Israeli startup company Optibus, which has developed software for planning and operating public transport, announced today that it had closed $100 million in Series D funding. The raise was at a valuation of $1.3 billion, up from $500 million in the company's previous round last year.
Optibus CEO and co-founder Amos Haggiag said that half the funding had come from Optibus's existing investors, among them Insight Partners, Bessemer Venture Partners, Verizon Ventures, and Pitango, and the other half from new investors such as Chinese giant Tencent, and the growth fund of State of Mind Ventures. Altogether, the company has raised $260 million since it was founded in 2014 by Haggiag and his partner Eitan Yanovsky, who serves as CTO of the company. All of the money raised in the current round will go to the company.
The round was closed last week, while technology stocks on Wall Street were tumbling, putting fear into the hearts of venture capital investors in the private market. Haggiag admits that this had a considerable effect on the process. "It wasn't easy to raise funds in the amount we wanted and at the valuation we wanted," he says. "Last year, you could raise funds more easily, but this time round the investors carried out due diligence in more depth. The most troubling thing for startups is the decline in the revenue multiples at which technology companies are being valued in the public market, but in our case the investors looked less at the multiples and more at the question whether Optibus could dominate the global public transport market and become the biggest player in it, and there's a high chance that it can."
No route planning in Israel
Optibus currently works with 150 customers, among which are public transport operators (such as Kavim, Egged, and Dan in Israel), municipalities and local transport administrations, and also technology giants (such as Facebook, Apple and Amazon) that use the platform to plan and operate a transport network for employees to and within their campuses. Optibus's software is used to plan routes in over 1,000 cities.
Haggiag says that Optibus's revenue is in the tens of millions of dollars annually, but declines to go into greater detail. Optibus's product assists companies and organizations in decision making on the planning and operation of transport systems, covering such matters as timetables, which vehicles to use, when to refuel, and routing, and also day-to-day operations.
Unlike in other countries in which it operates, in Israel, Optibus does not plan routes, because these are dictated to the operating companies by the Ministry of Transport, which does not work with the company. Here, it only helps transport companies to decide, for example, which bus to use, which driver to assign to a route, and when to give him a break and refuel the vehicle.
Haggiag says that Optibus's competition consists of old-established companies such as the Trapeze group, which was founded in 1990. Another player is Canadian company Giro, which was founded in 1979. "Most of the operators we come to still work with Excel, however, and sometimes even pen and paper, for planning routes, like they did 40 years ago, and as far as we are concerned the big competition is with the question 'why change?'," he says.
From a hobby to a 300-employee startup
Haggiag and Yanovsky met as mathematics and computer science students at Ben Gurion University. Haggiag subsequently worked as an engineer at Microsoft while Yanovsky headed the development team at startup GigaSpaces. The idea for the current company started as a challenge from Haggiag's father, who is CFO at Kavim, to improve the company's planning. At the beginning, the pair worked on the idea in the evening and at weekends as a hobby, before turning it into a startup in 2014. The company now employs about 300 people.
Many operators are moving to a model of journeys on demand, as with Dan and Via's Bubble in Tel Aviv. Do you not see that too as competition?
Haggiag: "There are differences of opinion around the world about how much journeys on demand will grow and how big it will get. A service like that actually suits places where demand for transport is low, and not a situation in which you have to move a large mass of people rapidly. If you want to run transport in a large city, it can't be based on booking journeys through an app. We advise customers on when it would be worthwhile for them to replace a regular route with an on demand model, for example."
Published by Globes, Israel business news - en.globes.co.il - on May 16, 2022.
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