YCD Multimedia has yet to see any investment by venture capital funds after two years of operations. CEO Noam Levavi, 25, says that there is no rush to raise money from the funds, but that he is definitely planning a financing round at a company value comparable to “a second financing round company value”. He adds, “If no money is forthcoming, it is always possible to approach our current private investors, who have no problem reinvesting in the company. The funds want to invest in good start-ups and the price is a matter of negotiation.”
YCD in its Japanese translation means, “Why are you dealing with Sony changers and CDs. Come buy something better from Israeli youngsters.”
YCD has developed software that enables digital format of voice and music tracks on several voice channels on a standard computer. An ordinary computer can simultaneously play up to 12 stereo or 24 mono tracks. The product is in demand by hotels and malls that want to have music playing constantly, but with different tunes at different locations.
Levavi says, “It is important for businesses to not have to worry about the music being played. They don’t want to have to deal with buying the music. We developed a communications infrastructure that manages the end points in a decentralized manner.”
The company has meanwhile succeeded in an impressive penetration of the Israeli market without any special marketing or advertising effort. YCD’s software is found in 17 of 19 of Israel’s biggest malls. Levavi states that planned revenues for 2000 were NIS 300,000, but will probably be double that figure. “We did not want revenues greater than NIS 300,000, because that would require a larger operation,” he almost complains.
A company founder Dan Zeevi, 29, says, “We installed systems in Israel despite a recession. People agreed to pay us, apparently quite willingly. They first tried single-station systems, and now there are customers with three stations.
“In contrast to Israel, Australian customers began with 2-3 stations at the outset. Multiple stations adds a new dimension to business. As a technology company for whom Israel is not its target market, we have sold already 150 stations to 90 customers.”
YCD’s revenue model is to sell its systems to integrators which will be responsible for installing the systems for the customers. Levavi says that YCD operates in Israel as an integrator as well. “It is a way for us to learn about our customers and market needs.,” he says. “There are many integrators worldwide. It is easier for us to work through them, as our partners. We provide them services that did not exist before.”
YCD charges customers (without integrators) $150-200 a month, excluding content.
YCD stresses that it will not abet intellectual property piracy by digitally recording CDs. It even more emphatically stresses what the company does not do. Levavi says, “There are all kinds of organizations in the world licensing us music. The organization in Europe is PPL, which licenses the distribution of digitally recorded music to businesses using the infrastructure. We pay for this, and it is legal. People get confused and think that we digitally record CDs, but we don’t. We work with licenses. The system works differently in Israel, so we don’t deal with music at all. We only sell the system, and don’t deal with content.”
“Globes”: How did you succeed in recruiting a staff of 20 within seven months without additional investment? Isn’t there a manpower shortage?
Levavi : “It works at several levels. All of our employees came to us without reservations. We have had the privilege of choosing all the people who joined us. They are less interested in money. We are not a rich start-up, and many employees compromised on salary when they joined. It’s also true that we have not raised a lot of money. We simply looked for people who suited our vision.
“When you speak with people and offer them cutting-edge technology, they understand. It is important for us that people come to us who understand this and know what to do. An important aspect is that it is easier for people to join a company in the music field.
“If you work according to a goal of recruiting a certain number of people, you will never succeed. If you want to recruit 10 people, the chances are you will get 10 unsuitable individuals.”
It will be rather hard to take Manhattan with such a recruitment strategy.
“True. Our biggest difficulty is marketing, especially in the US. It is hard to recruit people there, and this is one of our tasks. In Europe, we have a nice, very serious Director of Operations, Sai Chundur, who is very strong in marketing.”
Why don’t you offer your product to the home market?
“We thought about it two years ago. We saw where the most difficult problems were, what had to be changed, and they were in the business market. We felt that these were things people were not getting and were interested in doing. You could say that it is a small sector: pubs and hotels with a total of only 4 million listeners in Israel.”
Published by Israel's Business Arena on 15 January 2001