It’s Israeli entrepreneurs who make the startup nation The Startup Nation. In 2016 |v| is interviewing 12 outstanding founders on their current successes and past mistakes.
Photo: Lisa Avsiyan
DANNY WEISSBERG ON RAISING ALMOST $1M WITHOUT GIVING EQUITY AWAY, ACCELERATORS THAT HELP AND THE BEAUTY OF THE ISRAELI STARTUP ECOSYSTEM.
In the last few years there has been buzz around “social entrepreneurship” and “impact investing”: this is when the investors measure their ROI not only in financial terms, but also in terms of social and environmental impact their companies make. In reality, however, it still appears very hard for a startup in the social sector to raise money.
Several years ago, when Danny Weissberg realised that his startup will be addressing people with special needs, he knew that venture capital would be hard to find. So after raising an initial angel investment, instead of going to VCs he focused on winning grants and startup competitions – and became so good at it that he is now the go-to person in Israeli startup scene when it comes to what he calls “alternative funding sources”.
Danny’s company, Voiceitt, is working on an application that can recognize human speech. But not just any human speech – their app will be able to identify words that don’t sound clear and can not be understood by other people or by generic speech recognition software such Siri or Google Voice.
For people who had a stroke, throat cancer or other conditions that affect the way they communicate, Voiceitt will literally become their voice – recognizing what they are saying and speaking it clearly. For these users, it is the first time they can be truly heard by others.
Lisa Avsiyan and Katya Rozenoer spoke with Danny on his entrepreneurship experience.
Education: BSc Civil Engineering @Technion, BA Computer Science @Open University
The book: M.K. Ghandhi, The story of my experiments with the truth
What would you do if you weren’t in hi-tech: Physics
Startup Count: Second
Current status: Beta Testing
– Do you remember your “aha moment” with Voiceitt?
– Back in the fall of 2014, I participated in an initiative called the Creative Business Cup which is a competition of innovative businesses organized by the Government of Denmark. Throughout the year people from 30 countries compete within their countries and then all the first place winners go to Denmark.
I presented at the Israeli competition in Shenkar and I didn’t win.
We only took the second place. It was disappointing to say the least.
But a couple of weeks later Shenkar people phoned me: “The Danish want you. They said your startup must be at the global competition”. And so I went.
It was an amazing event in Copenhagen, wonderful dinner, everything was just great. But the thing was, what I really needed at the time was funding, not just dinner. It was still there when I suddenly got an email – I never stop checking my emails – and it said we won the Verizon Powerful Answers competition! I immediately knew that it was at least $250K in funding!
So I see this mail, I get all excited and I start to tell everyone around me: “I just won! I won!”. Then I scroll to the end of the letter and see a note saying that the information needs to be kept confidential for another month and in case of any leak they might call back the prize. Lesson learned: always read the small print first.
– But you still got the award.
– Yes, although it was challenging to keep this secret at the time. Then a few days later we won another prize – Philips Innovation Fellows.
So suddenly in less than a week we moved from a situation of not knowing if the startup would even survive, to a position of having more than $310K in prizes. And it’s the best funding as it is non-dilutive and coming from valuable strategic partners. That was the moment I realized we were on track and I would have the team that would deliver.
– How did you arrive at the idea of Voiceitt?
– It took me some time actually. In the very beginning I just knew that I wanted to do something innovative. So I kept asking myself what are the trends and what does the future hold. I understood that everything will be computerized and it will all be connected: internet of things – IoT – which will communicate with these devices naturally as we’re talking to each other. We will use facial recognition, emotion recognition and also voice. It was clear to me that the future is all about speech and I decided to focus on it. But with further research, I saw that all of the companies such as Microsoft, Nuance, Apple and IBM were already doing it and there was no chance of someone infiltrating the market. So I thought – ok, speech recognition is out of the question. Emotion recognition turned out to be the same: interesting, but already crowded. So what would be another new thing could I do? I said, “ok, let’s do intonation recognition”. It was interactive and I could create an intonation engine as well as a new type of user interface for games and toys.
– But you’re not in the gaming industry now.
– Right. But back then the plan was different. I met Stas Tiomkin, who became my co-founder and CTO and we started to focus on the emotion recognition technology. Our first funding came from the government and some angel pre-seed investments as well as from our own money. We used these funds to develop the prototype and to do the market research. And as I was doing my research, I suddenly realised: “it’s not interesting. It’s just not interesting”. I talked to many of the game developers and toy manufacturers out there and none of them would give me a decisive answer about whether or not they liked our idea. To me that was almost a breaking point because if I didn’t think our startup would find its niche and then I would not be willing to take any further funding. I even almost gave the initial funding back.
