Virtual earphones co Noveto raises $2.5m

startups

The money was raised from Vyacheslav Bresht and Daniel Jammer.

Noveto Systems, which develops virtual earphones, has raised $2.5 million in its B round from the family fund of Vyacheslav Bresht and Daniel Jammer. The fund has invested $7 million in the company since early 2015. CEO Tomer Shani and Noam Babayoff founded Noveto in 2011. The company has 12 employees in Petah Tikva, mostly working in research and development. Noveto will display an advanced prototype of its product at the CES technology exhibition in Las Vegas next year, and its aim is to lower its price over the coming year and make the product fully commercial.

The commercial version of the company's virtual earphones will include a chip, a 3D sensor, and a loudspeaker. The sensor is able to detect the location of the user's ears and broadcast acoustic waves to them. It is possible for four people sitting in a car to hear different things without using physical headsets, provided that each of them has a different standard. The standard can also be connected externally through Bluetooth to PCs and mobile phones, but it cannot be used in sports activity, such as cross-country running, because the head moves around so much. Additional uses are planned for the technology in gaming and the smart home.

Advocate Gil Lev, a representative of the company's investors and the company's business development manager, says, "We are in close connection with the auto industry, the venture capital industry, and other concerns. We have already obtained all the patents for the technology, and we feel ready for a breakthrough. We have been a great deal in Europe in recent months, and we are going to develop a subsidiary in the US in the coming weeks. Many concerns want to meet with us at CES, where we will have a display in both the automotive hall and the Israel Export and International Cooperation Institute booth.

"Globes": But your product is not yet commercial.

Shani: "We're at the stage of shifting attention from the development stage to the product-making stage - taking the technology, reducing it to the level of a chip, taking into account the needs of the various customers and the structure of the various markets we're going into, and beginning to work towards a product."

Lev: "In performance, the product is much more than a prototype at this stage. We are already capable of installing it in existing systems, including computers. What we are working on now is to reduce it by one or two orders of size using a chipset in order to make it producible from the cost point of view."

The target price for the external device that connects to telephones and computers is $200, and where the auto industry and the PC industry are concerned, Lev says, "It has to be made much smaller."

On the face of it, you have a pioneering technology. A lot of people would be glad to get rid of those bothersome headphones, but this isn't reflected in the size of the company's financing rounds or its growth rate.

"Up until now, the company has been supported by the family fund, which has served as a kind of internal incubator. In the second half of 2018, our goal is to raise $30 million, probably mainly from US concerns, in order to reach the commercial stage. We're in touch with several chip companies, and between the second and third quarter of next year, we'll hold a global auction for production of a chip, which will be a significant milestone for the company."

If Noveto is successful in raising $30 million during the coming year, it will be an indication that there really is room for its product in the market. As of now, however, there are questions. Despite what appears to be a technological breakthrough, the size of the company's B round is half as much as the usual amount in A rounds, which may be attributable to the planned price of the product for consumers. High-quality wireless headphones can now be purchased for less than $50, and the use of them is not limited, as virtual earphones are.

The cost of the product is also a problem in the auto market, even if it is in the tens of dollars, not $200. The reason is that auto manufacturers are making great efforts to cut production costs in amounts that seem negligible for an individual vehicle, but become very large when several million cars are produced a year.

The company explains that its strategy in the automotive industry is to start penetration with premium brands where there is less price sensitivity and to work its way down to other brands. It says that from extensive talks with various companies both in the automotive and PC sectors, it concludes that its target price of tens of dollars in the mass production stage is attractive.

"Autos are only one of the segments in which we are operating," Lev adds. "We're operating in categories like PCs, smart homes, and offices - everywhere people share a work space. For PCs, there will be one product installed in the screen and a different one that people can take with them wherever they want and be connected with Bluetooth to whatever device they want. We are doing viability proof with one of the major computer manufacturers. The device will be installed within the computers."

Published by Globes [online], Israel Business News - www.globes-online.com - on December 18, 2017

© Copyright of Globes Publisher Itonut (1983) Ltd. 2017

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