Marketplace: Scaling Annapurna

How Billy Hrvoye and Nafea Bshara reached the start-up peak

By SHLOMO MAITAL
April 4, 2018 13:04
 Nafea Bshara (left) and Bilik (Billy) Hrvoye

Nafea Bshara (left) and Bilik (Billy) Hrvoye. (photo credit: NITZAN ZOHAR)

 
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Building a successful world-changing start-up is not unlike climbing a Himalayan mountain. This is the story of a remarkable start-up, founded by an Israeli Christian Arab and a Jewish immigrant from embattled Sarajevo, then-Yugoslavia, born when a plan to climb the real mountain (the formidable Annapurna) was not implemented – and the mighty rock gave its name to the start-up anyway.

Intimately involved in the story is a catalyst – a savvy successful entrepreneur named Avigdor Willenz, whose exit struck it rich and who used his brains and money, as an “angel,” to replicate his success, with a clever choice of “ingredients” − budding entrepreneurs and their ideas and vision. By the way, Willenz himself did climb Annapurna, in the 1980s, before launching his own start-up.

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Located in Nepal, the fearsome Mt. Annapurna has a peak over 26,000 feet high (Everest is 29,000 feet) and is regarded as one of the most difficult and dangerous mountains to climb. The name Annapurna is Sanskrit, and means “goddess of the harvests” or kitchen-goddess, the mother who feeds.

Our story begins in 1992. Communist Yugoslavia is falling apart as the sectarian Bosnian War rages. Bilik (Billy) Hrvoye grew up in Sarajevo, capital of Bosnia. War ravaged the city. Billy’s mother insisted he leave the country on what was the very last Jewish Agency flight out of Belgrade to Israel.

Billy realized he would not soon return to his homeland and persuaded the Technion’s Electrical Engineering dean to accept him, even though Billy could not take the entrance exam because he did not yet know Hebrew.

For two years, as war raged in Sarajevo, Billy could not communicate with his friends and family. “The Technion was my family,” he observed. “I came like a refugee and the Technion helped me dream big.”

During his second semester, Billy met Nafea Bshara, a student with whom he played basketball. Nafea is a Christian Arab who hails from Tarshiha, a northern Galilee town linked with the mainly Jewish city Ma’alot.

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The close links between the two cities, one Jewish, one Arab, are a paradigm of smooth Jewish-Arab cooperation.

Nafea’s father is a Technion graduate and his parents lived in Technion dorms when Nafea was born. Nafea finished his BSc in Computer Science in only three years, even though he also worked during his last two years of study.

Billy and Nafea did graduate degrees at the Technion. Billy joined the high-tech company Galileo, founded by Avigdor Willenz, where Nafea was working, after leaving his job at IBM. Billy recounts that two weeks after joining Galileo, Willenz bought him a round-the-world ticket to go out and meet Galileo clients.

In late 2000, Galileo was acquired by a competitor, the US semiconductor manufacturer Marvell. As a result Nafea moved to Santa Clara, California, to become Chief Technology Officer for Marvell. Billy stayed in Israel as Vice President for Engineering.

For a decade the two close friends worked as a team, with frequent trips by Billy to California.

In 2011 when Billy was nearly 40, he and Nafea talked about the future. They decided to start their own company. After resigning, they spoke with their former boss, Avigdor Willenz. Willenz at once invested $20 million in their start-up – half his own money, half from colleagues − even though the intrepid pair had no product or even a business plan.

Billy and Nafea chose to name their company Annapurna Labs. Why? After quitting Marvell, they had originally planned on a trek to Nepal, to climb Mt. Annapurna. Naming their start-up after the challenging mountain they did not climb was a tribute both to what lay ahead and to what they had given up.

The two entrepreneurs assembled a strong talented team. Nafea remained in California while Billy opened an office in Yokne’am’s Science Park. And the two had a plan.

