September SUN100 Update: Israel’s Top Tier Private Startups

IT, cloud and cyber services providers are among the most growing in Israel in the last summer, as it is seen from our September SUN100 ranking of the most valuable Israeli startups. The recent month was an excellent one for startups such as the video management service Kaltura, The flash storage providers Elastifile and Kaminario, the cyber security companies Cato and TrapX, and the marketing analytics plaform Datorama.
Each of these also raised few dozens of millions of dollars. This is a milestone that not only increases the valuation of a company at the moment of the round, but also symbolizes the rapid growth the company is experiencing.

Gett: (1st , no change from previous ranking) The taxis service that is popular in Israel and in some cities in Russia secured $300M from Volkswagen this year. The two didn’t mention the services or products that should come out from this co-operation but it seems that the two will hold hands in the race for another fleet management platform that will compete with Uber, Lyft, Didi and Via. Zirra valuates Gett at about $2B

Kaltura: (From 12th to 3rd) The video management platform for enterprise raised this August another $50 million, bringing its funding in total to $160. The acquisition of TVinci two years ago brought Kaltura into the IPTV and OTT market, right on time to help many telcos and others into a Netflix-like VOD service. Zirra valuates Kaltura at $901M.

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Elastifile: (From 87th to 67th) The SSD and flash innovative system has doubled in the past year and made several high profile hirings like the addition of an EVP Global Sales and a VP of Marketing, both with rich background from IT vendors such as Oracle, EMC and NetAPP. Elastifle convinced Cisco to invest in the company, leading a $15M round this summer. Zirra valuates Elastifile at $226M

TrapX: (From 116th to 103th) A player in the crowded arena of deception cyber security providers, TrapX raised $9M this April from Strategic Cyber Ventures, established by formerly DoD execs, and hired a VP Sales from FireEye, a VP Product from IBM and a VP Marketing from Cyphot. Zirra valuates TrapX at $173M.

Datorama(From 84th to 30th) Marketing analytics platform Datorama raised $32M last month, after a significant growth in sales in the U.S. Datorama made a successful bet with extending its reach from ads agencies to advertisers. For more insights on Datorama, read Zirraӳ full analysis on Datorama here. Zirra valuates Datorama at $395M

Vidmind (From 56th to 137th) The video OTT and VOD Platform was supposed to receive an investment of $30 million from Russian entrepreneur Maxim Nogotkov, but ran into issues when Nogotkov began experiencing financial trouble possibly connected to economic and political turmoil in Russia, eventually being bought by the same group for just $2.4 million in a process involving the courts. The total headcount went down to 14 from 50, while Sagi nominated a former playtech exec to the role of CEO. Even so, OTT platform can be an attractive investment if done right as demonstrated by Kaltura in this list. Zirra valuates Vidmind at $122M.

So let’s take a look at the full Start-Up Nation 100 list to see how the top Israeli companies ranked in September (click here to access our live spreadsheet):


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A Panorama view on Datorama

Last week, the fast growing company Datorama showed the world its dominance in the industry of marketing analytics, and announced a new financing round of $32M dollars powered by Lightspeed. Previous investors, such as Marker LLC, joined the deal.

The Israeli based company was growing as more and more businesses today gain access to marketing analytic tools, which enable them to receive data from their marketing channels such as Facebook or Google, and to track and manage their campaigns. Last year, Harvard Business Review reported that companies plan to increase their spending on marketing analytics by 73% over the next 3 years – a good sign for Datorama.

Data collection and crunching present a key challenge and pain point for full-stack marketers, whether in brands or in agencies. The Datorama platform is able to understand the ongoing performance in a blur of several data sources – Facebook, Google, ad exchanges, networks, direct publisher sites, and affiliate programs (especially since these, too, frequently cross paths further along the advertising funnel). This is where the value of Datorama can be clearly demonstrated and monetized, and where the competition will naturally focus their efforts.

There are, however, an overwhelming number of solutions available, on a variety of individual websites and systems. Datorama has differentiated itself as a user-friendly cloud platform, offering an easier management of data from different marketing tool channels.

It is a cloud-based system which is designed to facilitate easy interactions with all of a company’s data on marketing analytics. Datorama has grown significantly, mainly by putting together a global sales force that has been successfully selling to advertising agencies and is now looking to scale its presence by transitioning sales to advertisers directly.