– Really. To me it’s business ethics. But as I was mentally preparing to do it I continued to speak to people. And at some point my friend and entrepreneur Hila Ovel-Brenner, told me: “Do not give the money back! You’ll find an idea and the market. I trust in you!” Then by chance I realized that our technology could do something much greater and more meaningful for people with special needs. My grandmother had a stroke and lost her ability to speak almost completely. I wanted to speak with her, she wanted to speak with me but we just couldn’t. It was so frustrating. Next step was that I just took a phone book, found the speech therapists section and started cold calling them.
Voiceitt aims to help people with speech impairments/Video: Voiceitt
– Wait, you would just pick up the phone, dial a number and… say what?
– I would say “Hi, I’m an entrepreneur, I am developing an idea relating to intonation recognition… maybe it can help people with speech disabilities. Would you like to meet?” Surprisingly almost all of these therapists wanted to meet. By talking with them I understood the possible directions. And one of them was speech recognition engine for people with speech difficulties. One occupational therapist specifically, Hagit Rubin, told me: “I have patients who really need such a thing”. She told me about those people and it immediately connected to my personal story.
– So you could literally feel what is usually called the “customer’s pain”?
– Yes, I knew exactly what was the need that Hagit was talking about. And I knew that all the solutions out there were focusing on what people were saying and not how they were saying it. And in cases when the words are not clear there is no help. So I discussed it with Stas, he said we could do that and then Hagit joined us soon as our third team member.
– That is when Voiceitt was actually born.
– Yes. I once again started to research my market and my target population. I did a huge amount of work, consulted with the specialists and one of them – who is a former VC – told me what an amazing venture we were creating. This is a niche. It may not cater to the entire population, but those who will benefit from it are going to be eternally grateful. It’s a good deed and a great business too. It gave me even more confidence.
After Danny’s grandmother lost her ability to speak he realised what does it mean for a family to not being able to communicate properly with one of its members/Photo: Lisa Avsiyan
– It really is amazing to me how you just approach strangers, call people you don’t even know and seek their advice. And what’s even more amazing is that you really listen to what is being said!
– I think it’s as much me as it is Israel. I’m not sure that would work in other places. In Israel people are open, they’re interested and they are willing to help one another and agree to meet people they don’t even know. That’s the beauty of the Israeli ecosystem.
– Looking back, what are the things that you know for sure you did right with this current startup?
– First, the fact that I feel like it has been mostly me who has developed the company and managed to keep on top of the major decisions. The second thing I did well was to receive our funding from competitions and government grants, not from VCs. I’m almost positive there are no other startups that have been the recipients of as many grants and competitions as we did in the past three years.
– You have like a million dollars in prizes and grants, right?
– In total we have around two, but almost one million came in grants and prizes.
– And that million comes without having to give away any equity.
– Obviously there are obligations that come with each amount since that’s part of what is required from the Israeli government and the European commission. But it is still worth it as this funding is given without equity. It keeps our already existing investors and shareholders in good standing.
– Except for actually making it all possible, what do you think is your biggest achievement as a founder today?
– Two things. One is my team: people, dedication, atmosphere, talent. The second one is coming up with an idea that can truly impact and change people’s lives for the better. Before I became an entrepreneur, I was always volunteering here and there, because I felt the need to do something positive in this world. But now I’m completely fulfilled. My work and my life goals are intertwined. I’m a part of a venture that is not only for money but also meaningful and can improve the lives of millions.
The Voiceitt team in company’s office in Ramat Gan, Israel/ Photo: Lisa Avsiyan
– I know your first startup was not a success.
– Yes, I had to close it. Long story short I signed a bad investment deal hoping that it was going to be ok.יהיה בסדר as we say in Hebrew. And it was not. It took me a long time to accept the reality and then some more time to recover.
For a while I was at a junction, trying to figure out what to do: go back to work as an employee in hi-tech – which wouldn’t be so bad I guess, I’d been offered a higher position, R&D manager or something like that, I’d definitely get a better salary than before but… I couldn’t even think about it. I simply could not go back to being an employee again.
– But did you have the energy and money to start a venture again?
