GoNet Channels recruited Jack Gault, lately one of the senior executives at the cable giant Time-Warner (which recently merged with AOL), to its board of directors. GoNet hopes that Gault will open the doors of the world’s great communications infrastructures operators and manufacturers. GoNet developed technology enabling maximum bandwidth utilization, in order to optimize data transmission in multimedia environments.
In mid-99, Orni Petruschka and Rafi Gidron approached Gault through a common friend in the US cable industry, suggesting that he join Chromatis’ advisory board. Later, Gidron (who is a member of GoNet’s board of directors) introduced Gault to GoNet’s entrepreneurs.
“I plan to meet some Time-Warner senior executives soon,” says Gault, “in order to interest them in investing in the company. I also intend to invest in GoNet myself.” At the moment, GoNet’s shareholders are Gilat Communications (8.6%), Genesis II venture capital fund (30%) and the company’s managers and employees.
Why GoNet? There are several known bottlenecks on the Internet. One of them is the interstice between the Internet server (ISP) and the subscriber, i.e. on the home stretch. “Our technology is designed to deal with bottlenecks on the last mile,” says GoNet CEO and chairman Ofer Goldhirsh.
“In other words, even when information flows quickly up to the ISP, at peak hours, it can take a long time to reach the subscriber. Our solution reduces the congestion over this last mile, speeding up the flow of information. Rather than adding to capacity, our technology enables us to move the information during the ‘off-peak hours’ when bandwidth is not fully exploited, thereby delivering information to the subscriber at his convenience.
“Communications providers can use our technology to transmit content to subscribers when the network capacity is not fully utilized, saving the bandwidth for peak hours. Our solution enables cable and satellite companies to create revenues by optimally exploiting bandwidth throughout the day.
“We constantly listen to the line, filling in the unused part, in order to transmit users’ regularly needed peak hour content. For example, let us assume that that there are 2,000 Internet users in Ramat Aviv who, during peak hours, always enter specific sites. Usual methods require that each of them separately enters the storage each time they try to enter during peak hours. They increase the overload on the net, and each of them is forced to wait many minutes for the desired content.
In order to prevent this, GoNet’s system learns the preferences of the service’s subscribers, locates the content regularly used by each subscriber (without identifying him/her) for the server, and ensures that this content is transmitted to the subscriber’s computer. In future, content will be transmitted to a smart converter that can store content, or transmit it to a server installed in the user’s home.”
“Globes”: Who are your customers?
Goldhirsh: “Our customers are infrastructure communications companies, i.e. cable and satellite companies. We plan to sell the system to communications providers, including LMDS and MMDS providers. At this stage, the largest market is the cable companies, but in general, we are focusing on communications providers offering content to the private market.”
What is the estimated potential size of GoNet’s market?
“We estimate the potential of the market at several billion dollars. The payment to GoNet is derived from the number of the service’s users.”
What market share are you planning to reach in the next five years?
“We can realistically speak of 20 million subscribers within five years, but it depends on the entry rate of high-speed modems and smart converters to the mass market.”
How do you make money?
“We sell licenses to operators and receive royalties for the maintenance. The license is based on the number of users, so that our revenues increase proportionally to the size of the market. Our goal is to be a part of the service package of communications providers and to make our product a strategic solution for him. Each deal is estimated at between several million and several tens of millions of dollars. In future, after the company grows larger, we will go over to a revenues sharing model.”
How long do you estimate will it take others to develop similar technology?
“I estimate that within 18 months a company will be founded that will develop a similar technology.”
When will you begin to see sales and profits?
“We will soon have revenues from sales to satellite content providers. We expect that they will amount to several hundred thousand dollars. We not see profits anytime soon.”
Are you considering a public offering?
“Not in the near future. We will not go public until we have sales and profits. In any case, we don’t lack for money at the moment. At the end of 1999, we raised $3 million at a company value of $10 million from the Genesis II venture capital fund, and we are planning our next financial round for the second quarter of 2001.
Who will you raise the money from?
“We are first looking for a partner from the communications industry, i.e. an infrastructure manufacturer at the scale of Cisco, or a large cable provider on the scale of Time-Warner. In addition, we are interested in a financial partner, with a clear preference for a large US venture capital fund.”
Who are your competitors?
“There is a Swiss company, Fantastic, that distributes content via bandwidth, and there are other companies such as CiDRA and iBeam, that mainly offer bandwidth service provider technology. But at the moment, we are the only company that has developed technology that exploits ‘off-peak hours’, i.e. the time when bandwidth is not fully utilized.”
Published by Israel's Business Arena on 10 October 2000
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