Finegold Already Considering Next Project

Mercury Interactive recently reached billion dollar market value, but founder Aryeh Finegold is already contemplating his next stop. "Founding a new start-up makes you feel like a sixteen-year-old", he says, "and I definitely intend doing that in the future".

Mercury Chairman Aryeh Finegold isn't exactly beside himself at the fact that the company headed by him just recently attained a billion dollar market value. "With me, everything is as usual. Nothing has changed", he says. Finegold has excellent reason not to get too excited by the market value reached by Mercury. This is not his first time as a member of the Billion Dollar Club. It happened before with US company Daisy, established by Finegold at the beginning of the 'eighties.

While he has spent a not insignificant part of his life in the US, 52-year-old Finegold started out in Israel, in the mid-'seventies, as an Elbit employee in defence electronics. For one thing, he was a member of the team that was awarded an Israel Defence prize for developing electronic warfare equipment for the Navy. "What we developed then is undoubtedly on show now at the junk museum", he jokes. "Things we thought very smart at the time now fit into a tiny corner of some bug".

Finegold's American chapter commenced in 1977, when he started working for Intel. Finegold then served as head of the team responsible for next generation products architecture.

Finegold owes the start of his independent career to a curious quirk he encountered while working for Intel. Finegold noticed that electronic engineers, who were developing tools such as word processors and electronic spreadsheets for others, were themselves still working manually, drawing with pencil and paper. "They, who were developing such sophisticated instruments, were actually working like some backward tribesmen", Finegold says.

Finegold, sensing a potential gold-mine, reviewed his options and decided to leave Intel. He and some others then proceeded to form Daisy. Daisy, founded in 1980, developed tools for making drawings directly on a computer, with no need for manual draughtsmanship, through simulation of the final system. Daisy thereby broke the ground for an industry currently estimated at several billion dollars, namely the electronic design automation market.

"I recall that when I went to raise money for Daisy", Finegold now reminisces, "I told someone who was then a potential investor that 'in my assessment, this is a market worth billions of dollars'. Do you know what he did? He threw me down the stairs", Finegold grins.

All that remains to that potential investor is to kick himself for not putting his money on Daisy. "Anyone who invested $10,000 in Daisy", Finegold says, "received $3 million over the years. Daisy's first two hundred employees are all millionaires today, and that includes the secretary and the janitor".

"Globes": What actually brought you back to Israel?

Finegold: "Good question. Must have resulted from severe brain damage", he jokes. "Do you have any other explanation for the fact that a normal person would want to come back here? Rather more seriously, though, I came back to Israel in 1989, for my son's Bar Mitzvah. When I first left for the United States, I said I would come back when my son reached Bar Mitzvah age; but for some reason, nobody took me seriously.

"Even afterwards, when I was working for Ready Systems, nobody there believed I would leave the company, especially when it was about to make its IPO, but I did. I left Ready and came back to Israel. And, taking into account that I am still satisfied that I remained here, the brain damage must really have been serious", he laughs.

And how did the idea of setting up Mercury get started?

"When I returned to Israel in 1989, I thought I would take time out for a year. But not long afterwards, I met a few people, including Amnon Landan (currently Mercury's president), with whom I had worked previously, at Daisy. They spoke of a proposal they had for a technological solution for software inspection.

"I knew from experience that software inspection was one of the problems causing company managers sleepless nights. Obviously, if we had to hand something that could solve the problem, companies would have no hesitation about spending large sums of money for it.

"This, incidentally, is an important factor that must be taken into account when forming a start-up. It is important to identify a problem that is causing company managers headaches and sleepless nights. Nothing less than that. There are other problems, that may be no less critical, but that are perceived as able to be solved by money, by applying greater resources, rather than through new ideas".

You founded Mercury after returning to Israel. Why, then, is Mercury registered as a US company?

"Mercury started out as an Israeli company, but was registered as a US company for a very simple reason. Let's not forget that, at the time Mercury was founded, in the late eighties, foreign investors were still leery of investing in Israel. US investors putting money into Mercury were so scared of its Israeli identity, that our original instruments of incorporation included a clause expressly forbidding company managers to transfer more than $10,000 to Israel without the investors' permission.

"Mercury's leading investor, incidentally, was Hambrecht & Quist, which now has an active representation in Israel, that is constantly on the lookout for more and more investment opportunities.

