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Weekly Start-up: XACCT
Israel's Business Arena - Globes
Company Name: XACCT
XACCT was born in Morocco, at least conceptually. Eran Wagner and Limor
Schweitzer, the founders, never dreamed that the invitation from a
university in an Arab country would lead them to found one of the jewels in
the Israeli start-up crown. Wagner and Schweitzer never dreamed of founding
another company at all.
Business Card Name: XACCT
"We were demobilized from the Israel Defense Forces (IDF), we studied at
university, we founded a projects company named Xpert", Wagner says, who is
vice-president for technology. "We had many projects, we doubled the sales
turnover every year, and the company was the joy of our lives". Xpert won a
Moroccan tender after creating a software component, which enabled
university management to know how each student was using the network
resources at any given moment, allowing it to bill every university
department according to the use its students made of the network.
Winning the tender brought Xpert victory in a much larger tender: a union of
no less than 80 hospitals in the Paris region, all connected on one computer
network, also wanted to bill each hospital according to usage time.
In 1996, Xpert had no product ready to offer the many customers knocking on
its doors. "At the end of the year, we built a small program, which fit on
Check Point's Firewall-1, with several features, at the customer's request",
Wagner recalls. "Suddenly, it looked like a complete item. We said to
ourselves, 'perhaps we can do something with it', but we had no idea what".
And so XACCT was born. Unlike an integration company, which finances its
activity itself, the company required investment.
Wagner and Schweitzer went to Shelly Tshuva of the Foresight consultant
firm, who got them $1.1 million from Ampal Investments, Israel Seed
Partners, and Technorov. Wagner: "We thought that was all the money we'd
ever need".
Globes: Why create a separate company?
Wagner: "The concept was that every activity required a clearly defined
focus. An integration company and a software company are two very different
animals".
At the beginning of 1998, Eric Gries joined the company as general manager
and president. Gries had been manager of the computer networks and systems
division in the US software company Compuware. Gries had served in the IDF
and is a Hebrew speaker. Wagner says they hit it off from the beginning.
XACCT developed a kind of meter, which sits on the organization's IP
network. The system collects information about network traffic, develops
billing records, and feeds the records into the collection and customer
system. The target market for the product, which is called XACCTusage, is
Network Service Providers (NSP). These include Internet Service Providers
(ISP), cable companies, cellular companies, telephony companies, and very
large organizations.
XACCTusage enables these companies to design additional revenue channels by
offering a price package according to the quantity of network utilization.
XACCT currently leads the world market in its field. It has almost no
competition, other than the Hewlett Packard product.
The last capital raising round, which was the third and was completed a few
months ago, was one of the largest ever seen here: $22 million at a company
value of $110 million after money. The list of investors included Deutsche
Bank, Trident Capital, Crossover Ventures Technology, and the Japanese firm
Nissho Iwai. These joined ISP, Eucalyptus, Ampal, and Trident, which
invested $11 million last year. XACCT is planning an IPO next year.
XACCT currently has a staff of 75 employees. Most are in the R&D; branch in
Bnei Brak, the rest being in the main offices in Santa Clara in the Silicon
Valley. The company has five sales branches and about 40 business partners.
Wagner reports confidential meetings with practically all the large
telephony companies, which want to adopt XACCT's technology without the fact
becoming known.
Another of XACCT's advantages is the volume of its business. A typical
transaction ranges between $250,000 and $3 million. "That's only the
beginning", says Wagner. XACCT plans to expand its business volume using the
same method as infrastructure companies of its type.
The strategy is to make its infrastructure into a standard, inserting it
into as many organizations as possible, then add new applications to it.
Wagner dreams of making his product "an inseparable part of every business
system used by future communications providers, from the infrastructure
level to the applications level. Every network will require our layer. We
will be a very large company, serving the richest customers:
telecommunications companies. We will grow with the market that is
developing the most".
What does that mean in financial terms?
Published by Israel's Business Arena on January 4, 2000 |
