Israeli image editing app developer Lightricks has announced that it has raised $60 million in a financing round led by Insight Venture Partners, with participation from Claltech. $45 million of the funding will be used to acquire shares from founders and employees.
The Jerusalem-based company is growing profitably, mainly because of its Facetune product for processing images, and will use the funding to build more products and to double in size, recruiting an additional 150 employees for its Jerusalem and London offices. In its previous financing round in 2015, the company raised $10 million. Lightricks is projecting revenue in excess of $100 million in 2019.
Lightricks cofounder and CEO Dr. Zeev Farbman said, “The mobile market is growing, and more and more people are turning to mobile devices over desktop software to create their content. Whether you’re an Instagrammer editing a photo, an artist designing a poster, or a small business owner creating a video, you can use one of our tools. This field of creativity lends itself well to the exciting, and in many ways, new business model of consumer mobile subscription. Insight brings expertise with several investments they’ve made in the consumer subscription space, and we are excited to partner with a world class firm to build a world class company.”
Farbman told "Globes," "This is an unusual deal on the Israeli scene, because most of the deal isn't money entering the company; it's going to the shareholders. We think that such a deal supports development of a large company. Investors frequently expect entrepreneurs, who are usually poor students, to build large companies. At some stage, the students are worth a lot on paper, while they are still living in rented apartments in poor areas. When an acquisition offer comes along, it's very hard to refuse in this situation.
"We gotten offers all along the way. It was easy for us to say no because of the structure of the deals we make. We did something similar in our first financing round in 2015, when we had a $10 million-deal, and half of that amount went into the company, while the other half bought shares from people.
"In the end, the first million is very important, and the 10th million is less important, because people prefer to remain and do something interesting. This is a deal that you can afford when investors know that you don't need the money and can go on growing even without it. We were lucky in the first two years that Facetune started making substantial amounts of money very quickly."
Lightricks, which has a team of 95 developers, develops two lines of products. One is the Facetune app, which came in second place in the Apple app store, and its follow-up, Facetune 2, used to edit portrait photos. With the launching of the second app in the series, the company switched from payment for downloading the premium version of the app to payment based on a monthly subscription. The second line of products is a set of apps for creating artistic content on mobile devices called Enlight. The most recent app in the series, which is used for animating still pictures, was launched in September and accumulated six million downloads and close to 200,000 paid subscribers. The company's revenue is divided evenly between these two product lines.
Aiming to be like Adobe for mobile
Farbman says that the company aims its products at three categories of premium users. The first is Facetune users for whom their appearance on the social networks is important enough for them to pay for a subscription. The second is artists using Enlight products for art on mobile communications without expensive equipment and the bother of using products made by Adobe, the leading software company in this realm. The third category is small businesses using Enlight products to create independent marketing content.
"Globes": What challenges do you see in development of your apps?
Farbman: "Developing tools like ours requires a lot of research and development capabilities. The system first of all has to recognize that there is a picture, and then build a 3D model that can be edited. The same is true for all of our products; they all have complicated technological components. If I had to find a common denominator between the projects right now, we're working on a transition from conventional computer vision and machine learning algorithms to neuron networks architecture. Four members of our founding team have PhDs from Hebrew University in graphics and computer vision. Let's say that we needed these doctorates to succeed in these areas, so we also employ 15 more PhDs on our development team."
It sounds like a very large investment. All of this just to look better on Instagram?
"In my BSc in 2001, in addition to computer science, I also studied cognition science. At the end of my degree, I took a course in computer games, and then I simply realized that there would always be people who heal everyone and people that provide enjoyment to everyone, and I prefer the enjoyment side.
"Where Enlight and art products are concerned, I don't think that art has to be protected, because in the end, this is what people want to do as soon as they have bread and water. In the end, for many people, Facetune is a very important part of their lives - their digital identity on the social networks is a very important part of their lives, and it looks cool and important enough to us.
Are you active on the social networks?
"Let's say that I just changed my Facebook picture for the first time in a decade."
You spoke a lot about making the company grow and building a large company. Where do you see the company in the future?
"We think of ourselves as a company trying to do what Adobe did for desktop computers, but for mobile. We'll put out more and more products suitable to the needs of our community. We have a roadmap with a lot of products. In the creative sphere, for example, we haven't got a product yet that provides a good solution for audio and music, and in the marketing materials for businesses, we'll come out with another product in two week."
Are you making a profit?
"We're making a moderate profit, but it's not affecting our growth. The investors' complaint against the company in the growth stages will be, 'If you generate profits, why not channel them back into marketing?' Our answer is that retaining a small part of the profits makes it possible to raise money on better terms, thereby reducing costs. There are people who always think about dividends when profits are spoken of. For us, making a profit was always for the purpose of strengthening the company's balance sheet, and in order to avoid being dependent on anyone."
Lightricks was represented by Advs Yael Baratz and Michael Nussbaum of the Pearl Cohen Zedek Latzer Baratz law firm.
Published by Globes, Israel business news - en.globes.co.il - on November 19, 2018
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