Founders: Shai Cohen, Evelyn Landman, Roni Ashuri, Yuval Bonen, Yahal David and Eyal Fayneh
Investors: Viola Ventures, Avigdor Willenz , Lip-Bu Tan , Intel Capital, Mediatek, Porsche
Year founded: 2017
Capital raised: $190 million
In recent years, Shai Cohen and Evelyn Landman - who have founded companies together for over 30 years - have been among the entrepreneurs most sought-after by venture capital funds. Seasoned investors, even those without much knowledge of semiconductors or industrial production, who have spent their entire careers investing in cyber, apps, and advertising, have been chasing the duo, just to acquire a stake in their start-up, ProteanTecs, which promises to transform the electronics market.
Cohen and Landman worked together on Intel's Pentium chip, the bestseller that made that company the star of personal computers in the 1990s. They were then among the founders of server chip company Mellanox, which went public, and was later sold to US multinational Nvidia. But their new start-up appears to be generating an industry buzz the likes of which they have never experienced before.
The reason lies in the business model that ProteanTecs offers its customers, one that also keeps investors in their comfort zone: cloud-based software as a service, meaning that with one click, any kind of customer, anywhere in the world can be given service.
ProteanTecs is a semiconductor company. It has developed sensors that are embedded in chips to monitor their performance throughout their lifespan, meaning years after a chip has been installed in a car, server, phone, computer, or gaming console. But its business model is the thing revolutionizing the chip market, thanks to the practices it brings from the software industry. Using the data continuously transmitted by the sensor, ProteanTecs offers a service that checks the health and integrity of the chip, from the planning and production stages, and on through years of use. A digital interface presents the state of the chip at any given moment to the various customers, and sends the instructions and actions needed for improvement and repair. The comprehensive platform facilitates connections between departments at client companies that previously were not in contact with each other - something that seems impossible at any software company today.
What really has investors excited is the ability to generate recurring revenue, to charge according to usage, to offer countless applications, and to upgrade customers quickly, in a model similar to the one used by giants such as Microsoft or Monday.com. ProteanTecs offers its customers - chip manufacturers, car companies, or cloud computing providers - service upgrades and enhancements over time. In addition, customers will be able to choose new digital products, bring in different departments, and new staff members to work with the system, in accordance with the desired testing stages, in a single click, and without long sales cycles.
For instance, an automotive manufacturer like Mercedes-Benz - one of ProteanTecs’ most prominent customers, "Globes" understands - is able to access a full picture of the dozens of chips installed in its Mercedes, Mitsubishi, or Rolls Royce cars, starting from the stage when they are installed in the vehicle until years after the vehicles hit the road. Through these tiny processors, the manufacturer is able to get a continuous snapshot of the vehicle's functioning, and involve other departments, not just the department in charge of inspection before the chip is installed in the vehicle.
A company like Microsoft, for example, which is believed to be using the Israeli company's systems (ProteanTecs declines to comment on the identity of its customers like Microsoft and Mercedes - A.G.), for the first time receives almost complete visibility into the performance of the chips embedded in it servers, and the server farms through which it provides cloud service to large enterprises. This guarantees customers a more reliable service, and enables problems to be discovered before they can cause a catastrophe. In this way, in a world in which the US and Chinese chip industries are heading in different directions, the Israeli company is creating a common language between all parts of the industry.
"Until today, the world of semiconductors depended on local testing processes that would take place in different places along the value chain, but with our chips and process, a single standard has been created that everyone can talk to, " says Cohen. "We create a common language, a uniform measuring stick, and thanks to that, we can also predict the lifespan of any machine."
The company's name, ProteanTecs, comes from the Greek god Proteus, who was able to change his shape and to answer any question. "In the myths, he was able to predict the future, but for that you had to catch him," says Landman. "We wanted to call the company Proteus but that domain was taken. The Go Daddy websites service offered us ‘ProteanTecs.com’ for $10. We bought it and that's what determined the company name."
Lack of pretension has been part of ProteanTecs’ corporate DNA since the day it was founded: the Haifa-based company has never plastered recruitment billboards on the Ayalon highway or thrown huge parties. "The truth is, we’ve never gone overboard" says Cohen. "We’ve always grown at a healthy rate, and even the $100 million funding round we undertook was also done on the basis of very clear results. We’ll go public only when we feel we’re ready for it We’re not going to be like the ones who say, ‘Let's go public and see what happens.’"
"On the other hand, you can't look at what's happening in the world and stay calm," says Cohen. "This is an interesting period, and we’re trying to take advantage of it to highlight the benefits, keep our heads down, and work. "
Cohen and Landman asked not to comment on the company's financial performance, but "Globes" has learned that the company generates annual revenue of over $50 million a year. In the funding round in September 2021, in which it raised $95 million, it was accorded a $560 million valuation, according to PitchBook.
The first investment was by chance
ProteanTecs was founded as a chip company, with a special technology for miniaturization and integration in the production processes of electronic systems, including microchips, but it grew as a software company. Cohen and Landman brought Yuval Bonan to the company as VP Software Development; last year he was joined by Uzi Baruch, a senior developer at Nice and Optimal+, who was recruited as VP Strategy as a data and analytics expert.
This is how shrewd chip industry investors like Avigdor Willenz, who in the past sold two semiconductor companies to Intel and Amazon, and Cadence CEO Lip-Bu Tan, came to the table alongside veteran software professionals like Shlomo Dovrat and Zvika Orron of Viola Ventures . They were also joined by serial investors Oren Zeev , formerly of Apax Partners whose current and past portfolio companies include TripActions and Houzz; Lee Fixel , a permanent member of the "Globes" "Midas List" with past investments in Stripe, Coinbase, Peloton, and Snyk. Tech giants like Intel and Mediatek, car companies like Porsche and Champion Motors, the importer of Volkswagen and Audi to Israel, also joined the list.
