investors, who are happy to get their money back, and then some.
there is another way – where a start-up company remains under local management,
with the same management structure and staff. One way to do this is for two
start-ups to join forces and forge new products for new markets. And it’s this
path that two Israeli start-ups, Vringo and Zlango, have decided to take. In a
deal that was closed last week, the two companies announced a merger, with $2.5
million in backing from venture-capital firms Benchmark Capital and DAG
Technically, the deal is a buyout, with Vringo, which is traded
on the AMEX, acquiring Zlango’s assets in exchange for 3 million shares of
Vringo stock. But both companies look at the deal as a merger, says Zlango CEO
“We’re both companies that work in the mobile space,” he says.
“We share the same market and the same customers, and our products complement
So it makes sense for us to work together on products and
Vringo, for those who don’t know, is the pioneer of video
ringtones for cellphones. Users sign up at the site and send video ringtones to
their friends, who can then sign up for the service if they’re not members
The content sent in “Vringos,” as the clips are
called, can include promos for movies, music videos, TV commercials, etc., with
the sponsor paying for placement.
Zlango, meanwhile, is an iconbased
“language” (actually a platform for icon-based international communications)
that integrates with your cellphone’s operating system (currently available for
Android and Symbian phones) for use in SMS and other text-based apps. Each icon
is accompanied by the text it represents as a caption, so the message is
accessible even to users who aren’t iconsavvy, and Zlango messages can be
received as regular text messages by any phone.
Both companies are very
active abroad. Vringo works with numerous cellphone service providers in Europe,
the UK, Malaysia and the Middle East.
Zlango is very active in the Far
East, Poland, Portugal, Switzerland and many other countries.
some presence in the United States, but with the merger, marketing there (as
well as in the other big wireless prize, China) will be infinitely easier, and
cheaper, Haim says.
“One immediate benefit of the merger is that we will
be able to work with service providers as a team, making it easier and more
efficient to reach potential customers,” he says. “It will also help us each get
into new markets more quickly, since we can use each other’s contacts to meet
In the US, the “synergy between us,” as Haim calls it,
will help both companies reach more users.
“Right now we are both
appealing directly to users in the US, without going through a specific service
provider,” he says. “We will be able to offer new and more sophisticated
services by leveraging our capabilities and abilities.”
plays an important role in the decision to merge instead of sell, Haim
“Both Vringo and Zlango are Israeli start-ups that now work on a
large scale and whose R&D is still in Israel,” he says. “So we have a common
culture, we understand where the other group is coming from, and now we will
have a common infrastructure here in Israel for development, which will make the
work that much easier and more efficient.”
Without the need to spend
valuable energy learning how to adjust to an American-style corporate culture,
workers of the new merged company will be able to dedicate all their energy to
developing new products and services that the technologies of the newly merged
companies bring to the table, Haim says.
And finally, he says, there is
his own personal view on the matter of selling out.
“Zlango is my fourth
start-up,” Haim says (he was a major force in 4G network technology company
Alvarion for over a decade), “and I always preferred to continue building and
growing, creating a company that will stand on its own. And that’s what I feel
we have done here. Benchmark and DAG Ventures are doing something unique in
financing this deal, and I am sure they, and we, will be pleased with the
Vringo CEO Jon Medved has similar thoughts.
thrilled to announce this investment from Benchmark and DAG, along with our
letter of intent to acquire and merge operations with Zlango,” he says. “The
financing led by Benchmark Capital and DAG Ventures is a significant vote of
confidence in Vringo. We believe Zlango’s exciting messaging platform will allow
us to enter the massive mobile-messaging market, which ranks second in mobile
revenue only to voice.
This additional funding and the Zlango transaction
will be highly beneficial as we continue to grow our
Ultimately, all four parties to the deal have a
“Benchmark, DAG Ventures, Jon and I are all on the same page on
this,” Haim says. “We all have a vision: that one plus one will equal far more
than two. I know we are right.”