Kaltura CEO: We're in this for the long haul

Kaltura execs Photo: Tamar Matsafi

The Israeli video platform company is not in a rush to hold an IPO, but is sure that one will happen at the right time.

Ron Yekutiel, cofounder and CEO of Israeli startup Kaltura, asserts that paying attention to the possibility of a company holding an IPO is "superficial." The market estimates Kaltura's turnover at over $100 million. When you add an impressive list of customers and a $50 million investment in the company from Goldman Sachs last August, an IPO looks like a realistic option. "An IPO is mainly a means of access to cash that makes it possible to do deals," Yekutiel told "Globes."

"Globes": On the surface, it seems like you have all the requirements to become a unicorn - a company worth more than $1 billion. Why is that not happening?

Yekutiel: "Why don't you think it's happening?

An IPO was spoken of a long time ago, and so far, it hasn't happened.

"It wasn't spoken of before. Let's get this straight. There were slips of the tongue here, but there never were concrete plans until recently. If there was any talk, it was about quite a few years in the future, not now. There was a proposal for hundreds of millions of dollars, and as part of the discussion about it, we said that we were planning something much bigger for our future.

"We were never as ready as we are today. This is something fairly new. Furthermore, the company is ready in size and power, but we're going for a broad vision, and this vision sometimes keeps us from rushing forward. You have to decide whether you're running a 100-meter dash or a marathon. People run 100 meters faster than they run a marathon. It's unavoidable; part of the company's strategic preparation is generating slightly flatter growth than for someone running and trying to get a quick result."

Kaltura's vision is "to provide a possible video solution for every organization." The company has three main types of customers: business companies that integrate the video platform in their organization's internal communications, training, information sharing, marketing, sales, and customer relations needs; educational institutions, mainly universities, that use the platform for documenting and distributing lectures, sharing accessory materials and audiovisual home lessons, remote learning, and other study uses; and communications companies wanting to provide content to their customers.

Yekutiel explains, "As early as three years ago, when we entered the television field (through the acquisition of Tvinci, N.Y.), we were making a profit, growing at an excellent pace, enterprise, other things, but we weren't in television. We entered a young market - it was even before HBO entered streaming - and we took a chance. We said that this thing was going to change the market. We believe that even though we're doing a lot of things and leading in quite a few areas, we can enter a super-difficult market, fight against super-big players - Huawei Technologies, Ericsson, and Cisco - and succeed, and take a very big chance in a market that has lost a lot of money, in which there was so much investment in advance.

"We could have taken that loot (tens of millions of dollars invested in the acquisition of Tvinci, N.Y.) and invested it in more and more sales people, and gone much higher than we did from what we were doing in enterprise and education."

Is there more room to grow there?

"Absolutely - the market is just beginning. It can easily grow 10-fold, 20-fold, and 30-fold. The size is unbelievable." According to Kaltura's forecast, the market for which the company is competing will more than double, from $9.6 billion to $20.6 billion. The main growth in the market will be in the enterprise segment, which is expected to grow from $5.2 billion to $11.7 billion.

"The world is becoming more and more diverse," Yekutiel says. "People are connecting in real time and creating content. Even the world of video conferences, which seems like it has existed for a million years, is only beginning. Today, most people don't use video at work, but in another 10-20 years, it will be a majority of everyone's business. More and more organic teams will be established in real time around the world, in virtual reality, augmented reality - whatever you call it, it will be a video experience.

"We started only in VOD, switched to broadcasting, entered real time, the entire video experience on any subject whatsoever, whether it's training, learning, cooperation, drones, smart cities, autonomous cars - we want to be everywhere there is video. This is an insanely broad company. In order to establish a company like this - from a given number of blocks, you can build a tower or a wall, but not both. From the beginning, the strategy was that a tower doesn't interest us. We want to be something gigantic. So you need a little more patience and build it up, and put up your wall gradually.

"In reality, we already have the biggest customers in a wide variety of fields, and are starting to raise the volume more and more. It comes with something of a tradeoff, but we're going for a much bigger market. In media and telecom, we recently closed with a very large customer, VimpelCom (now called VEON, the world's sixth largest mobile phone operator, N.Y.), with 220 million subscribers. We have an agreement with Viacom, with 25 million users in India, and there's the agreement with Vodafone, which serves 755 million customers worldwide.

