Technology is connected to banking in two ways: the huge changes that customers who use an increasing amount of technologies are going through, and, internally, it is possible to see the banks committed to investment in technology, said Bank Hapoalim (TASE: POLI) chairman Yair Seroussi at the closing ceremony of the Smartup2 program organized by the bank and “Globes.”
Seroussi participated with GetTaxi Ltd. founder and CEO Shahar Waiser on the panel moderated by “Globes” editor-in-chief Hagai Golan. He sought to describe the link between technology, start-ups, and contemporary banking.
“We are seeing revolutions in infrastructures as well as in our ability to manage data research. We’ll see better marketing thanks to the ability to better understand the customer,” said Seroussi. “In the past, banks avoided working with start-ups. They are capital consumers, not debt consumers. But today, we realize that start-ups also need banking. Bank Hapoalim is seeking start-ups representing breakthrough technologies and deals. Innovation is the growth engine of the Israeli economy.”
400% annual growth
Golan asked Waiser, “How do we build in Israel, with an emphasis on Israel, a company worth $2-3 billion, and if that is not the valuation, tell us what is?” Waiser founded GetTaxi, which last week was named by “Globes” as Israel’s most promising start-up.
“When you talk about the company to investors, they usually don’t think about the Israeli market as worth anything,” said Waiser. “You usually do not build on the domestic market. Israel’s taxi market is 50% larger than the Canadian market and is half the size of the London market NIS 5 billion a year. That is the amount of money transferred in cash by passengers to taxi drivers. Credit cards are common, but not yet for cabs.”
Golan: Your valuation is not derived from the Israeli market.
Waiser: “True. We are now working with other markets. In fact, at GetTaxi we feel like a small bank when we deal with problems we never thought we’d face. Next year, we expect $500 million revenue. We’ve had 400% annual growth to date.”
That figure has been growing every year.
“Yes. In history, there have not been any companies that made $100 million and then went on to grow by 400%. I very much hope that we’ll be able to do it. This is precisely the point to exploit technology and operation of a company that is due to make $500 million and continue to be profitable in a few more quarters.”
Is that after the next stage an IPO at the value I mentioned?
“Every company should keep a balance. I hope that, next year, we’ll continue robust growth, which leaves options.”
Do you prefer an IPO over a sale?
“If we continue to maintain this growth rate, it will be hard to talk about a sale. You don’t float a company at these multiples, a company with over 100% growth.”
What is GetTaxi’s advantage?
Some would see that as a disadvantage.
“One of the advantages is that, from the beginning, we could develop both B2B and B2C, providing both business and private customer service. Today, we’re the only company in the world with both a business and private option. There are now 1,500 companies that work with GetTaxi, which gives the company two legs. It also permits change and strength.
That’s a relative advantage?
“Yes. We can reach any market. Manhattan and London are business capitals. We provide service to Goldman Sachs, for example.”
As long as you’re mentioning Manhattan, it seems that it is harder for you to gain a foothold because Uber operates there, and there is the option of rides by means other than taxis.
“It’s true that it is no small matter to enter this market, but it helped hone our thinking. Last month, we launched a product there and already we cannot meet the demand for it. It’s possible to order a limo in Manhattan for $10 and the driver will arrive within ten minutes. We quickly reached a situation in which we could not handle the load.”
Do you think that New York is the place where you can cross the Rubicon?
“We’ll wait a year and then we’ll see, but it’s probable.”
What about other places in the world?
“Working with competitors isn’t easy, but it’s very important. When Uber began working in Moscow, we thought that that was good for the consumer. That wasn’t obvious when we began working. Here comes a player with more resources and you don’t know what to do. A year later, they account for just 2% of Moscow’s cabs.”
The struggle in Israel isn’t aesthetic, no?
“You usually see in such start-ups that relations are more moderate, but that is not simple here. When we launched in New York, Uber was under pressure and took unacceptable steps. They tried to work with our drivers and wreck us while we were still small. It isn’t always ethical, but everyone does it his way.”
You first let the drivers work with Uber, but regretted it.
“We wanted it to be otherwise. In Israel, they tried to order drivers to exploit that to work with them. We told ourselves that this was the second time. Why let it happen?”
Today, on the basis of your experience, would you advise start-ups to begin in Israel?
“There are successes in Israel, but the road usually heads out. I think that Israel is amazing to start with. Society is supportive and that is not always the case in other places. It’s very important because when a start-up is just starting out that is exactly what it needs.”
Besides that, what tips can you offer new start-ups? What are the most important things that they will take with them?
“The first and obligatory rule for success is to love what you are doing, and not merely going through the motions. I don’t think that I have ever seen someone succeed when he did not love what he was doing. The second rule is that the team makes the success. When the moment of truth arrives, you realize how much you need the right people by your side.”
It will take for institutions to invest
Golan summarized the panel by asking Seroussi whether we can expect the banks to begin investing in start-ups soon, and not just as providers of credit.
Seroussi said yes, but that it would be measured. “There are limitations,” he said. “For institutions, it depends on success. It is taking them time to recover from the 2009 crisis. If we succeed now, they’ll come in. For example, I spoke with Shahar today. Afterwards, I told myself, ‘Here is a big success story.’ You hear it in his voice. I remember how I saw Check Point Software Technologies Ltd. (Nasdaq: CHKP) when it was just ten guys. Here too, in the case of GetTaxi, you hear it. It isn’t easy, but what is amazing is their growth rate. We, as a bank, see and seek companies seeking growth, so one of our ways to grow is to precisely seek these breakthroughs. It is important to pay attention to their ability to spot opportunities from which growth is derived.”
Turning to Waiser, Seroussi concluded, “I strongly hope that you won’t sell, but become a public company.”
Published by Globes [online], Israel business news - www.globes-online.com - on November 6, 2014
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