How ambitious must you be to found a startup that will compete with tech-giants like Microsoft, Facebook and Google as well as Slack, Trello and successful Israeli companies like Monday (formerly dapulse)? The days when Israeli startups proclaimed with certainty that they had invented the next Facebook have gone but Chatway CEO Shahar Mintz is convinced that his product has solved the genuine need, to which even the tech giants have failed to provide an appropriate response.
Chatway, which was founded two and a half years ago and has six employees, is developing a system for managing tasks based on instant messaging. The company is currently launching its Beta version, which is free (for a year) for both the business sector and the public at large. The company will soon begin raising a financing round of between $3 and $6 million. Mintz and entrepreneur Rony Zarom who invested $1.5 million in the company, told "Globes" that existing solutions are for the high-tech market and project development and are designed to respond to their needs.
The problem is that they don't provide a solution for managing and group collaborating on tasks in other industries - like for example a medical team, or financial offices, or hotel staff.
The company was accidentally conceived when Zarom tried to solve problem that shed light on another problem: the need for tools for collaborative group work both within organizations and with customers. "We took a complicated and intricate problem of multiple platforms, multiple passwords, computer files dispersed in several places on a cloud, messages and all the things that help to manage a project - and we tried to unify everything on an easy-to-use platform that would cut down on the complexities of managing a project and people."
Not make do with a flow of disappearing messages
Zarom is one of Israel's wealthiest high-tech figures who made much of his money just before the dot.com bubble burst in 2000 by selling eXalink to Comverse for about $550 million in shares. Zarom's stake in the acquisition was estimated at more than $250 million and he sold at peak prices shortly before technology shares plummeted on Wall Street, which saw Comverse's share price shrink to just 10% of its value at its peak.
Subsequently Zarom invested a major amount in acquiring publicly traded real estate company Aspen Group. He is also well known today as a philanthropist identified with the Unistream entrepreneurial project, which trains youth from Israel's disadvantaged regions to become entrepreneurs. The project has been running for seven years and Chatway Product Manager Toli Elenberg is one of the graduates of the project's first courses.
The sale of eXalink, a startup that offered technology to connect mobile phones to Internet content back in the 1990s was not the last time that Zarom bet on the right horse at the right time. Last June he told "Globes" how he sold his holdings and shares in 2007, just before the 2008 crisis, and how he bought low on "technology shares like Cisco, Google, Apple, and also Citi, when the share price was just $1.50." Today he has invested in companies like Tesla, on the one hand ("I very much believe in Tesla. It is just starting out and can expect a great future"), and early stage local companies like Chatway, on the other hand.
Mintz grew up in the US and among other places spent his childhood in Silicon Valley. As a student, he worked at Elbit Systems as a program developer of weapons systems. He joined the startup scene as cofounder and CTO of Cliquer, which operated in the US but closed down after funding dried up. In 2016, he returned to Israel to look for work and found Chatway through a former colleague who was a R&D manager at the early stage company. In 2017, he was appointed CEO.
He recounts that before Zarom founded Chatway he asked, "If the public is anyway snowed under with instant messaging 24/7, why does it not use them to manage data for teamwork instead of making do with a flow of marginal messages that are disappearing in increasing numbers? From there Mintz says, "The idea arose to take a system of instant messages and use it to build a mini-project management system."
Although the solutions currently existing on the market include options for an interface with external services and integration with other organizational systems, they are relatively complicated and require efforts to adapt them to the needs of each organization, and their structure is suitable for the high-tech sector. Slack, for example, that was recently valued at $7 billion, is built around infinite channels catalogued according to subjects and according to hashtags; Trello, which was worth close to $500 million two years ago does that with tabs with visual interpretations that make it look like solitaire. The interface of part of Monday look like a video editing program designed to synchronize between teams and tasks on a timeline. Facebook even offered a solution to businesses called Workplace.
Therefore, most people manage their work routine mainly with email alongside instant messaging, mainly WhatsApp. Those a little more advanced use online tools like Google Drive and Google.Docs, Microsoft's Teams(as part of Office365 or with Skype for businesses) or Dropbox's Paper application, which was launched in 2015 but has earned little publicity and is not commonly used. But both the tools of Office and Google did not take root as collaborative task managers - either among the public at large or workplaces outside of high-tech and instead have been utilized for personal use or specific and temporary collaborative work.
