Celltrex: Betting on the favorite

Celltrex's founders put all their money on the Internets number one application - e-mail. The company develops convenient access to e-mail through cell phones. It welcomes competition and takes care to please its employees.

Everyone now understands that e-mail is the number one Internet application. The Internet applications that have come and gone have been many, and often bizarre. Throughout the entire development of the web, however, the leading Internet application has always been e-mail, with 90% of Internet users regarding e-mail as the most effective tool the web has to offer, while the next most popular application has only a 40% share of the user market.

Eran Fuchs and Celltrex president Erez Halahmi understood this when they founded the company in mid-2000. They put all their money on the Internets number one application.

Halahmi was familiar with the subject from his stints in senior development positions at Comverse Infosys and Comverse Network Systems. Halahmi and Fuchs initially thought of several ideas and presented them to a number of industry figures. One such figure was Comverse (Nasdaq: CMVT)s VP Marketing, who was glad to help the entrepreneurs, whom he knew personally.

The idea that won him over was to give the public the opportunity to examine and read e-mail more conveniently. This is achieved by shortening the time required to connect and download e-mail files. The product is not an office or home application, of course, but rather deals with the problems of connecting to the network from outside the office using cellular devices, whether the user wishes to access his e-mail on his cell phone or on a mobile computer with cellular technology.

Celltrexs technology can significantly shorten the time required to connect to the Internet from a mobile computer, and even reduce the time needed to read HTML pages with WAP technology.

The emphasis, however, is on an e-mail product that can also be used for Internet surfing the main thing that interests the market. Halahmis presentation clearly shows that the response time when accessing e-mail from a mobile computer is much shorter using the company's product. The interface is a browser, not an e-mail program. The browser displays the material located on the e-mail server. The technology allows users to open Word files in the same way they open an Internet page. There is no need to wait until the entire attached file is downloaded before opening it.

Supports Chinese

Toward the end of 2000, the Polaris fund also decided to gamble on Celltrexs idea and invested $3 million in the company.

Globes: Why only e-mail? Did you investigate the matter thoroughly, or did you rely on your gut feeling that e-mail is the most fashionable application?

Halahmi: I wont pretend that we checked it out that thoroughly. We just decided to focus on e-mail. Time will tell whether the decision was right or not. If we hadnt decided to gamble on e-mail, we probably would have failed. It appears, however, that an absolute majority of the Internet world uses this application, so it was fairly easy for us to gamble on it.

You have a development that facilitates cellular WAP surfing of regular sites. To what degree is this a vital part of the company? Could it be that this is a gamble on intermediate technology that wont manage to get off the ground?

Weve gambled on something bigger cellular e-mail. This product can also connect simultaneously with PSDN, the IP gateway to a CDMA network.

To whom will you sell the systems?

Were primarily approaching the cellular operators.

Do you have beta customers already?

Our market situation is definitely good. Although we have customers, the road to success is quite long, and I dont want to start telling tall tales. Were well situated.

Does Celltrexs technology support all existing cell phones?

Yes. We support almost all existing devices, including those in Chinese.

How reliable is the system?

Its true that getting disconnected on a regular call and one on the Internet is completely different. Having a regular call cut off is regarded differently than having an Internet call cut off, when you have no idea whom to blame: the cellular operator, the Internet provider, or the site. From my standpoint, I have to set up a much more reliable system for cellular operators.

Targeting the US

What will your next milestone be?

Reaching strategic customers in Europe and the US, the target markets.

When your company reaches the marketing stage, will you continue recruiting employees?

Certainly. Were adapting our recruiting campaign to the markets response. Its very important for us to recruit high-quality personnel. We now have 32 staff, and we see ourselves developing in the direction of Europe and the US. In the short term, we want to recruit another ten qualified employees.

Theres a cafe near Kfar Vitkin. When I was there, it put my vision in concrete terms to build a place the employees would enjoy being in. Why is that important? Because if you build a place like that for business reasons, far fewer employees leave, employees are much more loyal to the company, and their results are much better. Thats what you see in the cafe the employees like working there.

We invented a new position manager of personal development (PD). It was nice to see how the customers immediately understood his function and what lies behind it. His job is to be like a quality assurance manager for people, instead of development. He has to show everyone how to work with each other and have a good time doing it. Its a difficult, thankless job.

Isnt that called a human resources manager?

Yes. As far as Im concerned, thought, this is the key duty of human resources personnel to cause the employees to enjoy their workplace, which is very hard. Material compensation isnt always what keeps employees in their jobs.

Do you have competitors?

Theres a lot of competition in this market. I prefer it that way. Without competition, I would have to ask myself whether I was the only one interested in this technology. Its hard to say who is the main competitor; the market is just getting started. We believe our technological advantages and the size of the market will make room for us, too.

How do you think the cellular operators will roll the investment in this system over on the end user, if at all?

It depends on the cellular operator. It could be a fixed regular payment, according to (amount of) use, or by airtime. It could also be free, depending on the operators business model.

Whats your guess?

Theres a device in the US called blackberry a kind of e-mail pager that costs $500, and a monthly subscription costs $50. They have 1.5 million subscribers. It appears theres a demand for such services. I think the end user will be willing to pay the cellular operator for a service like this.

Business Card

Name: Celltrex

Founded: 2000

Founders: Erez Halahmi and Eran Fuchs

Product: A high-speed system for cellular e-mail connectivity

Employees: 32

Competition: Ericsson, Nokia, Openwave Systems, Comverse, and others

Owners: Founders, Polaris, employees (25%).

Previous financing round: $3 million from Polaris

web site: www.celltrex.com

Published by Israel's Business Arena on May 31, 2001

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