Shlomo Dovrat, the company’s first investor (through Viola Ventures) came to it completely by chance, as a result of a family connection to one of the fund's partners. His acquaintance with Cohen and Evelyn, despite it being a social one, rather than from a previous work relationship, matured into an initial investment of $6 million in 2018. "As an investor, you constantly meet companies that operate in an existing category and do something that someone else is already doing - only better," Zvi Orron, who represents Viola Ventures on the ProteanTecs board of directors, told "Globes". "It could be software with more features, or a new service that with lower costs. But ProteanTecs invented a new category: they make electronics not only do their job, but also broadcast their status, and this is revolutionary - precisely because it allows transparency and flexibility along the entire value chain."
The chip industry software market has so far been held exclusively by two giants: Cadence and Synopsys. These companies developed their own testing systems that could not communicate in the languages of other companies, and were therefore limited to development and production. From the moment a chip was sent to the factory, all contact with it was lost.
Synopsys recently launched a competing product after noting the Israeli company’s success. At the same time, the chip giants also began to develop similar solutions for themselves. This does not worry Cohen and Landman; when the major companies educate the market, for them, it’s a net gain all around, and in any case, the global economic crisis has diminished their motivation to develop products unrelated to their core business. They turn to ProteanTecs instead.
The connection made on the shuttlebus
Shai Cohen and Evelyn Landman met for the first time at Intel in Haifa, working on a team that produced, among other things, the Pentium MMX chip, one of the most successful products ever to come out of the Israeli development center. The center was managed at the time by David "Dadi" Perlmutter, who was later the Israeli candidate for Intel global CEO, served as Intel EVP and Chief Product officer, and is today a member of ProteanTecs' advisory board.
The friendship between Cohen and Landman, which developed thanks to the fact that they rode to work together on the same Intel shuttlebus, developed into a business partnership that has already been responsible for two major companies. In 1999, Cohen heard that several Intel colleagues were planning to leave and start a company that would develop a chip that would streamline server farm operations. Cohen did not want to leave the company without Landman, who was already considered a technological genius, and so the two became part of the nine-person founding team of Mellanox that included Eyal Waldman, Roni Ashuri, Michael Kagan, Eitan Zahavi, Shimon Rottenberg, Udi Katz, and Alon Webman .
Mellanox was a success story: it went public on Nasdaq in 2007 at a $510 million valuation and was eventually sold to GPU and AI giant Nvidia for $6.9 billion. But Cohen and Landman weren't able to enjoy the exit; activist fund Starboard Value (the same one currently trying to take over Wix), asked to replace the entire board of directors and also ousted Cohen, who was Mellanox's VP of operations. Landman, who was responsible for considerable parts of research and development, including aspects of product engineering, processors, boards, systems, cables and optics, decided that she would not stay at the company without Cohen, and the two set out on a new path.
"We are indeed serial entrepreneurs, but starting one company after another with a gap of two decades feels like jumping into a time machine," says Cohen. "During the 17 years of having our heads down in a state of non-stop performance, a generation of entrepreneurs and managers had grown up around us. We went out into the free market and discovered an environment that was completely different from what we had known before."
Cohen went on to describe the changes in the market: "Initiatives, start-ups, funds, investors and angels everywhere. The world has also changed since we founded Mellanox: the amount of electronics that we use is growing at a tremendous rate - in cars, server farms, or end devices. And with this quantity come problems, since it is hard for the large systems that produce them to maintain high quality. The demands made of chips are also becoming more complex: a chip in a car must be able to inflate the airbag and also perform spatial object recognition. A server farm chip must provide almost absolute reliability because one crash could endanger millions of customers. And if that's not enough: as the chips get smaller and more sophisticated, their production costs keep going up, while the problems of reliability become more difficult and widespread."
Evelyn Landman, as the company's VP of development, faced the challenge of developing and launching a seemingly impossible product: a chip that could be integrated into the production processes of other chips, and remain throughout the duration of their entire life cycle.
"Shlomo Dovrat asked me if it would work. I answered him, ‘Honestly, I don't know,’" she told "Globes". Although the two made a detailed and convincing presentation, the solution was not feasible. But the duo had a feeling that it could happen. The company entered an accelerated development process at the beginning of 2018, but nearly a year later, the product was not working. "We saw gaps that made no sense in each of the trials we performed," recalls Cohen. "We blamed ourselves. It was a disaster that, unless it was resolved in time, could have been fatal." There was a happy ending, of course, but this experience served as an example for the pair of the risks they were willing to take.
"ProteanTecs' product is pretty complicated, as its technologies come from different disciplines," says Zvika Orron of Viola Ventures. "The chip contains very deep software layers, and requires an understanding of complex manufacturing processes for semiconductors, their implementation on systems, and of the artificial intelligence that analyzes the data. It’s hard to find people who are so experienced in all of these disciplines, and in this sense, Landman is unique; there are very few people in the local industry who can reach this level . It’s very hard for novice entrepreneurs to found a company in a complicated area like this, and the fact that Landman and Cohen came to this as second-time entrepreneurs is very important."
The Most Promising Startups rankings are part of the annual Enterprise Technology Summit held by "Globes" and JP Morgan.
Published by Globes, Israel business news - en.globes.co.il - on December 14, 2022.
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