Relationships between parts of the application
Chatway has developed what Mintz calls, "Our small psychology: there is a big gap detrimental to non-high-tech industries and our aim is to make accessible to them what is called 'real-time cooperation' and make it become relevant through suitable tools. There are research studies that demonstrate how use of such tool increases efficiency by 20-25%: thus work time spent on tasks and chores is shortened because cooperation is swifter and succeeds in receiving everybody's insights.
"Research conducted by us and research by McKinsey found that work carried out by email where an employee sends an email when beginning the work and until everybody responds is already not a very advanced way of doing things, so that he is regressing. Everything is delayed." In comparison, because instant messaging is the number one app that people go into according to all statistics and is most frequently open before us, it is logical that all other data that we start to put on there won't disappear from sight so easily and people will pay more attention and relate to them"
And indeed, when "Globes" checked out the different versions of Chatway, on mobile and desktop, the resemblance to known instant messaging was clear. The system itself is relatively intuitive, not too overloaded and includes all the functions that the average employee needs. The main disadvantage is that the application does not have the capability to be dragged and projected on other advanced functions on the touch-screen but this can be forgiven when taking into account that we are talking about an initial beta version.
Alongside the message, there is the latest feed that concentrates all the activities conducted on the app by the user's colleagues that are relevant to him; there is also a personal area where all the files, notes, calendar, and list of tasks of the user are stored rather like in Gmail of Google Docs; and an area where the users can see in one place all their activities throughout the app. The various sections of the app are not separate and have between them many options for connections - like for example the ability to set a task for a colleague by chat and it will appear on their tasks list.
Another interesting feature, is the option of bringing into conversations people from outside the organization through designated email addresses that are issued for the chat and to which the guest can sent content, which will appear as part of Chatway's chat. This enables cooperation with people outside the organization without them needing to undergo approval or a registration process.
Doesn't it concern you that you are entering a niche in which all the tech giants are operating?
Mintz: "We always have the feeling that somebody is breathing down our necks and we are very slowly understanding the gaps in this world. The existing systems require much more work - it's enough that you have to set up another account with a supplier's management system and to connect to existing systems and that's already awkward. Our target customers want everything in one place, with one experience where everything appears the same."
"The concept guiding us is that if the user already knows element A then it is reasonable that he will also figure out successfully by himself how element B works. The discovery process is very easy - in every sense it is like beginning on Whatsapp. It already invites people inside because it is features that they are used to using. That's where the charm starts."
What about your business model? Will it ultimately be similar to those of your rivals?
"In the first year, the first 20 users will be free and after that it will cost about $5 per month per user. There might be a basic free subscription, we haven't yet decided about that."
The problem is that customers might be fearful about managing their internal organizations correspondence through a small external service. Not only because of data security but also because of the risk that the company will close down.
"Every company that enters into cooperation of this size is aware that there are certain risks, but we have strong investment. If we have satisfied customers then we will have a financial horizon. In any event, we will supply every company that asks tools for protecting and exporting data. The system is built on Amazon's cloud with all the data security that Amazon provides.
Beyond that, in terms of data security, there are two levels: the first is end-to-end encryption similar to WhatsApp in which data is encrypted and there is no way to hack into the servers and look at it and only the second addressed party has the key to read it. But if a specific device is lost, it is impossible to reconstruct the information. The second option is keys management: We encrypt the data and the keys that are also kept by us so that we can decode or retrieve if required. The keys are protected in a different way, secured, with access to them compartmentalized. At the moment, for example, I only have access to the encrypted keys. We recently reviewed with a security expert all the clauses of Trello's security policy and we complied with all of them."
Aren't you being overambitious? In order to achieve your business expectations, you will need to have millions of paying customers - something that will require enormous marketing resources, beyond the $1.5 million that has been invested.
Rony Zarom: "My world outlook is that the moment that a CEO takes the reins into his hands, then that person is also responsible to raise money and bring in customers. As the chairman, I am happy to help with everything, including investment, and I believe that he will do good work even in raising funds but the stage is his. Chatway's team has made amazing achievements with relatively limited resources. They are made out of material that can bring achievements on the scale of WhatsApp."
Published by Globes [online], Israel business news - en.globes.co.il - on October 8, 2018
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