When you compare Aryeh Finegold’s successes in Daisy Systems Corp. and Mercury Interactive Corporation (Nasdaq:MERQE) with his present efforts in start-up Orsus Solutions Ltd., it’s hard to imagine that he will one day repeat his two blockbusters, and turn Orsus into a multibillion dollar company.
Daisy Systems and Mercury Interactive grew to become companies with hundreds of millions of dollars in revenue, whereas Or Yeduda-based Orsus is best known for writing off value for investors. It has burned over $50 million of the $68 million raised to date, and has shown no revenue, except during its first year of activity.
Today, with $15 million in cash, Orsus chairman and CEO Finegold is trying to navigate the company in a new direction by changing its business model. He will swear that Orsus will one day become another Mercury Interactive.
When asked to compare the successes of Daisy Systems and Mercury Interactive with Orsus’s stagnation, Finegold says, “The difference is that we started Orsus with too much money, compared with Daisy Systems and Mercury Interactive, when we were hungry.”
Finegold says, “When I’m asked about the differences, I always remember my reserve duty in the paratroopers. Looking back, it seems like had a great time in the reserves, but during the duty itself, I crawled through the mud and ate shit. At Daisy Systems and Mercury Interactive started doing one thing and switched to another. At Mercury Interactive, we began developing hardware for testing software performance, offering boxes to customers, but realized that the market wanted software solutions.”
Finegold is not ashamed to admit that Orsus’s failure to date was because he, like everyone else, was swept away during the bubble era. “I grew up in my entire professional life with the understanding that a company’s success derives from identifying a problem and developing technology to solve it. Toward 2000, people bought all kinds of companies with technologies that could burp after a meal and brush teeth, but had no real use. The bubble changed everyone’s perceptions, and I too fell into the trap.”
However, today’s Orsus is a whole other story, says Finegold. “Today’s Orsus has the same name, but isn’t playing the same game. We used to be like a football team with eleven players, but we’re now a basketball team with five. We have fewer players, but they’re much taller.
“The situation management market that we’ve recently turned to has a billion-dollar potential, and I definitely see Orsus achieving the size of Daisy Systems and Mercury Interactive. Like Orsus today, Daisy Systems and Mercury Interactive also turned to new markets in their first days.”
Finegold burned the money
Orsus seemed promising at first. Finegold raised all the money in 2000, just before the high-tech bubble burst, from top-tier investors.
For their part, the investors were blinded by Finegold’s two successes, and invested in Orsus at inflated valuations, in the hope that Finegold and his partner from Mercury Interactive, Amir Weinberg, would make hundreds of millions of dollars. “They chased after me to invest,” says Finegold.
Orsus held its last financing round in 2000 at a company value of $200 million. Its investors include Tel Aviv Maccabbi basketball players Nadav Henfeld, Nate Huffman, coach Pini Gershon, and others; and also some institutional investors, among them Comverse Technology Inc.’s (Nasdaq:CMVT) Comsor Venture Fund; Cedar Fund, Israel Infinity Venture Capital, Epsilon Investment House Ltd., and Modgal Tech.
“Two kinds of investors are backing me,” says Finegold. “The first kind tells itself that Finegold made millions at Daisy Systems and Mercury Interactive, and isn’t interested in new business. They ask what happened to Finegold, who burned their money, and they want to hear from me only before an issue. It should be remembered that during the bubble, investors didn’t only invest in experienced people like me, but also in entrepreneurs with nothing.
“The second kind of investors are the smart ones. They look at Orsus’s chances, and see its amazing dowry in the form of the technology from its previous incarnation, and its great potential.”
As mentioned, Orsus decided to change direction last year. It took its technology for linking content sitting in a company’s information center with handheld and mobile devices into the situation management field.
“We emerged from the bubble with less cash, but stronger. We developed amazing technology that was far more advanced than the market could comprehend. Whereas technology on the market was screwed into the floor, our technology was in the heavens.”
But the amazing technology that Finegold talks about generated almost no sales. Although companies like General Electric (NYSE:GE), Fujitsu Ltd. (TSE:6702), and Honeywell NYSE:HON) expressed interest in the technology, things did not work out, and Orsus had to slash its workforce from a peak of 160 people to 32.