"We don't usually like to take credit for things, but I have no doubt that Mercury's success caused lots of venture capital funds and investors, which until then didn't dare get close Israeli companies, to begin to realise that the bogeyman wasn't so frightening and that one could go in for high-tech in Israel and succeed".

Mercury, now ten years in existence, currently has a payroll of 600 employees in various parts of the world, compared to 470 last year. Increase and growth are having their effect, and the company is shortly expected to relocate to its new building in Yahud, which will naturally be a little less modest ("when you build new offices, it's no longer possible for them to be so modest", says Mercury Israel general manager Uri Agmon, half apologetically).

The cost of the new buildings, one in the United States and one in Israel, is $30 million, which Mercury today, with annual revenues of $120 million, can certainly afford.

Mercury is largely identified with Finegold, whose name is frequently coupled with that of the company. Perhaps for this very reason, Finegold today finds it important to point out that Mercury is not a one-man show. "One of Mercury's secrets of success is teamwork", he says. "I am currently chairman of the board. Responsibility for the company's results rests with people like Amnon Landan (president), and Uri Agmon (Mercury Israel general manager).

"This works upwards as well as downwards. Our board consists of strong, experienced people, and they give us significant assistance in reaching various decisions. These are people highly experienced in industry, such as Giora Yaron, Yair Shamir and Yigal Kochavi. They often look at things from a different vantage point, and that is very helpful to us. Sometimes, the company is caught getting complacent about various matters, and the board members are able to bring this to the surface, and that helps us reach the correct decisions".

But the three people you mentioned have a rather unfortunate common denominator. Giora Yaron is seen as having been ousted from Indigo's management, Yair Shamir wasn't seen as a dazzling success either in Elite or in Scitex, while Yigal Kochavi is currently having not a few difficulties with DSPG.

"When you choose people for a Board of Directors you want people with scars, not fashion display models. You want people with a proven track record in industry, who have already experienced various situations. Such people will have obviously also encountered problems in the course of time, clearly, he who acts also encounters problems.

"Quite often, though, it happens that you are labelled a failure for no good reason. It happened to me, incidentally, in the case of Daisy".

To what extent are you currently involved in Mercury's routine management?

"Anyone setting up a company has to know when to take a step back and have someone else take the steering wheel. That is what I did with Mercury. I started out as president, CEO and chairman. I marked Amnon Landan as my heir, and drew him upward.

"Amnon is now company manager, instead of me. I am chairman of the board. He obviously consults me on various matters, but any decision on Mercury's current affairs is ultimately his, so he, too, is due some credit for the company's financial results".

Those results are now being reflected in the share price too. Even so, complaints have recently been voiced on the market that the share price is too high. What do you think?

"Toward the end of every quarter, friends always come asking whether it is a good idea to buy shares. I tell them: first of all, I am legally not allowed to tell you. But even if I were, there is no knowing how the market will respond to the results. You know you have fantastic results in hand, but that proves to be insufficient.

"You are familiar with Wall Street's whole rumour mill - analysts, for example, expect you to make a dollar per share, whereas the market actually expects you to make five dollars. And then there may be a situation in which you have good results, but the share gets badly buffeted. On the other hand, you can come along with bad news, and find nobody in the market is bothered about it. Why? Because people say 'We knew about that before, it's nothing new'".

Mercury is not the only high-tech company in which Finegold is involved. He is invested in series of start-ups, including Tegrity, which engages in the development of computerised graphic representation for instruction purpose and for management meetings; and Chronos, which examines systems in real time; and Mayotek, which develops tools for programmers.

Even though you have investments in various start-ups, you still invest most of your time in Mercury.

"That is correct. Mercury is where my office is today. The day may come, however, when I decide to move my office from Mercury to somewhere else, to a new start-up in which I will invest my best energies.

"So far, I have been involved in setting up two companies, Daisy and Mercury; and at some stage, I will undoubtedly form some new start-up. In the high-tech world, in contrast to biological life, you can move backwards in time and feel like a sixteen-year-old. The way to do that is to form a new start-up".

Can you estimate when this is likely to happen?

"It will happen when I feel I can invest less time in Mercury, and more in another company".

Published by Israel's Business Arena February 11, 1999

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