"We’re getting money from these ventures according to the number of end users - how many people are registered for the service, whether it's the number of people in the organization, or the number of people registered for the service of the mobile phone operator. The revenue curve of the mobile operators is like a hockey stick (which goes up gradually for a long time, and then rises steeply, N.Y.). After we sign, it takes the operator a long time to finish building its video service with us. After that, it has to bring the content, and then it takes more time before it is ready to launch and market in various countries. Then there's a hockey stick, however, and we benefit from double the number of users. Kaltura's potential in the area is very great just from the seeds we have sown in recent years."

Another person pouring cold water on the idea of an imminent IPO is CFO Yaron Garmazi. "This process takes six to nine months," Garmazi told "Globes," and at this point, we haven't set it in motion yet. It could come in another quarter, or two or three quarters."

Garmazi's arrival at the company in May was one of the factors that raised expectations concerning an imminent IPO, given his past involvement in six IPOs of Israeli companies on Nasdaq and the New York Stock Exchange, among other things as CFO at Ness Technologies and Passave. "A lot of Israeli companies held IPOs by the numbers," Garmazi says. "They said that if they pass the $100 million mark (in annual sales, N.Y.) and can grow by another 20-30%, that's the time for an IPO. We're playing in these areas, so if you look at just the figures, the company's ready for an IPO."

Deals with Harvard and Yale

This week, Kaltura announced the signing of deals with 15 of the 20 leading universities in the US for the supply of infrastructure for transmitting video content and live broadcasts to students and faculty members. Among other things, deals were completed with Harvard University, Yale University, Columbia University, New York University, Stanford University, and Michigan University. The company says that its services are currently used by hundreds of universities worldwide in deals with an aggregate annual value of $30 million.

"Our infrastructure is used by academic staff and students in recording and distributing lectures, sharing auxiliary materials, and audiovisual home lessons," says Kaltura cofounder, president, and general manager Dr. Michal Tsur. "The hottest segment right now is e-learning. Universities want to establish content libraries of video clips in order to increase the number of their students beyond the constraint of physical room on the campus, thereby increasing their revenue. We'll soon also accommodate remote teaching and learning in real time."

The business sector uses real-time video mainly to hold remote meetings and conference calls. This is one of the missing elements in Kaltura's services, whose vision, according to Yekutiel, is "to provide every type of video solution to every organization. Creating a broad platform, a set of software Lego blocks that can be used to manage the entire sector, including video conversion, uploading, management, distribution, advertising - the entire flow - is a rather daring vision. We have a thousand such blocks today that we can use to create any experience whatsoever at work, home, or school."

Kaltura currently serves a thousand companies, including major companies such as HBO, Royal Philips. Warner Brothers, NBC Universal, DBS Satellite Services (1998) Ltd. (YES), TNT, Siemens, Novartis, SAP, and Target. Together with its paying customers, the company also operates an open code venture, around which a community of 150,000 members and 170 technological entities has been created. They have developed products based on Kaltura's technology. In the coming year, the company plans to develop models for generating revenue from this activity.

"Major pre-IPO measures"

According to Tvinci cofounder Ido Wiesenberg, who became senior VP business development at Kaltura following its acquisition of Tvinci, the question of an IPO is secondary to the company's growth targets. "Today, we're also looking at growth through non-organic means. This could be one of the reasons why we prefer to conduct several major measures before an IPO that will enable us to grow rapidly. We have a plan several years ahead that Yaron (Garmazi) led, and from there we go back and draw a strategic map, priorities, and finding opportunities.

"In the enterprise segment, there is an area suitable for what we're doing, and we're not in it - real-time communications. Our customers prefer it to be part of the package we provide, that everything be together, and communicate with each other. This puts us in a fantastic place, because there is currently no real-time player with a broad strategy. We're considering all of our options in this field."

Will you acquire an Israeli company?

Wiesenberg: "No, Israelis aren't in this so much, and we're a company with 450 employees. We can digest an acquisition in another place. The uses of this go beyond video conferences. For example, take a case in which you've been in an accident, and you have to go bring documentation to the insurance company. You may be able to photocopy it now, but with video, the garage can assign an appraiser to check what's happening remotely and send it wherever he wants, and it's all left for later handling by the insurance company."

Published by Globes [online], Israel Business News - www.globes-online.com - on December 6, 2017

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

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Kaltura execs Photo: Tamar Matsafi
Kaltura execs Photo: Tamar Matsafi
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