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(photo credit: Courtesy Photo)
Today's lesson in Israeli Startups 101 is called "the theory of probabilities" - As in, which startup out of the million (give or take, of course) projects out there is most likely to make the "big time?" After all, it's not like an Israeli-born application hasn't already become the innovative standard for a Web-based service that made its inventors a cool couple hundred million dollars (http://tinyurl.com/2lx6qj). Who, or what, might be next?
Theoretically, of course, any of the startups with a valid idea, a VC backer, and (preferably) a patent could be the next ICQ. But if you had to pick just one - if you had to hazard a guess as to which one out of the million would be the one to make it - what would your criteria be? In other words, how would you know you were looking at the next $400 million plus (the amount AOL paid for ICQ) idea?
An investor or entrepreneur looking to invest money or time in "the next big thing" would probably seek out a company offering a product that would appeal to a large segment of the population - with an emphasis on demographic groups with more disposable income (i.e. teens and young adults). You'd want a product that's more or less unique, but familiar enough so that your customers could easily adapt to what you're offering.
You'd want something "viral" - i.e., an application or service that would encourage users to sign up their friends. And, of course, a revenue stream - a mechanism earning money from advertisers or vendors - would be a good idea, too.
But here's how you definitely know you're looking at the one to watch: If the person running the company is someone who has been involved in funding - and, therefore, evaluating - some of the most successful Israeli Internet and software startups of the past decade, you can be sure that the project he's running has a pretty good chance of hitting the "big time."
In the case of Vringo (http://www.vringo.com), we're not talking theory: The company offers a unique, advanced, but evolutionary service (video ringtones), to a very wide potential customer base (cell phone users) with a young demographic (http://tinyurl.com/3xwuoh). 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 (viral distribution) - and 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 (advertising revenue stream for Vringo).
And the guy running the company? It's Jon Medved, a veteran of Israel Seed Partners, the VC group that funded companies that went on to become some of the most successful startup exits in Israel: Shopping.com (acquired by eBay), Compugen (Nasdaq: CGEN), Answers.com (Nasdaq: ANSW), Cyota (acquired by RSA), Native Networks (acquired by Alcatel), Xacct (acquired by Amdocs) and Business Layers (acquired by CA).
With a business model like this - and "nearly a century of management experience" between the principals of the company, says CEO Medved, fresh from his own venerable Israel Seed experience - Vringo seems like a "textbook case" of Israeli startup theory, poised for success (on the ICQ model), come to life!
The comparison to ICQ really is appropriate - in more ways than one.
Back in the early days of ICQ, there were very few indeed who foresaw just how huge a business model instant messaging - and all its descendants, like IP telephony - would become. And the same thing held true for what Medved calls "cell phone personalization 1.0," the plethora of ringtones, wallpaper and other gimmick people use to make their phone stand out from the crowd. "Investors missed out on 1.0. Ringtones and wallpaper are now a $6 billion business worldwide," Medved says. So where does Vringo come in?
"Vringo is personalization 2.0, where the phone becomes an extension of the user's personality. With Vringo, the phone becomes a tool that allows the user to project the digital signature they want to the people they communicate with.
And the way Vringo works is very ICQ-like, too - with some Youtube mashed-in for fun. Vringo users can send - via their Vringo portal Web page or their phone's Web browser - video/sound clips of their choice to buddies, from an instant messenger-style buddy list; the sender controls the content, "pushing" a selected clip onto their friend's phone.
It really is like ICQ for cell phones, except that instead of the text ICQers usually send, the "message" in this case is the video ringtone - taken from either your own content or from stuff in Vringo's extensive library.
So, for example (warning: nerd humor ahead), if you've got a PC-loving friend who won't give your Macbook the time of day, you can send one him or her one of those nifty Apple ads that run in the US (view online at http://www.apple.com/getamac/ads/) as your Vringo. How cool is that? I managed to send an instant message/conduct a phone call, and get a little anti-Windows fun in, all in one "communication session!" I guess sending out a "contrarian" Mac Vringo ad to a PC fan would be a fairly sophisticated use of the service; I'm betting most Vringo users will pick a music video, or maybe one of the funny commercials, humor clips or movie previews that are/will be available (the company is working out content deals with some major players in the entertainment business, Medved says).
But maybe not; Vringo's reach can, and probably will, go far beyond entertainment. A service provider - like a programmer, plumber, or lawyer, for example - could put together a little video clip advertising their services, offering special deals to customers, or some other promotion gimmick that will make sure the people they communicate with keep them in mind the next time they need help. With Vringo, if you've got a cell phone, you've essentially got your own little "advertising agency," where you can develop your own image (or use a stock Vringo clip that reflects your image) - and your cell phone becomes a "tv station," from which you can "beam" your ads to viewers. Media companies, always interested in a new advertising resource, are flocking to the service. Among the partners Medved has already signed up is Universal Music (they've got a huge catalog). And Vringo has no fewer than 24 patents for this technology, ensuring that it takes, and remains, in the lead in a market that is going to get very hot, very soon.
Vringo's application development is also far more advanced than that of any other potential competitors - the company beat industry estimates by more than a year and introduced a version of the service compatible with J2ME phones, enabling it to be the first company to provide video push services to non-Windows CE or Symbian devices. And the company's got Jon Medved - who knows from successful startups. Forget the probabilities - with all this going for it, it's hard to see how Vringo can avoid being "the next big thing!"