Crossrider CEO: Teddy Sagi's vision fits our plans

Kobi Menachemy
Kobi Menachemy

Crossrider CEO Koby Menachemi tells "Globes" about the transition from start-up to public company.

Crossrider Ltd. (AIM:CROS) CEO Koby Menachemi (37) was little under the weather in his exclusive "Globes" interview, just after his company's successful IPO on the AIM Stock Exchange in London. He apologized, joking that getting a cold was probably an unfortunate result of the UK's unfamiliar cold weather. Menachemi packed his bags and moved to London with his family (his wife and two daughters aged 3 and 4) two months ago. "I've been so busy with work that you couldn't really say I've become acclimatized. I think it will be OK," he says, and explains that he moved to the British capital because "Crossrider is growing quickly, and its customers are mainly in New York and London."

The story of Crossrider, which deals with optimization of Internet surfing traffic as an analytical tool for the digital advertising market, is a rather exceptional story even in the Israeli high tech industry, which was not long ago referred to as the "Startup Nation." Menachemi and his cofounder, CTO Smueli Achdut, 32, began the company only three and a half years ago. 20 months later, in December 2012, when the equity investment in the company stood at barely $2 million, Crossrider was acquired by Teddy Sagi, the renowned young billionaire, for $37 million in cash.

18 months after that, last May, Crossrider acquired two Israeli companies: Ajillion for $2.2 million and Definiti Media for up to $12 million - $7.7 million immediately and the rest contingent on meeting milestones. One month later, still infected by the acquisition bug, Crossrider acquired another Israeli company, Reimage. In this case, however, the proceeds were not in cash, because Crossrider assumed a $10.3 million shareholders' loan taken by Reimage.

The company's most significant move, at least where the financial press was concerned, then got underway. Exactly one week ago, Crossrider held its IPO on the AIM exchange and became a public company. The company raised £45.9 million ($75 million) at a share price of £1.03 and a company value of £153 million ($250 million) after money. The issue did not include an offer for sale, and a week after the offering, the share price was unchanged. On paper, this means that the value of Sagi's investment has quintupled in just over 18 months - an almost inconceivable return.

Menachemi is aware of how different Crossrider's story is from those of many other Israeli startups, but he insists that it be regarded in the proper proportion. "From outside, it may look like Crossrider's saga is like a Cinderella story, but keep in mind that like every startup, it's a rollercoaster with us, too; we've had more difficult periods," he says. "I think a company is judged by how it copes with hard times, and that's part of Crossrider's secret of success. Investors are also judged mainly by those times, and Teddy was there for us, and strengthened and supported us. "

"Globes": Just the same, isn't the rapidity with which everything happened a little frightening to you?

Menachemi: "If I sat down and drew a timeline, it could be assumed that I'd realize after a few minutes that I was wasting my time. Still, we have one goal, and that's to make Crossrider a world leader. When we got acquisition offers, they just came. When we acquired companies, we realized that we had an opportunity, and we were mature enough to acquire other companies. Mergers and acquisitions are not a simple affair; they require a certain degree of maturity. The IPO was another step that will lead us to the final goal. I don't think it's necessary to either be overanxious or go overboard. It's just the company's development process."

When Menachemi talks about acquisitions offers, he is referring to a short period in the winter of 2012 when Crossrider got four offers, besides the one by Sagi. "We didn't put ourselves up for sale, and the decision whether or not to be sold was very difficult," he stresses. "In the end, we decided that this is what we should do, but we didn't plan it. No one plans such a thing in advance, and to tell you the truth, it was an excellent deal for all the parties. Here, it might be true that I was surprised at how fast it happened."

How difficult was it thinking over Sagi's offer?

"When we had to choose, what tipped the scales was where and how we take the company forward. When I went to London to meet Teddy and discuss it with him, I really connected with his vision for the company. That put me at my ease, and decided the matter. My name and Shmueli's have always been associated with Crossrider. It's our baby, and Teddy's vision fits our vision the best."

What did you know about him before you met him?

"I read about him in the financial press, mainly in your stories. There's no doubt whatsoever that you can't argue with his track record. What won me about Teddy was he understood in a flash what the company was doing, and in one minute started throwing me all sorts of ideas. After 10 minutes with him, I came to the conclusion that this is the guy with whom I can move the company forward."

How much was he a partner in the change that came over the company after the acquisitions you made?

"After he acquired Crossrider, he helped us a lot to realize in which direction it should be taken, but from there, the credit belongs to Crossrider's executives and employees. Teddy deserves a lot of credit for the direction we chose, but he didn't interfere with day-to-day management of the company. He was always there to advise, and he has a very broad network of connections. If I need someone to consult with, it's obviously easier to get to him through Teddy instead of on my own as Koby Menachemi."

When he acquired Crossrider, was the IPO already part of his plan?

"No, the IPO was more part of my plan that he went along with, rather than the other way around."

How did you feel after the IPO?

"The truth is I felt the same. I came to the opening ceremony for trading in the share in a suit and tie, of course, because in the London financial district, you have to leave your jeans and t-shirt behind. I admit that I was more excited than I thought."

Were you surprised at the success of the IPO?

"I couldn't really say I was surprised, because as someone who lives with the company on a daily basis, I know what it has and what it's worth. I'm in love with Crossrider as if it were my third daughter. It's a big part of my life, and it's about the same age as my daughters. I was a little surprised, because we had a little trouble with the road show, such as the Scottish referendum and negative sentiment about the advertising industry, but these difficulties just made me stronger."

Have you gotten used to being CEO of a public company, not a startup?

"I've been CEO of a public company only a week, so its hard to say I've gotten used to it. Still, when we were a private company, we behaved almost like a public one. Now there's another layer - the tradable share."

Published by Globes [online], Israel business news - - on October 7, 2014

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

Kobi Menachemy
Kobi Menachemy
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