Taboola And Israel’s Next $1 Billion Companies

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Taboola, an Israel-born content discovery platform, now reaches more U.S. Internet users on desktops than Facebook, Google sites, Yahoo or AOL, according to ComScore’s September monthly Distributed Content report.

Singolda: ‘We are here to solve the discovery probleme’

Taboola boasts an audience of some 400 million and serves up some 150 billion recommendations per month. And the seven-year-old company, which has raised $40 million in venture capital to date with an estimated valuation of around $1 billion, has even bigger ambitions. Now that it has conquered the U.S. market it plans to expand rapidly into emerging markets and is adding new discovery categories, such as products, rather than just videos, articles and slideshows.

Taboola is just one example of how Israel is now building global Internet brands.

Israel Is Now Building Global Internet Brands

“We are here to solve the discovery problem,” says Adam Singolda, Taboola’s founder and CEO, who was scheduled to speak at NOAH but had to bow out for personal reasons. “Instead of searching for something on Google when you know what you want, we are going to reverse the process and let the products find you. Say you are reading an article comparing iOS and Android and we see you read a lot about mobile, we could offer you the chance to buy an iPhone 6. And what is next is indexing other things yo, an Israel-born content discovery platform, now reaches more U.S. Internet users on desktops than Facebook, Google sites, Yahoo or AOL, according to ComScore’s September monthly Distributed Content report.

Are These Israel’s Next Unicorns?

Taboola

Year Founded: 2007
Estimated Valuation: $1 billion
Status: Private
Founders: Adam Singolda

Outbrain

Year Founded: 2006
Estimated Valuation: $1 billion
Status: Private but rumors of a planned IPO persist
Founders: Yaron Galai and Ori Lahov

eToro

Year Founded: 2007
Estimated Valuation: several hundred million dollars
Status: Private
Founders: Yoni Assia, Ronen Assia and David Ring

Wix

Year Founded: 2006
Market Cap at Press time: $647.13 million
Status: Public
Founders: Avishai Abrahami, Nadav Abrahami, Giora Kaplan

MyHeritage

Year Founded: 2005
Estimated Valuation: several hundred million dollars
Status: Private
Founders: Gilad Japhet

Taboola boasts an audience of some 400 million and serves up some 150 billion recommendations per month. And the seven-year-old company, which has raised $40 million in venture capital to date with an estimated valuation of around $1 billion, has even bigger ambitions. Now that it has conquered the U.S. market it plans to expand rapidly into emerging markets and is adding new discovery categories, such as products, rather than just videos, articles and slideshows.

Taboola is just one example of how Israel is now building global Internet brands.

“We are here to solve the discovery problem,” says Adam Singolda, Taboola’s founder and CEO, who was scheduled to speak at NOAH but had to bow out for personal reasons. “Instead of searching for something on Google when you know what you want, we are going to reverse the process and let the products find you. Say you are reading an article comparing iOS and Android and we see you read a lot about mobile, we could offer you the chance to buy an iPhone 6. And what is next is indexing other things you like, such as places you may want to travel.”

To achieve its ambitions the company, which moved its headquarters to New York City but maintains its engineering operations in Israel, is rumored to be considering another funding round and although it is not pursuing an IPO now “it is going to be part of the future,” says Singolda. “We are fortunate enough that our product has a global-scale opportunity and that gives us the opportunity to dream big and build big.”

A New era for Israeli Start-ups

Waze, the mobile navigation service which was sold to Google for $1.1 billion in 2013, was the first Israeli consumer Internet brand to be considered a “unicorn” — companies which started no more than 10 years ago which are valued at $1 billion.

It is unlikely to be the last. “Israelis are moving culturally away from pursuing [smaller] exits to building something big,” says Chemi Peres, managing general partner and co-founder of Israeli venture firm Pitango Venture Capital. While no one questions that the sale of Waze was a triumph, the challenge for Israel is now to build independent companies with big revenue streams.

“I believe we are in the beginning of a new era for Israeli start-ups, especially in the consumer tech space,” Noam Bardin, Waze’s co-founder and CEO wrote in a blog post.

And how. In August, four months after Bardin wrote his blog, Mobileye, a Jerusalem-based company that make software to help drivers avoid car accidents, raised $890 million, a record for an Israeli company going public in the U.S.

Informilo polled investors in Israeli companies to ask them which consumer-oriented Internet companies can be considered unicorns or potential unicorns. The names that kept surfacing include eToro, MyHeritage, Outbrain and Taboola. All are global internet companies and have either reached a billion-dollar valuation or, say investors, have the potential to do so.

180 Billion Recommendations Each Month

Consider Wix, which turned down acquisition offers and instead raised capital to go global from Tel Aviv. It went public in 2013. “I think we can grow the premium users category by 90 times the current amount,” says Wix co-founder and CEO Avishai Abrahami. “We are constantly adding more functionality and more territories. We are growing in the U.S. and we see the developing market as a big growth opportunity.”

Outbrain, a content discovery platform that originated in Israel and has gone on to raise $99 million in venture capital, is following a similar path. It is co-founder and CEO Yaron Galai’s fourth company.
Outbrain, a Taboola rival, makes 180 billion recommendations each month to an audience of 550 million people. “We have enough work for 10 times the number of engineers and product people so I’d like to build the business to fund that,” says Galai.

Rumors that Outbrain will file an initial public offering persist. “It is one of the routes we are obviously considering.”

It is not just ambition that is giving Israeli start-ups a leg up. “The fact that the Internet has become very significant and strong in the last decade has given startups the ability to market, to get audience, close transactions and test their products,” says Pitango Ventures’ Peres. “That efficiency has helped Israeli companies shift to growth and close all the gaps of distance, language and culture.”
That has been the case for eToro, a social investment network that has so far raised $31.9 million in venture capital and today has close to four million registered users. “Today you can get any product to any consumer around the world without leaving your own country,” says eToro CEO and Co-founder Yoni Assia.

Challenges Remain For Israel’s Would-be Unicorns

“The biggest challenge Israeli companies used to have is distribution,” he says. “The 1.0 companies were focused on building sales forces. When you are selling B2B there is a huge benefit to being acquired because you can sell through the bigger companies’ distribution channels. But now consumer products and even B2B products like SimilarWeb can be distributed completely over the Web. This allows companies to leap ahead and have the potential to grow infinitely.”

Still, challenges remain for Israel’s would-be unicorns. Access to experience is one. To succeed, Israeli companies will need not just capital but investors or mentors who have built unicorns. And most of those are in Silicon Valley.

Even then it is not a slam dunk. So the question the current herd of unicorn wannabees needs to ask is: “how they are going get to $1 billion in revenue rather than a $1 billion market cap,” says Pitango’s Peres.

“I think that these companies can do it but they need to have their mind set on business rather than valuation.”

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