– No. I was broke, exhausted, unemployed and I wasn’t even eligible for unemployment – in Israel it’s not provided to people who owned a substantial part of any company. But I got lucky: the company I worked for before, said that they really needed me and they agreed to allow me to work part-time and from home. It gave me cash to survive. For a year I was doing that while starting Voiceitt.
– Do you ever get scared these days?
– Yes. We’re an amazing team and we’re on track but we need to develop this technology and we need the funding to last. So for now it’s like a race against time to develop and get the funding we need to make it.
– And when you’re feeling down, where do you find support?
– I have an advisor who I talk to every week. It’s an extremely skilled and focused person – Daniel Petz, he is a Global Groupon manager. He really helps. Sometimes I feel stressed over the money, so he reminds me that we have enough funding. It makes me feel better. It’s also helpful that he’s outside of the company and so I am able to have a more objective and clear perspective of our current reality.
Also jogging has always worked for me – I go to the beach and run for hours. No music no nothing just me and my dog Ubi. Now she’s getting older so I mostly run alone.
– What are your usual working hours?
– There are no hours. “I’M WORKING” IS MY DEFAULT MODE.
I guess it’s not very balanced but it is what it is. Sometimes I also eat out or run or go see a movie.
– What was the last movie you saw?
– The last one? I don’t remember.
Danny’s dog Ubi has her own space in the Voiceitt office/Photo: Lisa Avsiyan
– I know you have participated in a number of acceleration programs, so I guess you’re not one of those people who think such programs are a waste of time.
– Not at all. Each program gave me something valuable. For example, with Voiceitt I was in the Social Program of 8200 EISP accelerator. It was an amazing program and it was through them that I received several investment offers, including $2M offer of investment.
– Wait, and you didn’t take it?
– No, I didn’t. It was a hard thing to turn down since it would have given me a long run.
– So except for this offer what was the main gain from the Social Program?
– Mentors and connectors – those who connect you to the real investment opportunities. And of course the community itself. Also through the program I became connected to the whole 8200 network [8200 is an Israeli Army Intelligence Division known for its strong network – |V|]. I wasn’t in this division in the army, I was in the engineering unit but this accelerator suddenly gave me access to 8200 people as well. Two of my current employees were actually in 8200. Another great experience was with Mass Challenge. They opened up a lot of doors for us within the Boston healthcare system.
– You’re also now in the IBM Alpha Zone.
– They are not a regular accelerator. Usually accelerators are more focused on the business side and business mentors. Alpha Zone is about helping us scale our product and build the infrastructure. It came at the right time for us, exactly when we wanted to build a scalable solution. Beyond the pilot we needed to be able to connect thousands of people to our server allowing them to be able to use our technology. IBM gives us infrastructure and technical support to build it together. They offer us design consultations and help us to implement the solution. We’re now much closer to the release of the real ready-for-market launch. And their PR is great too. Every time we win a competition or something happens, the first people to pick it up and push it on Twitter and Facebook is IBM’s team. Another added value to Alpha Zone is that we were able to apply for a joint grant to the Israeli Chief Scientist for another series of funding, which we’re in the process of receiving now.
– There is also Buffalo on your list. What’s there?
– It’s not an accelerator. It is a global competition called 43 North. There is an initiative called Buffalo Billions, which is working on developing upstate New York. Buffalo was one of the main cities in the US until 1950s when the steel market moved to China. Now it has an existing infrastructure of a Metropolitan city, but without the population to fill it properly. This is why they have such a well thought out development plan. For example, they’re currently developing and building world class medical centers for 30K employees. 43North competition is one of the parts of this development project. We were the first israeli startup who participated and we were fortunate enough to win the second prize of $500K. Now they are launching their third year and prizes are amazing ranging from $250K to $1M. They do have one condition though: at least in 2016 we need to have a founder present and participating in the Buffalo incubator space. We now have an office there and part of my team is there as well. I am living there for a large part of the time but I fly back and forth a lot between Buffalo and Israel.
Danny and Devora Mason, Voiceitt biznes development manager, pitching at 43North competition in 2015/ Photo: Nancy J. Parisi
– How is that working out for you? Is it helping?
– Yes. Firstly, it’s being physically closer to our main market and to our partners. And the cost of living is way cheaper there than in Boston and New York. They have a huge medical center and we can collaborate with all of the specialists. Because there are not that many startups in Buffalo, all the doors are open to us. Being a winner in Buffalo makes us celebrities and everyone wants to help. There, as the 43 North winner you can connect with professionals, medical centers and research institutions.