Two months have passed since Kaltura Ltd. raised $47 million in a financing round led by SAP Ventures, adding to the $110 million the video platform company had previously raised. It is hard to ignore such a large financing round by a fairly mature company, founded in 2006, given that other classmates, such as Wix.com Ltd. (Nasdaq: WIX) and Outbrain Inc. have already gone public, or are about to do so. However, Katura chairman and CEO Ron Yekutiel and his three co-founders - chief revenue officer Dr. Shay David, president Dr. Michal Tsur, and CTO Eran Etam - are not worried, as they are not the usual entrepreneurs written about by the media.
The four men have a past and have seen a thing or two in their careers; more importantly, each of them have already chalked up at least one exit. Tsur co-founded Cyota with Minister of the Economy Naftali Bennett, and Etam co-founded ICQ. This might explain either a sense of being sated or maturity by entrepreneurs who are in no hurry for an exit.
"We founded Kaltura in our mid-30s, when we have less ego, which says, 'I want to do something with myself, but rather a sense of working together,'" Yekutiel (40) told "Globes. He is a former Air Force transport helicopter pilot and serial entrepreneur, who previously founded GPS company Destinator Technologies with Shay David, and other companies.
"Kaltura's initial direction was completely different. We sat down together for a brainstorming session. One of the ideas thrown out was an innovative helmet for drivers. We knew what we wanted to be. The subject that interested all of us was pluralism. The Internet trend of empowering the user was just beginning. The best example is Wikipedia and joint writing. At the same time, video was beginning to pick up."
The result was Kaltura, gibberish of "culture", with the idea of combining Wikipedia and YouTube. "We launched a product for the joint creation of video clips." The product launch was a TechCrunch conference. "This was at their first conference. We registered late for the start-up competition and there was no room. The only way to enter was to demonstrate a product demo and the audience votes on the company that will go to the finals," Yekutiel reminisces.
"Shay and I told ourselves that we were going to win. We were at a TechCrunch party to honor the event. There was a barwoman who was amazing and sparkling. I asked her, 'What are you doing tomorrow?' Fortunately, she was free and we told her what we needed her to do. The next day, she wandered around the conference and told people about Kaltura's service and how great it was. That's how we won."
In 2008, on the eve of the great economic crisis, Kaltura realized that approaching end users was very nice, but that the company needed to build a serious business. "We realized that the issue of creating joint videos was only the cream, and that a breakthrough product was possible. We stayed loyal to the vision of pluralism, and we built an open and flexible system for submitting videos," says Yekutiel. The result was an open code for video management and submissions.
Kaltura's first business was the media, companies such as Disney, Warner Brothers, and Fox, loved the idea from the get-go. Kaltura then moved on to education and began creating video platforms from universities to record and share lectures filmed by students, uploaded, and viewed at home. "We now have the world's leading schools, almost all the Ivy League," says Yekutiel.
Kaltura's third pillar is enterprises, offering a kind of in-house YouTube. "Today, workers at Intel, SAP, the Bank of America, or AT&T can see lectures, the CEO's speeches, new products, and other things on the enterprise portal," says Yekutiel.
The fact that Kaltura is based on open code allows considerable flexibility in creating and developing features for the video platform, including by a community of 80,000 developers. The latest developments include MediaGo, nicknamed "Netflix in a box", which offers leading content companies, such as Disney Europe, a kind of ad-based VOD service on all mobile devices. "More and more content providers prefer sending content on their sites, rather than YouTube and paying a high fee. Companies that have a brand have no problem in generating traffic, so our system is very relevant for them," says Yekutiel.
"The vision is to be the world's biggest video technology company, but we're not fighting YouTube, because we're technology and it's a kind of portal. We're also not fighting Akamai, because it's a CDN (content delivery network)," says Yekutiel.
Kaltura's competitors are companies like Brightcove Inc. (Nasdaq: BCOV), which offers a video platform that is not based on open code, and does not operate in the corporate or education fields. Another potential competitor is Ooyala Inc., which is mainly engaged in the media industry. "For someone to do this right in the video technology world, you need a lot of products for many markets. That is why someone who does not follow the Lego strategy like us, a flexible system that can create a different video for different places, will not win in the end," he says.
"I don’t expect a new player to emerge with a new system for this market. This is an investment of tens of millions of dollars that takes many years to get off the ground. What could happen is that leading cloud players will launch something like this, but even if that were to happen, this is ultimately an opportunity because the competitor of that player will want us," says Yekutiel, hinting of a possible exit. "Whoever buys us, if we're acquired, will have to keep the open code style. It won't have a choice because it's already out there and you can't go backwards."
Kaltura's figures could definitely attract potential buyers, but investment banks also want to collect a return from an IPO. "We were profitable in 2013. This year's sales should reach $50-100 million, and as a SaaS company, 80% of the revenue is turned into profit," says Yekutiel. "We're maintaining a 50% annual sales growth rate. Our customer retention is exceptional, our growth rate is extraordinary, and our high profit margins are outstanding. A long time ago, we said that we wanted to be a billion-dollar company, and we're headed there, but to achieve our dream, we must pick up the pace, which is why we raised more money, even though we could have organic growth without it."
Tsur told "Globes", "We're readying ourselves for an IPO. It will happen in 18-24 months." The level of expectations following the latest financing round has not affected Yekutiel's equanimity, however, and he is more cautious. Although he talks about the possibility that a big cloud company might acquire Kaltura, but he rules nothing out. "Banks which talk to us strongly believe in the product. An IPO is a definite possibility."
Published by Globes [online], Israel business news - www.globes-online.com - on April 22, 2014
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