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Tradeum trades up vertically
From The Jerusalem Post
April 9, 2000
However, a Barron's cover story from March 20 which focused on the cash burn
rate of some Internet companies - and which mentioned VerticalNet -
precipitated a sharp fall in the company's shares which was only exacerbated
by recent Nasdaq volatility.
In the month that has elapsed since the buy-out was announced, the deal's
value has collapsed by close to 60% to a mere $220m., as VerticalNet's
shares took one of Wall Street's hardest falls.
Tradeum's management seems, however, not to be worried about stock value.
"We sold a vision with the ability to execute," said the company's chief
executive, Zev Laderman.
Even after the recent decline in the deal's value the rise of increase in
Tradeum's value can only be described as phenomenal considering the fact
that it completed its first round of financing last August based on a
company value of only $7m.
And that's as a company that - in the budding tradition of today's new
digital economy - has had just one sale. But it is Tradeum's envisioned
solution that enabled the sale, offering a new way for businesses to
exchange and barter goods in the digital marketplace.
With the Internet providing a new forum for the business supply chain,
companies can now access customers and resources that were previously
unavailable to them. That interaction is what is now called the
business-to-business market, B2B for short.
B2B COMPANIES not only eliminate the old-economy intermediaries but serve as
a new kind of electronic hub, concentrating on specific business industries,
from automotive parts to reinsurance risks, and then gathering buyers and
sellers and reducing transaction costs.
It is a potentially massive market. According to a recent projection from
Boston-based Forrester Research, B2B commerce will reach some $1 trillion by
2003. For a start-up like Tradeum, the key to success in this new business
model is providing the technologies and infrastructure necessary for the
supply chain to operate quickly and efficiently.
Tradeum's product, Xchange Suite 2.0, aims to offer a flexible marketplace
solution that enables trading parties to discover the right bundle of
products and services for the best transaction possibilities and outcomes.
Hence, the name Tradeum, which is the Latin term for "pinnacle of trade."
The company name was coined by Zvi Schreiber, Tradeum's British-born founder
and chief technology officer, who holds a doctorate in computer science as
well as masters' degrees in theoretical physics and mathematics. It was
Schreiber who set out to solve this apparent market interaction problem,
looking to create an unobstructed marketplace where buyers and sellers could
match their different parameters.
Working with a team of mathematicians in the proverbial small apartment
start-up in Jerusalem, the group created a set of algorithms to solve this
logistical dilemma. After managing with financing from private investors
during its first year, the company received a round of funding last June
from venture capital funds STiVentures, Vertex Management and Israel Seed
Partners.
AT THAT POINT, it was clear the company needed professional management, and
Laderman joined Tradeum last August, after meeting the company at the behest
of venture capital fund Israel Seed Partners. What drew Laderman to the
company was his clear understanding of how the Tradeum technology could help
industrial companies.
A former vice president at software giant Oracle Corp., Laderman, who is
Israeli but lives in San Francisco, was fully familiar with the
technological constraints of Enterprise Resource Products (ERP), the network
software solutions currently used by industrial companies. While not a
"technologist," he admits, Laderman does know how to sell technology. And he
saw how Schreiber's algorithms could be applied in the real world.
"I came on board to redeploy the company," he says, guiding Schreiber and
his team toward a software application that would work for potential
customers.
In the world of ERP, companies reside in "islands of enterprise isolation,"
Laderman explains. The Internet has changed that relationship, allowing
buyers and suppliers to occupy the same territory, but the logistics are
still complicated. Tradeum's solution allows all demand to be instantly met
by suppliers' capacity. Through the solution's exchange infrastructure,
different ERP systems can speak with one another, questioning and answering
their various needs. Moreover, by creating an exchange, demand and prices
can be leveled off, allowing businesses to control excess supply and demand.
So what makes Tradeum's solution unique? A combination of factors, according
to Laderman. To begin with, the software application is written in Java
code, the standard language of the Internet. Moreover, the application
resides in memory, not a database, which makes it easier to download and
therefore to sell. He also believes that the company's new management team,
people that he brought with him from Oracle, has helped tremendously.
FOR NOW, Tradeum is in the lead player among other B2B suppliers that are
figuring out similar solutions. Laderman figures the company has a
nine-month lead on its competitors, which includes industry leaders such as
Oracle, SAP SG and Baan Company N.V. There are also several other start-ups,
including Ariba, Commerce One, Moai Technologies and TradingDynamics, which
are crowding the playing field.
The current aim is to snag fifty customers by the end of the year. So far,
Catex, one of the world's largest reinsurance exchanges, is Tradeum's sole
customer.
Tradeum is also preparing to raise an additional round of funds, some $80
million to tide the company over until the company begins raking in profits,
in about two years. About 50 of the company's 150 employees work out of the
Jerusalem research and development office in the Malcha technology park,
while the remainder are located in the company's San Francisco headquarters.
As for the sale to VerticalNet, it was somewhat unexpected this early in the
development game, but eminently worthwhile, Laderman believes. According to
the deal, Tradeum is a fully-owned subsidiary of VerticalNet, relieving the
Jerusalem company of its start-up title, but at the same time allowing
Tradeum to consider going public at some point in the future.
"VerticalNet was a good complement for us," he said. "We're founded on the
same market and we're very valuable to them."
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