Two and a half years ago, Ford was set to invest in Israeli public transport journey planner app Moovit. But after protracted talks, the planned investment fell through and Moovit had to find another anchor investor. "The investment fell through at the last minute and it was very traumatic for us but today I'm glad that it worked out that way," recalls Moovit cofounder and CEO Nir Erez. "It made us take a step back and search for a new investor and that's how we found Intel. It was the best thing that could have happened to us."
Erez spoke to "Globes" after closing the sale of Moovit to Intel for $900 million with a further $100 million being paid to retain the company's employees.
He said, "The connection with Intel was made through Prof. Amnon Shashua. Eli Barkat, an investor and director, formerly sat on Mobileye's board for a long time and told us both that we must get together but we were both busy and it didn't happen. In the end, we met and Amnon listened to me for 15 minutes. He is one of the smartest people I know and he immediately understood how we fitted into his vision. After an hour he said that he wanted to invest through Intel, and it happened very quickly."
Moovit was founded in 2012 by CEO Nir Erez, VP Operations Roy Bick, and Yaron Evron, who is no longer with the company. Since then the company has raised $134 million. Moovit has developed an app that helps public transport users plan their best route, while the company sells the data that it gathers and analyzes to local authorities and public transport operators. Over the years it has also added services for ridesharing companies including electric scooter rentals, and more.
Erez said, "Intel's investment was the start of looking at things as shared vision. Mobileye's autonomous car technology is the world's best but it needs other assets to transform them into a service. Such assets can include data and understanding the way people are moving about, at what times they do it, and what type of transport they use. This will help the technology become a service."
Intel invested in you two years ago but why did the acquisition happen now?
"The time was probably ripe because Moovit has undergone a very significant process over the past two years from being a product designed for computers to becoming an infrastructure that provides Mobility-as-a-Service for cities and transport operators. Intel's presence in the company let us do this."
"Amnon saw the vision when making the investment and recently he saw it realized. There was an understanding that it would be difficult to do something together while they were only an investor in us because there was always a cloud hovering above that maybe somebody would buy the company. It does not seem obvious to decide on this step in conditions of major uncertainty on the markets and that proves the long-term view of this market, because a crisis comes and goes, while Intel are looking decades ahead.
Did you get any other acquisition offers?
"We received other acquisition offers but I don't want to go into details. In any event, there are quite a few players in this sector, but if I had to dream as we developed, I think that from our point of view Intel and Mobileye would have been that dream. It's a connection to a company with the leading technology in its field and beyond that it has the DNA and the people. When you look at Mobileye's vision, you understand Intel's decision to go with everything for the acquisition of Mobileye, so from my point of view these are good signs that it is a good home for Moovit. And perhaps this sounds like a cliche but there is also a feeling of pride that we can change the world of transport from Israel."
"It was hard to bring in users at the start"
When Moovit was founded in 2012 there was very little digital data about public transport. "Although there was already widespread use of mobile phones, their connection to public transport was very weak. At that time only 15% of large cities in the world had digital data about public transport, which was crazy. Even today in cities like Istanbul or Buenos Aires, there is no fully aggregated data. It was difficult to develop appropriate technology but it was also our opportunity. We needed to gather the data ourselves. Today we possess data on over 65% of cities."
"Cities are realizing what processes are happening but the revolution still needs to happen. Two years ago there was no such thing as tenders for transport as a service, but we now see tenders in hundreds of cities. In the past six years, alternative forms of transport have developed and added a new dimension because it gives additional options for travel. There is also the connection to the smart city in the sense that any object that moves in a city has its route plotted and there is an understanding of how people behave, both in terms of historical data and real-time. Transport is one of the first things that a smart city can operate."
Did you have difficulty in finding a business model?
"I wouldn't say it was difficult. In the first five years we received support from investors for our concept that in order to win over the world, we had to focus on growth in user numbers and be the number one company in terms of data about transport in cities. The moment that you focus on revenue, then your focus moves. The investors encouraged us to look for a business model. We lead every other company in the world in terms of our data on users and now the time has come to look back and think how we can generate revenue from this. I think that over the past two years we have succeeded in creating phenomenal growth in revenue and Intel has also seen this.
