Mail-Bit is graduating from university

The circumstances behind the founding of Mail-Bit is similar to the way many start-ups set up by Israelis got off the ground in 1998-1999. It starts with a problematic situation the entrepreneurs happen to come across, which immediately sets their feverish minds working to find a solution and results in the founding of a company.

Mail-Bit’s story started eighteen months ago, when Ran Ben-David and his partners watched an unfortunate student trying in vain to get his semester examination results by telephone. The student needed to know whether he had to retake the examination, but was unable to find out. Ben-David and his partners thought about the student all the way home, and in the evening decided to set up a company which would develop a solution for transferring students’ results by cellular telephone using SMS.

Universities enthusiastic

However, there was a problem. The wheel had already been invented, and everyone knew how to send SMS. On the other hand, not everyone knew how to adapt SMS to organizations’ databases. CEO Ben-David started meeting with university representatives to find out whether there was a demand for the product, or whether the universities had already started developing something similar. Obviously, there was no point in setting up a company to develop SMS messaging if the universities you are interested in servicing have already assigned the project to computer science students, for instance.

Ben-David was surprised by the warm reception he received at the universities. One month later, Mail-Bit closed deals with colleges in Tel Aviv and Ra’anana. The company’s product is currently being tested at all of Israel’s universities. You may well ask how Mail-Bit managed to penetrate universities, which have such large bureaucracies. The answer lies in its business model: the universities have nothing to lose since the product does not cost them anything. Students will pay NIS 48 for an annual subscription.

Beyond academia

The product was successfully used by students at all of the country’s universities, and Mail-Bit is now targeting new markets. It recently signed an agreement with Oscar Gruss for an annual fee of NIS 300,000. Mail-Bit will send SMS messages to Oscar Gruss customers regarding the shares they hold; the messages will be tailored to match the subscribers’ preferences. The company is also negotiating with one of Israel’s largest personnel agencies which is interested in sending job offers “the smart way”, i.e. by matching employer demands with employee job definitions.

Isn’t it dangerous to build a business model based on a poor population, like students, paying for services, when they are fighting to have tuition fees lowered?

Ben-David: ”Students pay universities NIS 10-11,000 a year, and would be right to think the service should be provided as part of their fees. However, from the universities’ viewpoint, this service was not a part of the universities’ budget. Using our model, the university enables the student to get the service while paying a token fee for it. In the meantime, no student has approached us to complain. Not only do the students save time in trying to get results, but they are informed if a lecture is canceled. If a student is saved from going to one class that was canceled, he’s already saved NIS 48.”

Wouldn’t Comverse or a similar large company be able to set up a system like yours in two hours?

”Of course it could. Reichman College asked Comverse for a quotation for a similar system. Comverse demanded $750,000. Reichman is getting our system for free. Other companies can certainly set up similar systems, but you are also evaluated on the basis of your business model. Everyone is talking with the universities, and seeking to sell them SMS.”

Have you considered the possibility that Comverse, which can afford to offer the service for NIS 30 a year, might push you out of the market?

”Comverse won’t do it since it would lose money if it charges NIS 30. As you mention, Comverse is capable of setting up the system in two hours, but it will take it no less than six months to integrate it with universities’ databases and set up a suitable billing system.”

Are you thinking of the corporate market?

”Yes, we’re currently negotiating with a very large corporation which has a user base that has 600,000 users, double the number of university students in Israel.”

When do you predict you’ll have at least 100,000 students?

”I believe we’ll reach that figure as early as the first semester of the next academic year, when we’ll be working with the five major universities.”

When will you offer your service overseas?

”We have no problem offering our service overseas as long as an overseas company cooperates with us. I would be pleased to cooperate with a company like iTouch, which could take our system and distribute it outside Israel.”

Published by Israel's Business Arena on 27 March, 2001