At some point, Orsus decided that money in hand was better than technology in the bush, and it looked for a market with a technology gap that would pay money for its solution. “We identified a market seeking a solution and without complete technology, and decided to focus on it,” said Finegold. “We didn’t pass the elevator test with the previous technology. The elevator tests determines whether you have something good in hand, can explain it to the customer while the elevator is going up. In our previous incarnation, we could have gone up and down four times in the Azrieli Towers’ elevators without being able to explain what we were doing. Now we can explain ourselves in an elevator in a four-floor building.”
The Orsus Situator is basically an upgrade of existing situation control systems. Whereas present systems are awareness systems that tell you what’s going on, a situation management system takes the next step and recommends what to do. The Orsus Situator is designed to help organizations improve their response effectiveness in both routine and emergency situations. It includes software that automatically provides all alert procedures in order to direct decision-makers during crises.
Take the example of an operations officer based in the operations room receiving reports about a break in a security fence who becomes stressed as he tries to figure out who’s attacking whom and what has to be done. After gathering his wits and starting to act, he must comply with a series of procedures. First, he has to send response teams to check the fence, notify a long list of commanders, and do another long list of things according to the book.
“In a situation of stress, everyone automatically freezes. The more experienced people recover first,” says Finegold. “Our system knows to take the next step and help decision-makers. It knows how to process information, automatically make reports to the proper people by SMS, e-mail, and the like, and verify that the reports have reached their destinations.”
The Orsus Situator has all an organization’s procedures uploaded into it, which makes it able to guide an operations officer step by step in response to an incident. The system can identify each soldier carrying a mobile GPRS communications pack, and knows whether the soldier can respond effectively to the problem. For example, if the incident involves the infiltration of terrorists, and if the closest soldier to the site of the incident is unarmed, the system directs armed troops to the location.
“We took our system, which managed technicians in the field while they were on the move, and converted it to handle security. A commander in the field can take command of an incident using his mobile device, even if he is not sitting in the operations room.”
“No gorilla competes with us”
“Globes”: Are there no players in this field now?
Finegold: “Even during the stone age, when I was a student at the Technion, there were thousands of solutions for a classic response to incidents. We have raised the solution to the level of situation management, compared with solutions that provide only response. One of our investors checked who was active in the market, and returned after two week empty-handed. That doesn’t mean that we have no competitors, but it does mean that no gorilla is competing against us. There might be some small start-ups.”
How long will your cash last?
“It can carry us forward three years without sales, but that’s not what we want. A few weeks ago, Poalim Ventures acquired the stake of one of our investors for $3 million (contrary to reports, Poalim Ventures’ investment was not part of a financing round by Orsus O.L.). I know Poalim Ventures chairman Nir Bronstein, who has joined our board. We made sure that Poalim Ventures would have the option of investing first.
“We see a very respectable pipeline in the short term. Our system will be installed at a large defense customer next month. Business looks impressive in the longer term, partly because its suits a wide range of customers. It is suitable for hospitals, airports, seaports, and almost every place.”
To what extent to you see tge increased worries about terrorism influencing your business?
“In the US, I would definitely be thrown in jail for saying this, but our best sales rep is Osama Bin Laden. Every few months, he makes sure to remind everyone of the need for products like ours. When I worked at Intel, its founder, Andy Grove taught me that the world is driven by fear, sex, and greed. Companies have no sex, but they definitely have fear. Americans are now afraid of attacks, which plays in our favor. Any olive tree you shake, olives will fall.”
Personally, what other differences do feel between your early days at Mercury Interactive, and your time at Orsus?
“I feel like a grandfather. I founded Daisy Systems at 30, when I was more or less the age of managers at the company. When I founded Mercury Interactive, I was already older than the employees, and I now feel like their grandfather.
“A lot of people of my age would be happy to be 20 again with the experience and head of people their age. It’s impossible to turn the clock back, but the nice thing at a start-up is that you’re always driven by new beginnings. I enjoy working now for the same reasons I enjoyed working then. I’m in a company with young people, and driven by enthusiasm to do new things.”
Published by Globes [online], Israel business news - www.globes.co.il - on August 30, 2005