ItemField acquisition updates

Few updates to the post about ItemField acquisition:

1. The acquirer is Informatica, a big player in the data integration market.
2. The price is around $50m. This is a moderate success for the investors which invested a total of $18m in ItemField
3. ItemField will most likely become an Informatica R&D center.

My understanding, the acquisition allows short term costs benefits to Informatica, as it is already offering ItemField's products to its customers. Moreover, ItemField's R&D capabilities complements Informatica's main effort.

Itemfield

It was just published in TheMarker (Hebrew) that Itemfield is going to be sold next week for tens of millions of dollars. I was interviewed there last year for a product manager position. I apparently passed the first interview with my hiring manager, but not the second one with one of the company's founders. However, I was very interested with the company's product. It is able to translate data from various formats, including databases, word documents, simple text file to XML. The cool thing about it is that the application scans the data source and determines automatically the XML schema based on a machine understanding of the data. I think that it is really cool, very useful, and much less complicated than solutions such as Attunity's (Which I hope will succeed - there are many excellent people there).
Well done Itemfield!

3DV systems

TheMarker reported on Tuesday that Kleiner Perkins Caufield & Byers and Pitango, a prominent Israeli VC will invest $15m in 3DV systems of Yokne'am. 3DV valuation is $35m after the money. This is the largest of the very few investments KPCB has done in Israel, as it doesn't have an office in Israel. 3DV develops video camera with a distance sensor that can calculate in real time the distance of objects from the camera. Their website says that they are about to launch a web camera based on the technology.
KPCB only invests where the potential market is huge, and the applications described in the 3DV's website provide a glimpse into that potential. Applications include gaming, where 3DV can make inventions like the Wii controller look complicated and unnatural. I can imagine for example a golf simulator where the player can play with his real golf clubs. There are many applications in security and the automotive industry, for safety control. What really excited me was the video-conferencing application. Using 3DV technology, it will be possible to generate a virtual background in real time. This can really enhance both personal and business video conferencing as background distractions will be eliminated.
I think the key to the success, is how quickly the team can implement these applications. Looking at their management, it seems that they have great technical capabilities and familiarity with the security market. However, although the willingness to pay in these market is huge, the market size may be low (high margin, low volume). I would bet KPCB expects them to aggressively go to the gaming and videoconferencing market. I am not sure however what is the right strategy for doing so - develop software applications in house, or partner with other companies. I believe in gaming KPCB should partner with Sony, Microsoft or Nintendo, but it may go by itself in video-conferencing.
Another interesting point about 3DV is that its two founders are P.hDs who worked for a long time in Raphael. Raphael is perhaps Israel's prominent military technologies R&D lab. Raphael through its RDC subsidiary is invested in the company. Raphael continues to be a source of innovation in military technology and it cleverly spins off startups to apply these technologies to civilian applications. The most known Raphael spin-off to date is Given Imaging (NASDAQ:GIVN), which created a new market for endoscopy pills, putting Raphael military technology to usage in the medical devices industry. I am certain that this is not the last Raphael spin-off we're going to see.

Israeli high tech custom search engine

I have added a search box to this blog. It is a Google custom search engine which I created that focuses on the Israeli high-tech industry. It currently includes more than 100 sites of Israeli high-tech companies, venture capital firms and online news sources. If you enjoy it or if you would like to add a site to it, please leave a comment.

SalaryScout

I have just discovered SalaryScout, which was featured in TechCrunch. It allows you to compare your salary with that of people in similar positions. I believe SalaryScout has a long way to go until it will be useful - it needs both a large number of registered users and tools that will make sense of the data and help the user answer what's really bothering him - am I paid too low?

The Israeli high-tech industry is represented by 15 users, all of them signing up after the TechCrunch post. Some of these looks like spam, and more interesting, some are earning a lot and are displeased of their job.

Gigya: Cheerful webmail

TheMarker recently reported (Hebrew) about Gigya, a new startup that aims to change the way young people use email. The Gigya service in essence takes Incredimail to the web. As well as the basic Incredimail functionality - wallpapers, emoticons, etc., Gigya also allows the user to use her MySpace formats and content from Gigya's partners. It is targeted at teenagers and people in their early twenties, that according to Gigya managers are underserved by today's business oriented email.

I believe that their customers would be young females. I think this has a lot of potential, if they can execute quickly and create a huge user base. After all, this service can be easily replicated by a the 800pd gorillas. Their main challenge would be to convince heavy users of instant messaging and SMS that email can enhance their internet usage.

Nintendo's value innovation

Lately The Economist discussed Nintendo's strategy in the article Playing a Different Game. Reading the article, I realised that somebody at Nintendo must have read Blue Ocean Strategy. It seems that I was right on this one, as the Wikipedia article on Blue Ocean Strategy contains a section about Nintendo's blue ocean.

A red ocean is a market space where many firms comepete. Because the competition is fierce and the sharks are biting, there is blood in the ocean. As companies fight each other, the amount of profit they can extract from the market constantly shrinks. The notion of the book blue ocean strategy is that leading companies must strive to get away from the competition and create uncontetsed market spaces - "blue oceans". The way to create blue oceans is through value innovation. Value innovations are not technological innovations, although they can involve new technology. The goal of value innovation is to dramatically increase the value to the customer, while in the same time eliminating costs for the value provider.

There are many examples of value innovations around us: Sony's walkman, Southwest airlines, IKEA, Cirque du Soleil to name just a few.

Nintendo's Wii machine is such a value innovation - it increases value to the consumer, non-gamers in this case and reduces costs for Nintendo compared with its rivals, Sony and Microsoft. As with all value innovations, Nintendo created several attributes to deliver value to its customers. It created a new controller that makes it easier for non gamers to start playing - the player needs to hold the controller and move her hand as if she were swordfighting, playing tennis or Golf, and sensors will translate these movements to game actions. Nintendo reduced significantly the complexity from its games which allows it to appeal to non gamers who couldn't commit to the amount of hours playing complex XBOX and PlayStation games demand. Reducing complexity also allowed Nintendo to reduce its costs. Nintendo will be able to sell the Wii for a reported $249 and still make a profit. In comparision, if the rumors are true, Sony will sell its PS3 console for around $500. It also created news and weather channels to increase the value to non gamers.

Until now, the strategy looks very promising and Nintendo seems to be executing it right. Nintendo did very well last year with its DS mobile console using the same strategy. However, I'm not sure that what worked well in the DS, will work with more costly home consoles. Nevertheless, as The Economist article pointed out, Nintendo is The Console Company to watch. Judging from Nintendo's share returns in the last year, in comparision with those of its rivals Sony and Microsoft, investors are already doing just that.