"I was never concerned that we wouldn't find a business model - the world of non-private transport is at a very significant breakthrough point. There is a very large understanding that it is impossible to pile private cars into cities. So we understood that both cities and private operators are ready to pay huge sums and we were sure that the business model would break through."
What were the most difficult moments?
"Hundreds of millions of users came in recent years but the start was very hard. Think of app stores that have millions of apps and you need to stand out and that costs money. And then you discover that your rate of growth isn't sufficient and you need to do things differently. We had to decide whether it was right to buy users or not and this is where Sequoia came in with its experience. They told us that it would be impossible to develop a winning app by buying users and it could only be done with the right product. We struggled for months to develop the ability to grow."
Where were you right with your vision?
"I think it was a question of how to do it and what would result in success. Whether to concentrate on one or two cities and try to polish them up to perfection and then try and take our model and duplicate it, or to take a more dramatic decision and with the assistance of a community of volunteers, to develop in every city that we know. There was an argument and it was a very big gamble but it was the most important decision that the company took. All the rivals got left behind. Much of this came from the community of volunteers that cofounder Roy was responsible for from day one. These people do it because it impacts their city, their neighborhood and their family. They see that they are improving something in the lives of the people in their city. People have a tendency to volunteer for their community and so I don't see that there is a contradiction in the fact that Moovit is a company seeking profit. Our app is free and creates value for tens of millions of users every day."
You conducted negotiations for the sale during a crisis. How was that?
"The acquisition offer was by telephone and email, and I assume that this is a Guinness record because from the time of receiving the offer through to signing the final agreement there was not one face to face meeting between us and Intel and Mobileye. It was an unusual experience. The negotiations themselves were easy and quick but the fact that this happened when the stock markets were falling proves that Intel looks to the long term. Everyone understood that this was a major crisis but we're looking ten years ahead, so markets go up and down, but in the long term it has no influence. Yes we were concerned that perhaps the deal would not be completed because of the crisis but that was a risk that both sides took."
"We too, the managers and board of directors did not meet during the negotiations. It could well be that there are positive aspects to the fact that you can sit down quietly and think without the stress from other people. Our board of directors has been running alongside us for seven or eight years and so we didn't need to see them face to face to know what they are thinking. We had amazing investors and I'm glad that they have received a good return on their investment."
How lonely is it to lead such a step as a CEO?
"It's very lonely. There were two elements that very much helped - the board of directors who I very much trust and Moovit's senior management. There are people there that I'd trust with my eyes closed and I'd go with them into any battle but what is more important is that we all think the same way. My cofounder and most senior executives were in on the secret and gave me their backing top conduct the negotiations and get a fair exchange without fearing that I would fail. It's very lonely because the success and the failure depend on me but I had the support of the management and investors.
In effect to a great extent you chose the difficult route. You stayed relatively independent and your journey was a long one
"I think the exact opposite - it was the easiest route. I don't work at Moovit in order to earn a livelihood and I don't see myself sitting on a desert island and drinking coconut juice for more than a few days. A person that doesn't have the desire to change things and create value quickly becomes less alive. I have to admit that I couldn't wait until the entire deal was completed because it involves things that I don't especially like, such as contracts and financial matters. I already wanted to get back to work and see how we can change things. Now, after the deal, I can also get on with doing things and spend less time raising money. We committed to stay with the company and Intel made sure that all our employees will be welcomed with open arms. This is a milestone for us and people are getting money that will change their lives but it is not really the end of the road, it's just the beginning.
In the past two years you began building up revenue and as you said you began fulfilling your promise. So why not stay independent?
"We could have stayed an independent company and we were even close to becoming profitable, but the pace of change that we could have achieved was small. It would have also required us to focus on a niche. There are very few companies with the resources of Mobileye that can develop the market. When the opportunity came along and it did not involve breaking up the company but remaining as an independent operation - that was a dream from our point of view."
Published by Globes, Israel business news - www.globes-online.com - on May 6, 2020
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