ISRAEL 
HIGH-TECH & INVESTMENT REPORT

- from the April 1999 issue


The Anatomy of a Startup

Innovation and technology are evolving to bring many benefits to the way the business world carries out its activities. A young startup, "Onset Technology, Inc." (Onset), has developed and is currently rolling out a software program which links the traditional facsimile to the modern E-mail. The result is major step-up in office communications efficiency and the likelihood that Onset may create for itself an important marketshare in a segment of the business communications industry.

The small but very smart company, is developing a package with the capability to provide voice, fax and E-mail in a single mailbox. Onset Technology Inc. was founded by Israeli Gadi Mazor who during his army service became acquainted with the power of algorithms when applied to telecommunications problem solving. Prior to founding Onset in 1997 Mazor, under the aegis of the BIRD-Foundation, provided risk-free R&D services. The customer would only pay his participation cost in the program if satisfied with the results. The entrepreneurial no-risk approach to American companies proved a success. After he repaid the first of a series of grants in nine months the BIRD-Foundation encouraged Mazor to continue this activity. One of the companies was Caere which eventually became a strategic partner in Onset.

Onset focuses on developing products that enable the next phase in human interaction with computers - the automatic interpretation, or recognition, of text and voice data and commands. It develops and markets automatic-recognition products that help users communicate with their computers. Automatic-recognition tools are software products that recognize and interpret text and voice data and convert them into digital format. Onset's highly proprietary technology relates to context-related recognition using probabilistic algorithms. It applies this technology to low-resolution image interpretation, thus improving optical character recognition (OCR), enhancing color processing, and enabling application-specific recognition. Onset also applies the same core technology to speaker-independent voice recognition, enabling efficient voice compression, voice over data, and hands-free dialing.

Background

Facsimile is so commonly used that it is taken for granted. Yet is a highly complex technology of communication. Facsimile is the communication of a photograph, or written or typewritten characteristics by electrical means over usually fairly long distances. The information is converted into signal waves and entered into the transmission system. At a remote receiving point, a receiver reconverts the information signal into a copy of the original material.

Facsimile is widely used in the United States. There 40% of US phone charges are accounted for by fax usage. The facsimile market is very appealing because there are 500 million users worldwide.

E-mail, by contrast, is the most commonly used Internet application. It is easy to receive and to store. It may be replied to, forwarded to, or resent at the click of a mouse. Its use is widespread and unlike a facsimile, whose message is a static graphic representation, the contents of an E-mail message may be changed or altered. This inherent quality makes e-mail ideal for usage in draft contracts, journalism or in the transmission of any texts which require some alteration, editing or adjustment. The e-mail market is also very appealing as it has 100 million users worldwide and the number is growing daily.

Providing the Solution

The answer is Onset's flagship ThruFax, a fax routing software. It identifies incoming faxes and automatically routes them to the addressee via e-mail. The software's Optical Character Recognition capability converts the fax image into useful text - users can edit contracts, modify copy, or save the data to their own information systems such as resumŽ databases. The product is being presented at the current CeBit show. ThruFax is sold for $395 per server. ThruFax requires a network connection to a working fax server system, Windows 95, 98, NT4 or higher, a Pentium-based CPU, 20MB free disk space, 32MB RAM (64MB/NT), and a MAPI-compliant e-mail system.

Marketing

The company's products are sold by the Santa Cruz based American Onset Technology Inc. The business plan calls for the marketing of 2,000 packages of ThruFax to bulk fax users, by the end of the year.

ThruFax will be distributed through fax server partner companies and value added resellers as well as directly from the company's website.

Financing Onset's Activities.

Initial funding for Onset came from fees from consulting to Israel's Ministry of Defense but were not enough to finance development activities.

In 1997 the company secured a strategic investment from a Taiwanese scanner manufacturer. Pursuing a pattern of seeking only strategic partners Onset acquired the Belgium Flanders Language Valley as its other strategic investor. Currently it is raising an additional sum of $3.0 million.

What is in the Pipeline

Onset is well advanced in developing "the unified message" box. This will offer the option of receiving a fax which will be delivered as an E-Mail or voice message.

The company has been invited to appear and present its novel voice recognition product at the Demo Mobile Show to be held in San Diego in April.

The Competition

An American company, eFax.com reported that 100,000 users registered to use its free service in its first month. eFax.com offers a fax number to individuals so they can receive faxes in their own e-mail account. A company executive said the service processed almost 250,000 pages during the period. "Their product does not touch the fax itself, only transfers it to your e-mail account. Basically, you sign for a number that they allocate to you (in the Chicago area). Then, any fax that is received by them, is sent through e-mail to your account. They embeded a micro-viewer, so that their faxes can be more compressed."

American investors during March, boosted the price of these shares by 50% in one week.

Conclusion and Projections

There is a major business opportunity for products that enable the automatic interpretation, or recognition, of text and voice data and commands. Onset could well become a candidate for acquisition by either a major producer of scanners or possibly by an Internet portal. Probably the most attractive route for the company is via the Internet where it is possible to attract millions of viewers. Onset's technology is extremely sophisticated and though it may not establish for the company a unique position, it does offer the combination of fax, e-mail and voice-mail in one neat bundle, a step-up on existing market offerings. The company requires a major effort in establishing broad recognition, and there is little doubt in our minds that in the current consolidation of smaller companies into the large ones, Onset could be seen as a prize plum, ripe for the picking. Furthermore, given the size of the market, even a small share could turn Onset into a major participant in the unified messaging field.


Reprinted from the Israel High-Tech & Investment Report April 1999

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