Benny Landa resurrects big ambitions with nano-printing

Benny Landa
Benny Landa

Landa tells "Globes" he always wanted to be HP, not sell to HP.

Benny Landa has broken what has always been his golden rule in business: to be a one-man show, using his own money, without loans or investors peeking into his business. Last week, he took partners into his latest exciting invention: Landa Digital Printing (LDP). True, in 2012 he already reported orders totaling billions of dollars for the nano-graphic printer that he is developing, but actually, he has been looking for financing for the past 18 months. "Did you ever try to convert orders for non-existent machines into money at the bank?", he asks in lieu of an explanation.

Altana, a company dealing in special chemical products, is investing €100 million in Landa's vision. In a joint press release last week, Altana, owned by one of the wealthiest women in Germany, BMW heiress Susanne Klatten, said that Landa's technology "is changing the rules of the game." Perhaps this will enable Landa to achieve his next printing breakthrough. After all, he did it once already in the 1980s with digital printing pioneering company Indigo, which he sold to HP for $830 million. Since then, he has been devoting his time and money to innovative developments in nanotechnology at Landa Labs, the secret scientific hall bearing his name, in addition to the time and energy he is investing in the Teva Pharmaceutical Industries Ltd. (NYSE: TEVA; TASE: TEVA) corporate governance war.

Landa is fully dedicated to the secret breakthrough he says he has achieved in nanotechnology, but he always uses superlatives. When he describes the unveiling of the nano-graphic printer and nano-graphic ink two years ago at the international Drupa Exhibition, he emphasizes, "The market's response was amazing. Everyone loved the machine."

"Globes": You obtained $1 billion in orders, but how binding are they on the people who made the orders?

Landa: "When you can make a product only after two or three years, it's never an order set in stone. We explained to the customers that anyone who wants to keep his place in line has to make an order with a deposit in the tens of thousands of euros, so that we don't waste time on non-serious customers."

Will you return the deposit if the development is not ready in time?

"Anyone can cancel whenever he wants and get his money back. We can also cancel, because there were seven different models, and we reserved the right to tell the customer, 'Sorry, we decided not to make the model you ordered right now.' We learned that there is a demand for the biggest and most expensive machines, and therefore these are the first models we're launching."

When will the machines actually be ready?

"One year from today."

Were you not supposed to launch the product already in 2013? On the face of it, it looks like you are late.

"We were supposed to send the first models to beta consumers by the beginning of 2013, but that was before the Drupa Print Media Exhibition. After the exhibition, we learned a lot from the customers. After all, we developed the product in secret, so we didn't have many contacts with the customers along the way. When we sent our people to 120 customers to start working with them, we discovered that there were many things in the product they would prefer to be different."

"For example, they wanted package printers to be able to coat the package, while our plan was for them to do the coating separately. The contact screen, which people just loved, was in the middle of the front of the machine, but we found out that the machine operator prefers it on the end where the printout comes out, so we had to change the contact screen's entire structure. There were other changes, too, and it took a long time."

Are the customers waiting for you?

"They're waiting. A few months here or there don’t matter to them. The fact is that today, even though they have the option of canceling, we have the same number of orders we had then - over 4,000. Yes, a few canceled, but for every one that canceled, there was at least one new order. Although we have stopped signing up customers, it will already take years to supply all the orders, and there's no point in extending the supply time. Since Drupa, we haven't been taking part in exhibitions or sending salespeople to customers; we have only taken care of those we already have."

In effect, you have taken a step backwards into the laboratory.

"I wouldn't call it a step backwards. It only happened because of the big demand. We didn't expect to leave Drupa with so many orders."

No more capital raising planned

The new announcement about the investment mentioned the sum of €100 million that Altana will put into Landa Digital Printing for what is described as a "minority shareholding," but the rest is unclear. At what company value was the investment made, or, in other words, how many shares did Altana buy for its €100 million in a company to which a value of $1 billion has been attributed? If it got 10%, that means that the company is valued at about $1 billion. If it got 49%, its means that the company was valued for the deal at less than a third of that amount something like $300 million.

Why the vagueness? A minority shareholding could be 2% or 49%.

"They're a private company, and we decided not to reveal it. Their stake is definitely a minority holding not 2% and not 49%. I'm willing to say only that it's a two-digit number."

Why did you change your usual practice by taking on a partner? You say you have $1 billion in orders, which is a fine developmental situation. What do you need it for?

"If it were possible to get money from the bank on the basis of orders for machines that aren't yet on the market, I'd do it. This burden is too heavy for one person, who is supporting Landa Labs, Landa Digital, and Landa Ventures (Landa's investment fund, managed by Mimi Sela), to continue financing by himself. I've been paying for all of it for 10 years already, and after 10 years, I don't want to say that my tongue was hanging out, but it was a burden. Now we have to start growing at a very fast pace in order to produce these machines and set up plants. Now comes the expensive part, which is also less risky.

