Microsoft yesterday bought Israeli startup YaData for tens of millions of dollars. The companies wouldn't name the final price, but YaData investors say they will see "a very nice return on their investment."
The purchase of YaData is another step in Microsoft's strategy to take on Google, as the startup makes software to target online advertising for specific segments of users. One of the company's two solutions is software to analyze the information in a user database and compile it into segments. This can be used by cellular and communications companies or financial services groups to target customers, and not only for the Internet.
Cellular operators could identify different groups of customers with different usage patterns and offer them special deals. For example, soldiers tend to make a lot of calls over the weekend and just before returning to their bases, and companies could offer them special packages.
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Another product is intended for use in Internet advertising. It analyzes user activities, and using "behavioral targeting" it would segment users and allow appropriate ads to be directed at specific groups.
The main investors in YaData are the Giza and Ofer High-Tech venture capital funds, which together have put up only $4.4 million so far, $2.2 million each; according to data from IVC-Online. The two funds each hold half of the company's senior shares, but the founders and employees also hold a large part of the company.
CEO and co-founder Amir Peleg, 42, owns 60% of the founders' shares. He and co-founder Rann Smorodinsky had previously founded another startup, Cash-U, now known as Unipier, which develops platforms for cellular games. Peleg had previously founded Elbit Vision Systems (EVF).
YaData was founded in 2006 and has only 18 employees. Its offices are in Tel Aviv.
Another co-founder is its chief scientist, Dr. Ishai Oren. Oren is an interesting character, having received a Ph.D. from Stanford at age 21 in mathematics, in the field of dynamic systems and Ergodic theory. He is an adviser to the IDF on cryptography, and has written two novels, worked as an actor and opened a restaurant with his wife. He is also the recipient of the Israel National Security Prize.
The decision to sell the company came from the founders, said Giza's Yaron Valle. The funds were forced to find a balance between the entrepreneurs' wish to sell and the investors' ambition to increase the return on their investment. "We are pleased that we found the golden path to sell - and the price tag," he said.
Peleg said the connection with Microsoft started a few months ago. The software giant's local unit for cooperation with startups "heard about us from a number of different sources, and that is how the connection started," he explained "They succeeded in connecting us to very senior [officials] in Microsoft," Peleg added.
"Why did we sell now? It was hard to say no to Microsoft, but we didn't feel weak in the negotiations. This was a huge opportunity. Steve Ballmer (Microsoft's CEO) estimated a quarter of their revenues will come from advertising in another few years. Our technology will handle the enormous amount of information in Microsoft. That will be an incredible growth engine for us," said Peleg.
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