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Sales and Marketing

Datorama has done extremely well in terms of sales execution and global expansion. Over a third of the company is dedicated to sales, and they have a very strong global presence particularly in the U.S. This explains the company’s success in direct sales but also suggests dependency on their sales execution and less on a recognized technology or product advantage.

Our web traffic and Google Trends analyses demonstrate that Datorama enjoys positive trajectories in both company specific and general sector vectors, and has put together a healthy of mix of traffic sources. On the cautionary side, a big portion of the traffic is generated via referrals. This portion may indicate a dependence on marketing expenditures, but is also offset by the rapidly increasing organic searches.

Datorama’s bet on ad agencies was successful. Ad agencies are the immediate customer because they are in dire need of marketing analytics and campaign optimization tools. Agencies are in a pressing process in which they are forced to expand in terms of workforce related expenses in order to demonstrate added value in the hyper-competitive performance-based universe of marketing tools. This forces them to turn to analytics and optimization platforms, such as Datorama.

However, Datorama’s decision to move from selling mainly to ad agencies directly to advertisers or brands looks like a necessary step. Not only because the market for ad agencies is finite, but also due to the fact that there is a growing distrust between brands and agencies with regards to performance advertising. Brands do believe more and more that leads generated by agencies are either irrelevant or fraudulent.

On the other side, global brands have the need to work with multiple agencies as well as launch direct campaigns, manage ad-exchanges, and affiliation programs, thus putting them in the same complexity matrix as the agencies face.

However, the growing mobile ecosystem is a potential “black swan” that can reshuffle this market and present a threat to the value Datorama aspires to. The mobile advertising space is already dominated with other purposes – by tracking and analytics companies which are, to a degree, already connected to advertisers’ CRM and have already put together monetization practices.

From a technology advantage, data collection itself is not necessarily a tech barrier although it requires work in terms of API aggregation and dashboard development.

There is already a large demand for platforms which makes it simpler to see data and gain insights from it, and this demand is only expected to grow. As marketers continue to focus more on various online media campaigns and engaging with the data and metrics from these campaigns, there is sure to be an increased desire for a tool to simplify this experience, and be able to look at all the data in one place.

Our analysis mapped companies such as Beckon, Birst, and Israeli Origami Logic as direct competitors. Bigger, more established players, like GoodData, Tableau or Qlik can be included too in the outer circle of competitors, although they’re not threatening directly on Datorama’s business and might even consider to buy the company in the future.

While Datorama focuses on data from marketing analytics, established companies such as GoodData and Birst offer similar services as far as bringing lots of data into one platform, but for any kind of data. These companies have features such as computing stats, forecasts and regressions, and automatically publishing insights to team members. Other startups are joining the field, and some offer unique features, such as advanced automatic visualization of the data and automated presentation templates.

Our traffic analysis shows that only Origami demonstrates comparable positive traffic trajectories. Origami is also well rated, with Birst scoring well in terms of absolute ranking and size, but less with current growth.

Datorama’s founding team is balanced, collaborative, and well rated. Their management team is also well rated and is indeed well equipped to deal with the company’s mission and tasks.

 

So, will the $32M dollars that Lightspeed invested in the company will lead to Datorama’s unequivocal growth? The answer to that depends on few factors.

The first is Datorama’s ability to deploy a “quick entry model” for advertisers of all sizes, similar to the SalesForce initial entry model with SMEs, and demonstrate the ability to quickly convert leads and not depend heavily on an “on the ground” sales force.

The second is that Datorama will have to lead the AI wave that washes the tech world, marketing analytics included. That technology includes also predictive analytics of customers interest and extensive use of big data. SalesForce just launched “Einstein,” that will help salespeople find potential customers using analytics and OpenText just announced a similar investment called Magellan.

Third, Datorama will need to constantly be a step ahead of Adobe, SalesForce or Tableau in terms of real life campaign data crunching. While Datorama may claim IP for business intelligence and predictive modeling, the market sees the value in “the simple stuff” and market share depends on that.

Most important of all is to develop a strong position on mobile advertising, including in-app advertising, and demonstrate a clear advantage over threatening potential moves from companies such as AppsFlyer.

On the way up, Datorama must not miss out on an exit opportunity window which is expected to not be too far down the line, with a limited set of potential buyers.

The M&A horizon is limited to a small finite number of players, the leaders of which consist of Adobe, SalesForce, Oracle, and possibly IBM. If the value is ultimately identified with data visualization the exit price is not expected to exceed $300M-$400M at a reasonable cause.

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