Israeli technology entrepreneurship in the present era has been strongly influenced by its American counterpart, which dictates a certain resume containing degrees from expensive and prestigious universities and long business experience in successful start-ups.
There are however other types even in the hearts of high-tech industrial parks. Here and there, one can still find people who built Israel’s multi-billion dollar high-tech industry with their own hands; people who once loved fixing what was broken, or simply disassembled watches to see what was inside, but did not become prime minister; people who exploited their talent, faith and stubbornness to contradict all the industry’s pervasive PR prattle.
“We made money before going to primary school”
The second time I spoke with Visonic Group chairman and sole owner Yaacov Kotlicki, I asked him to tell me how he ever founded his company. Visonic Group is not exactly a start-up. It was founded in 1973, has $50 million in sales a year, and is an leader in various security fields. And not firewalls, but real security, using sensors, infra-red, alarms and the like. Moreover, it has been profitable for 20 years.
“It’s a long story,” replied Kotlicki. “Do you have the time?”
I did.
“It all began with my father. He was orphaned at nine, and was forced to leave the third grade to earn a living. He was a house-painter, an artist and craftsman, as well as a jack-of-all-trades – electrician, mechanic, painter, carpenter. He did everything himself. He built machines and tools, even made his own paint. Nor was ever an employee. He was independent.
“My brother Moshe, who passed away a few years ago, and I didn’t grow up among employees. We learned to do everything ourselves. What didn’t work we fixed at home – lights, heaters, toys. My father built my first bicycle by himself. When you’re raised like that, you realize you can do things by yourself, and try again. In effect, you live in an image building environment.
“What happened was that at a very young age, we built kites and balloons that we sold to the neighborhood kids. We made money before we went to primary school, because we had nothing at home.”
The elder brother, Moshe, went on to learn electronics at a vocational high school. Several years later, after he had already graduated, his brother, Yaacov, also earned a vocational degree. “From the moment my brother graduated in 1966, we began working together,” says Yaacov.
“We both played music, for example. We worked with amplifiers. We began repairing them, and then also began building amplifiers that could withstand certain climate conditions. We were the first in Israel to repair and adapt electronic organs. During the War of Attrition (1967-70), we built battery-operated amplifiers for the IDF entertainment corps that could be hooked upped to car batteries.”
In the early 1970s, while Kotlicki was still serving in the Air Force, his brother joined an Amcor subsidiary in the television field. The sector was still in its infancy in Israel, and the brothers mainly developed central antennae for homes. Based on their work with audio-visual systems, the brothers, together with Tadeusz (Teddy) Keshet, founded Visonic (combining “video” and “sonic”).
Visonic entered the security business by chance. The three men gradually began taking on vehicle security projects, because the amplifier business was poor. “One day, our alarm system broke down. Naturally, we wouldn't let anyone touch it, and went to fix it ourselves. When I opened the box, I was amazed by the systems. I don’t want to say it was primitive, but technologically it was pathetic,” says Kotlicki.
Kotlicki says there was heavy demand for alarms and security systems at the time. “We jumped into the water without knowing how to swim. The first product we developed was a catastrophe, but we learned from it. In 1975, when I finished my military service, we could make an all-out effort on the matter, and within two years we dominated the domestic market. We then faced quite a few problems from copying. By the end of the ‘70s, we were facing legal battles. Our name is on a precedent-setting ruling about electronic product copyrighting.”
“We never held a financing round”
Visonic has come a long way since then. In the 1980s, Visonic was the first company to develop and manufacture an infra-red electronic eye, and it was years before competitors caught up. Visonic now develops home automation systems that include wireless control systems for home networks (lights, blinds, electronic gates, etc.) These networks, which are connected to the systems through the house’s wiring, involve countless functions, such as communications with telephones and distant hand-held devices (including opening channels to PDAs and security centers), distress buttons, Internet command centers, etc.
Kotlicki asserts that security is the killer application for the automated house. There may something in what he says, especially when pricing monitoring systems for automated homes. Visonic’s products, with all their functions, cost the customer the same as hiring a regular security firm. They are subsidized by communications and service providers, which want to increase their revenue through the use of automated home networks. Visonic has multi-million cooperation agreements with British Telecom, Telefonica (NYSE; XETRA: TEF; LSE:TDE) and other cellular top-line communications giants worldwide.
Moshe and Yaacov Kotlicki won the prestigious Kaplan Prize in 1987. The company currently has 220 employees at the first electronics plant established in Kiryat Gat. It has dozens of product lines, and its sensors are sold in over 70 countries. Visonic has a strong presence in US hospitals and prisons, and its sensors can also be found in the Louvre.
Kotlicki bought Keshet’s stake in 1977 and Keshet now manages one of Visonic’s overseas branches. Moshe decided to retire in 1994, sold his stake to his brother, and died suddenly a few months later. Kotlicki has since been working on building the company’s future. “I’ve carried out many organizational changes,” he says, “so that the company can survive without me. We’ve internalized all the procedures, computer systems, infrastructures and management. When my brother died, I realized I was no longer 18, and if something happened to me, the business would collapse.”
The process of converting Visonic from a Mom and Pop operation into an institutionalized company was completed two years ago when Kotlicki hired Amnon Presler as CEO. Kotlicki attributes Visonic’s managerial and growth capabilities to his experience in major projects for the Air Force and his work with people like Aharon Beit-Halachmi (who held senior R&D posts in the Air Force, was Ministry of Defense director general and is currently Eurofund president), and Emanuel Gil (who was CEO of Elbit Systems (Nasdaq: ESLT) and Elscint (NYSE: ELT), split them up and sold parts at enormous profit).
Kotlicki is now looking for a strategic partner who can help him issue the company in Europe. He says Visonic was ready for an IPO two years ago, submitting a prospectus that was approved, but the market collapse prevented the company from going public.
“Globes”: Visonic suddenly needs money after 30 years?
Kotlicki: “We’ve never raised money. We were always cautious, and when we had projects or flush times, we used some of the profits to grow and develop. The IPO is important to me personally, but not because I need the money. I prefer that my three children have shares in a public, rather than private, company and it’s important for the employees also. Allocating employee options has become important in recent years, including with us.”
It’s rather hard to float a company in which you own almost 100%.
“Yes. The European exchanges told us that. They don’t like a single shareholder, and prefer dispersion. That is why we’re looking for a partner to participate in a private issue. Nevertheless, it would be better if it were the kind of partner that could help a public issue.”
Published by Globes [online] - www.globes.co.il - on June 17, 2002