There are hardly any Internet surfers who have not come across banners urging them to join a lottery for a Green Card visa to the US. On the face of it, this looks like just another esoteric banner from which someone is earning a few dollars a month. Nino Ransenberg, and Daniel Scalosub, the co-founders of DSNR Ltd. thought so too, and decided that it was worth giving this nice idea a shot. Today, six years on, it appears that the nice idea has grown into a company that is set to hold an IPO on the Tel Aviv Stock Exchange (TASE), in which it aims to raise $15-20 million at a value of $60-80 million, which goes to show that the chance the two men took when they started their company has paid off.
DSNR will have to face two key challenges and it will have one notable advantage when it floats on the TASE. First there is the difficulty involved in holding a successful IPO. On the other hand, the company has an advantage by way of the lines of business it engages in - online marketing and advertising, a growing sector that shows great potential in the coming years.
The company's other problem is related to its accounting methods. Up till now, DSNR reported on a cash basis, and the transition to a financial reporting on an accrual basis has created a substantial discrepancy between its cash flow and its statement of profit and loss. Since a significant number of DSNR's contracts are for periods of 5-10 years and the amount payable is remitted in full within the first year of the contract, investors are likely to see a high positive cash flow, rather than a marginal profit or loss on the company's profit and loss statement.
In 2007 DSNR already had NIS 90 million in cash after it signed contracts for periods of 4-10 years, but once again, in accordance with accounting rules, these figures relate to the duration of the agreements and as such, they cannot be recognized in the current year.
Making waves on the net with $2,000
Ransenberg, who is company CEO, and Scalosub, now executive VP, met in 1995 at the "High-Tech College," where they gained first hand experience of the high-tech bubble as well as its implosion several years later. In 2001, they decided to collaborate in a new venture conceived by Scalosub during the two years he spent working in the US. He realized that the demand for work visas among immigrants was worth money. A lot of money.
"Because the sector was in the throes of a depression in 2001, we decided that we would invest $1,000 each in the new venture, to see if it any had chance at all," says Ransenberg. "We soon realized that there was a phenomenal demand for green cards. We didn't even spend all the $2,000. Things were different back then, and web sites in Israel had only just appeared and suffered from a lack of resources. Online advertising in Israel was still in its infancy, so with $1,000 or $2,000 you could make waves back then," recalls Ransenberg.
"Site owners were literally chasing after advertisers. Our first campaign was for MSN. We invested $6,000 in one month and by one month later we had earned $66,000 - all of it from sales of value added services for Green Card lotteries. This brought us to the realization that what was successful here in Israel could also work in other countries, so we set up a call center with 12 seats. Our call center service is based entirely on outgoing calls to anyone who showed interest in the Green Card lotteries, during which we offer our accompanying services. This business is built on a critical mass, since only a small number of those people who are interested eventually buy service package," says Ransenberg.
The amazing about DSNR is that it does not supply Green Cards, and it even states this in its advertisements. DSNR merely assists in the process of registration for lotteries. "Due to the US authorities' extremely stringent regulations, applications must be completed exactly as directed, and not everyone can manage this. For example, photographs have to be taken at the right resolution; forms must be filled out exactly as required, etc. It turns out that people are willing to pay for value-added services such as these."
Today, more than 70% of the company's revenue comes from this activity, which means that the biggest threat to its business lies in changes in US immigration regulations, or the lowering of the work visa quota. "We are not aware of any such process and we monitor events on a day-to-day basis," says Ransenberg.
Published by Globes [online], Israel business news - www.globes.co.il - on March 18, 2007
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