The story of how RAD Net came into being is like the beginnings of many of the other RAD start-ups. Avi Domoshevizki, from ECI Telecom, brought in the development ideas, relating to both public communications and data communications. At the same time, RAD began working with Asynchronous Transfer Mode (ATM) technology and it was decided to position the product among other RAD group products in order to be able to offer a complete line of solutions from the outset. RAD Net was established only two years ago.
In early August, RAD Net announced the completion of a private placement, raising $6.7 million in return for a 38% share, at a company value of $20.3 million. US firm Battery Ventures headed an investment group which included Evergreen via a joint fund with investment bank Robertson Stephens, Dovrat-Shrem, Gemini Capital Fund, RAD Computer Communications and several private investors.
The announcement essentially exposed RAD Net, which was at that point still without sales, to the general public. At first, RAD owners Zohar and Yehuda Zisapel owned 70% of the company. After dilution, the brothers now hold 43.4%, and company employees hold 18.6% of which the lion’s share is Domoshevizki’s. RAD Net currently employs 26 workers including a core group of 10 founding members who all own shares.
RAD Net will soon begin marketing an ATM multiplexer, which will initially be geared to the European market for two reasons. The first: this market lags slightly behind the US market in terms of ATM technology, making market penetration easier. The second reason is Domoshevizki’s past experience in Europe. RAD Net’s new investors will give the company a push towards the US market.
For the past two years, the company has carried out research and development activities alone. In one and a half months, RAD Net will begin field testing its new product at two European companies, with whom the company has signed a memorandum of understanding relating to strategic cooperation. The product’s price ranges from $12,000 to $75,000.
Avi Domoshevizki was ECI’s marketing and sales manager for both SDH and DigiLoop lines, two out of the company’s three main products. Forty-three years old, he was with ECI for 11 years, is a electronics engineer by training, a graduate of the Technion and has an MBA.
In an interview with "Globes" Domoshevizki spoke about the product developed at RAD Net:
Domoshevizki: "I reached the conclusion that it was worthwhile to develop a 155 megabyte ATM multiplexer for public networks in which large switchers were employed whose gateways operate at this speed. On the other hand, a multiplexer must be able to receive much lower, non-ATM rates of data transmission speed, sent by private users. The product is called ATMux.
Globes: How is it built?"
"We made a list of ATM characteristics, dividing it into those we wanted and those we didn’t, and that’s how we built the product. The goal was to end up with a very cost-efficient, low-priced solution. Clearly, if the entire product were ATM-based I would have a very successful product with a million dollar price tag. You have to understand which functions are best applied at the entrance to the network and which are best within the network. For example, a question arose concerning billing software, whether it needed to be installed in each end unit or in a central network location. We reached the conclusion that it need to be centralized, so we installed only compatible functions."
"Another example is a multi-casting program which allows one user to speak to several listeners. The network is the worst place for that software to be located, as you send the same packet of information over and over. The network is not used effectively. The best place, therefore, is at the network entry/exit port, and that’s why we decided to take this program on ourselves."
Is there something special about being part of the RAD group?
"I think so. We have no little advantages. At the beginning we had technological incubator conditions. As CEO I was able to site and occupy my little mind with two things alone: technology development and business development, while not being bothered with finances, grants from the Office of the Chief Scientist, holiday bonuses and so on. I received those services from professionals within the RAD group."
"Another advantage is the culture of cooperation between companies in the group. If you run across a problem, just pick up the phone to your counterpart at another RAD group company, and consult CEO to CEO or marketing manager to marketing manager. In the marketing area, RAD’s sales personnel travel the world finding business opportunities. You get quick exposure to a large number of clients, whereas usually it would take a lot of legwork to reach them. Additionally, saying you’re part of the RAD group gives you a great deal of credibility, and there’s a reason for that. RAD supports and assists. If there are problems, their clients know they have someone to lean on."
Is RAD a start-up factory?
"I wouldn’t look at it as a start-up factory but as a company which focuses on creating start-ups and gives them added value to reinforce their survival. If one out of the worlds’ 10 start-ups succeeds, then here the ratio is much higher. If the Zisapel brothers specialize in setting up start-ups, and I can take advantage of that as an entrepreneur, so much the better. I’m proud to be a part of it."
Generally, start-ups spring out of an idea in search of funds. In this case, we have a company with capital which analyzes the market and decides where it needs an idea. Then they seek out the entrepreneur to lead that idea. It all seems very technical and unexciting, whereas start-ups are supposed to be exciting.
"The emphasis in start-ups should be on success and not on pioneering. We grew up on a pioneer "make the desert bloom," "starting from scratch ideal," but if we can avoid that and get right down to doing things, so much the better.
Who are your competitors?
"Only two companies have developed ATM access products. One did not succeed and the second, ADC Kentrox, is already selling products and is the only company at present with products on the market. On the other hand, speculations are that the big money will be in this type of ATM product, and many start-ups are now operating in the field, mainly in the US. So I expect we’ll have no little competition."
Are you a one product company?
"I’ve mentioned only one but this is, in fact, a family of products. We have created a concept which allows many product lines to be built on the same cards, each one of which is part of a larger product, appealing to a specific market with specific demands. The first product is the ATMux 2000, a large-scale product for public telecommunications companies. The second product, ATMux 2004, is a small version with more group functions, and is geared to companies which require less bandwidth. We have structured the platform so that cards may also be developed by subcontractors. We are cooperating with RAD Computer Communications, among others, to develop cards for clients."
Where are you headed in the future?
"As a result of the fact that we do all technology transfer from existing protocols to ATM, we now have a great deal of know-how in all these technologies. So we have a number of options. We are currently in the process of determining our strategy for future company development."
Does this mean cooperative ventures or selling the company?
"We do not rule out strategic partnerships at this stage of our development, especially with companies in the US."
Part of the RAD group strategy is to take their companies public on Wall Street.
"It’s true that going public is the necessary outcome but not during crazy times, as occasionally happens on the market. The normal procedure is to record two years of sales before going public, therefore we don’t expect a RAD Net IPO before 1998."
During the past two years, Israeli high tech companies have had a breakthrough on the world market. You travel a great deal. How do they view this phenomenon abroad?
"Yes, a great many small Israeli companies have burst onto the international scene, in all aspects of high tech and most have succeeded in giving the world a message that we have very advanced, innovative technology. Although there are some Israeli start-ups which have damaged Israeli industry’s reputation abroad, all in all we have a good name. Almost everyone I meet tries to find out if I’m ready for a merger or sale. There’s a feeling that advanced Israeli technology can be bought at discount prices. An Israeli start-up can be had for $70-80 million while a similar-sized US company will cost $200-300 million."