"We already have orders and have proven that it's viable. Now we can recruit someone who shares my vision. He can check everything, and they did it. They did due diligence on us, brick by brick. They examined the technology, the patents, the competition, the markets, and the employees."

When you started all of this over 10 years ago, didn't you think about what would happen if it was unsuccessful? You put your money and many years of your time into it.

"That's a defect in my character. I believe so much in the vision that I don't think about it. Would a rational person invest 16 years in research and development in something, like I did with Indigo, or like I did here for 10 years on a much larger scale? That's irrational. This irrationality also interfered when I tried to raise money"

It was indeed reported 18 months ago that you tried to raise capital, and nothing came of it. What happened?

"Already then, we felt that this was too big for me to do alone. We looked for a financial investor. We didn't want a strategic investor, meaning one of our competitors, because an investor like that wants something in return, like copyrights and marketing rights. We got several feelers from them, but we more or less ruled them out from the start.

"When we started talking with the bankers and the investors, we realized that Landa Labs didn't exist for them. No unknown company can raise $100-200 million. Companies at the pre-profit stage are usually startups in which $5-10 million is invested, not $100 million, so venture capital funds were not for us. Private equity funds, which make investments of that size, don't invest in companies whose business can't be counted in dollars and cents.

"We came to the conclusion that the only way was a group of investors, each of which would invest $30-40 million, but that's not for me. I know what groups of investors are. You have to deal with each of them and explain to them separately. You have to host each of them who comes for a family visit, explain to them, work with them. I would have sacrificed my life for investor relations. In addition, what added value would they have on the board of directors? Zero. Nothing. That's why we preferred a single investor."

Why is Altana suitable for you?

"Who dreamed about an investor like this? They're strategic, but they doesn't compete with us in sales of machines and ink. They operate on the side we need - the supply side. They give me raw materials, add-ons, coatings, pigments, and they have a lot of know-how that I need, because I previously set up a manufacturing plant, for ink too, but not on such a scale of thousands of tons a year."

You are not a man used to working with partners. You want things done just your way. How will you get along with them?

"I'm very demanding," Landa proudly admits. Those sitting in the room, several employees working with him in various ways, nod vigorously. "I'm not willing to do business with a person I don't trust. I've done a lot of negotiating in my career, but I've never had such an enjoyable and mutually beneficial experience. They're people who know how to stand up for themselves, to be tough in negotiations, but they are fair and honorable, without a hint of aggression."

Altana, a German company, supplies materials to coating, paint, and plastics manufacturers and the printing, cosmetics, power, and electronics industries. The group has 46 production sites, employs 5,700 workers, and its sales volume totaled €1.8 billion in 2013.

What benefit do they see in this investment?

"They are a materials company, and in our business model, we're a materials company. It's true we need to build and sell machines, but only in order to create demand for materials, such as ink. The main revenue from a machine (whose average price is $3 million) will come from ink sales, which will reach $25 million per machine over five years."

Will you need to raise more capital or recruit more investors after this investment?

"We think the money we have is enough to bring the company to where it can finance itself and make a profit. We're not planning more capital raising."

"Patents are like minefields"

Landa says that the nano-graphic printer based on nano-ink is the first commercial invention from Landa Labs. The big advantage of nano-graphic printing does not lie in its thrilling technology, but in its simplicity - an economic matter. The type of ink and the printing process cut the quantity of material required by half, compared with offset and digital printing. Given the printing industry's small and ever-narrowing profit margins, printing houses are eager for a solution that will enable them to make profit even on short printing series.

In addition to the printer, Landa Labs is working on various nanotechnology-based inventions: nano-pigments that can be used for various types of paint, and a way of administering a drug in which the material on which it is based does not dissolve in water, and must be reduced in size, so that it can penetrate the cell walls of the organ for which it is designed.

According to Landa, it is fairly easy to reduce material to a size of 100 nanometers, but any reduction beyond that is possible only with a great deal of energy, time, pollution, and money, and even then, the result is not pure or uniform. "We had a breakthrough 10 years ago in this field. We discovered a way of breaking almost any material down to a size of 20-40 nanometers. It could change the world," he says.

This process is extremely secret, and Landa is not registering a patent for it, because he says it is very difficult to protect the process, because it is almost impossible to know how something was made from the final product. On the one hand, registering a patent will reveal its particulars, while on the other hand, a patent will not protect Landa Labs or maintain its monopoly on the process.

The centerpiece and the reason why nanotechnology is necessary is the ambitious goals of producing energy from hot air, for which nano-particles of a specific type are necessary. Landa agrees that this sounds completely fantastic, but he says it will happen. A team of top-level scientists - physicists, chemists, and materials personnel - have been working on this for 11 years already, "and it will take another few years before we get it."

You are a person who looks far ahead.