“We decided we would launch our startup on Billy’s 40th birthday and do an initial public offering of stock four years later, on my [Nafea’s] 40th birthday. And that’s exactly what happened!” Nafea explained.

What was Annapurna’s product? The two start-up entrepreneurs tackled a difficult task – to develop an ARM chip (advanced reduced instruction set machine chip for microprocessor controllers), competing with giant Intel. The product is very useful for cloud servers – servers that provide “cloud” access to a network of remote servers hosted on the Internet to store, manage, and process data, instead of using a local server or a personal computer. The Annapurna chip speeded up this access and turned out to be of great value to the high-tech giant Amazon, which quickly became a leading provider of cloud services.

Amazon was thinking about redesigning its networking and storage architecture for its cloud business. A meeting between Amazon and the Annapurna team, still tiny, which lacked even its own website, led to a strong click between the two. Amazon became Annapurna’s strong strategic partner.

And in 2015, right on schedule and according to their earlier prophecy, Amazon bought Annapurna for a reported $350 million, almost exactly on Nafea’s 40th birthday.

Was Annapurna really worth $350 million to Amazon? It was indeed. Annapurna gives Amazon the ability to develop its own processors, rather than pay Intel or others steep profit margins for its products.

Why did Billy and Nafea agree to sell? “We had an outstanding team and we needed to make sure our people would continue to have a great place to work in and continue changing the world,” they explained.

After Amazon bought Annapurna, it announced it would continue to invest heavily in Israel, opening two new R&D centers in Tel Aviv and Haifa, offering jobs to hundreds of Israelis.

Billy’s final word? “On a human level, it’s important that the people with us fulfill their dreams. We believe that if you can dream it, you can do it. And – they did indeed.

It is hard to overemphasize the key role played by the angel investor Avigdor Willenz.

In many ways such ‘angels’ bring far more than their checkbooks to the start-ups they fund. They bring experience, connections, and intimate daily hands-on management expertise, something venture capitalists always promise but rarely deliver.

In Galileo, Willenz became a start-up legend. I recall writing a case study about him and how he agilely “pivoted” Galileo from his original idea to fabless chip design and production.

In late 2000, the Marvell Technology Group, a US designer of high-speed communications technology, bought its Israeli rival and recent partner Galileo Technology for $2.7 billion in stock – an exit that would pave the way for many others in future. Willenz became an angel investor as a result.

And according to press reports, 300 Galileo employees got some $500 million in Marvell stock, creating many new millionaires.

And a final postscript about Amazon’s role in Israel. Throughout its history, Amazon and its founder Jeff Bezos have been game-changers. Beginning as an online bookstore, Amazon quickly expanded to selling everything online, then pioneering e-books, cloud computing, original TV programming, exploring drone package delivery, and the amazing Alexa digital assistant.

In Israel, too, Amazon is a game-changer.

According to the business daily Calcalist, in 2017 pay in Israel for software professionals rose 7 percent, to 319,728 shekels ($93,000). Algorithm development engineers are paid 366,000 shekels (well over $100,000). And data scientists average 480,000 shekels ($138,000). Moreover, top talent also gets signing bonuses, like star football or baseball players, amounting to 40,000, 80,000 or even up to 100,000 shekels.

According to Merav Laifer, CEO of see.V, a high-tech manpower firm, “in the past two months [end of 2017] Amazon stormed in and offered Israeli programmers huge salaries and unprecedented signing bonuses, and even before it entered the market we experienced a step up in the war over leading candidates.” Laifer observed, in the Calcalist, that “start-ups are unable to compete as aggressively over candidates, especially when competing against companies like Amazon that end up paying the [highest] price.”

Normally, I interview the subjects of my columns. But entrepreneurs Billy and Nafea have pursued a consistent policy of radio silence, which I fully understand. I based this column on an excellent piece by Rebecca Kopans on Annapurna in the The Technion magazine, Focus.

The writer is senior research fellow at the S.Neaman Institute, The Technion, and blogs at www.timnovate.wordpress.com

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