"In my experience, it takes 10 years to develop something. You can develop gadgets and applications in less than 10 years, but not basic technologies. We invested 16 years in Indigo, and here we invested 10 years before we launched the first product. I assume it will be no different with energy."

Landa is doing all this from his personal resources, probably thanks to the sale of Indigo. Before that, he financed the many years it took to develop Indigo's digital printing technology from the profits on the issuing of a microfilm company he founded with a partner in the UK, but mainly through patents. Indigo began as a photocopiers company in which a process using liquid ink (instead of the usual powdered toner) was developed. This process enabled photocopiers to attain an output of 100-150 pages a minute at a time when the existing technology could produce only 15 pages a minute.

In order to photocopy that many pages a minute, however," Landa says, "you also have to scan and feed in paper at that rate. For lack of choice, we also had to develop high-speed scanning and paper feeding methods. We were the first to develop them, because the industry did not need them yet. When you are the first to spot a problem, you can register excellent patents. When the global photocopier machines industry learned how to make faster machines, each one of them - Kodak, Zerox, HP, Canon, Ricoh, Minolta, and all the rest - trampled our patent. A patent is like a minefield. When you step on one, you have to pay."

Did you send lawyers to them?

"I didn't like doing things through lawyers. I contacted them politely, writing, 'Hey, I want to draw your attention to my patent; maybe you'll find it interesting.' That was a polite way of saying, 'You're using my patent, and you have to pay.' They paid Indigo $200 million in the 1980s for licenses to use the patents, and that is what paid for 16 years of research and development."

"Indigo's turnover is now five times as much"

Landa, married and father of three, living in Kfar Aharon in Nes Ziona, was born in 1946 to Holocaust survivors who fled from Poland to Russia in 1941. After the war, he was born when his parents were moving westward. His first two years were in a refugee camp in Germany. His parents expected to immigrate to Israel, but in those days, they didn't accept families with babies on the clandestine refugee ships. After two years, his uncle in Canada sent tickets to his family, and they moved there. His father was a carpenter, and his mother a seamstress. "I grew up in a very poor but Zionistic home, and I always wanted to immigrate to Israel," he explains.

His academic career was diversified. He started as an engineer and dropped out, changed to physics and dropped out, and also studied psychology and English literature, and dropped out. "I didn't find what most interested me. I love science, but I would come home and write poetry and stories. I was torn." He finally studied cinema in the UK, earning an MA, but while waiting for his first directing job, the designated producer fell ill, and he got a job as a construction electrician, and "I was quickly attracted to development." In less than a year, he became the company's development manager, and then founded a microfilm company with a friend that became the largest in Europe in its field. He then moved to Israel and founded Indigo.

The sale of Indigo made Landa a wealthy man and enabled him to pursue his vision and invest many years in innovative developments. The sale, however, was under duress, or, as he said at the time, "I wanted to be HP, not to be sold to it." One of the lessons that Landa learned from Indigo was to select the type of customers suitable for the first stage of nano-graphics. The printing industry has three types of players: the various kinds of publishers (newspapers, magazines, and books), printing houses dealing in packaging of products, and printing houses printing commercial materials, such as brochures, fliers, and posters. The third category are mostly family companies, and Indigo, which was over-dependent on these printing houses, became enmeshed in economic difficulties.

In Landa's current company, the initial focus is on companies that print packaging, which are much larger than the relatively small printing houses. Even in an era of less printing the packaging printers remain stable, because their products in the supermarkets and pharmaceutical chains still require printed packages, and no I-Pod application or website can replace the packages.

"Part of the reason why I sold Indigo to HP was for exactly this reason," Landa says. "A small family company buys an expensive product from you, and is also dependent on you to supply its ink. Then, even though everyone liked the technology, when the competition came and said, 'Did you see the exploding buses on the news? Israel is a battlefield. Do you want to depend on a place like that for every drop of ink in the future?' That really frightened these customers. When Indigo was under the HP brand name, no one was afraid of a supply problem, and that really helped. Indigo's turnover now is five times what it was 12-13 years ago (it was $250 million when the company was sold, and is now $1.25 billion)."

There were assessments that you sold it for too little. Indigo is now valued at $1 billion, and you sold it for less.

"Yes, but HP was willing to commit to Israel and to expand its development in Israel, and to do all its production in Israel. Without that, I wouldn't have agreed to sell."

That is a really important contribution to employment and the country. At the level of the tax on the deal, however, the state got less out of it. Indigo was not registered in Israel, and you also owned it through companies registered overseas.

"Indigo was registered in the Netherlands because we started as a company issuing licenses for intellectual property (patents related to digital printing and photocopying). Eventually, it became a manufacturing company, and all its production took place in Israel. There was a big hoo-ha about the tax, and you see it in Teva, too. The state profits from companies like Teva and Indigo through employment.

Published by Globes [online], Israel business news - - on July 8, 2014

© Copyright of Globes Publisher Itonut (1983) Ltd. 2014

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