The Israeli challenging Google's autonomous car (Globes (Israel))
Whether he becomes a global success or his venture simply ends up as another in a long line of revolutions that never caught on and dissipated, the passion that Haim Siboni radiates is the building block from which legendary businesses are built. With a small Middle Eastern company, boasting revenue of only a few million dollars, Siboni, the entrepreneur and chief executive of Magna BSP, wants to take hold of a significant market share in the most attractive and most futuristic and hopefully lucrative sector: the autonomous car.
He is certain he will succeed in his endeavor and that “sometimes David beats Goliath,” even if that Goliath happens to be Google.
“Globes”: You know there must be people who think you’re living a fantasy.
“There are those who already told me that. So what? I heard that more than ten years ago when I came and said, as a much smaller company, that I will protect the border for the military. They said, ‘Who would let you compete?’ Competitors tried to take me out, they sullied my reputation in the army. I wasn’t worried then, when I was small, so now when I am strong both here and abroad they surely won’t break me. It’s true that my products have yet to make the impact I want, but that’s exactly why I’m not waiting and launching another front.”
Siboni can hardly be described as apprehensive or fearful. He has a colorful personality and a daring tongue; he is a man of grand aspirations. Fifteen years ago he had the notion of developing a bird detector for runways a dangerous problem in the aviation sector and eventually he made his way to the defense industry, developing radar to detect infiltrations by terrorists.
Today, he is taking on his next objective, armed with flattering reports from the IDF, the Israel Prison Service, and the police and with partners that joined over the years like Aeronautics Ltd. and Psagot, who invested a combined NIS 40 million, and Excellence Group, which invested NIS 9 million last January.
To reach that target, Siboni is negotiating with Asia Development CEO Kfir Zilberman, who holds the controlling stake in the shelf corporation, in a bid to integrate the autonomous vehicle operation into the firm and catapult into the stock market, first in Tel Aviv and later on the Nasdaq.
The talks between Zilberman and Magna have lasted over nine months. “He is a tough negotiator, but a real partner,” said Siboni. “I can tell he will be by my side for the good moments and the bad. He isn’t just coming aboard for a quick ride. We haven’t worked out an agreement yet, but I hope it will come to fruition. He looked at 20 companies and chose me and my technology. I love his methodical examination. He brought me to a presentation in which 16 people experts from each sector automotive, tech, image processing, finance, and more. I see a good partner in him; the percentage split matters less to me.”
Asia Development has been trading at a value of some NIS 22 million bumped up by the announcement of the negotiations with Magna and has been looking to integrate new operations for a while. Market sources believe that Asia Development’s interest in Magna is based on estimates that the autonomous vehicle sector would develop rapidly in the coming years and that Siboni, they think, is well situated for market penetration with his proven tech.
“You need mental fortitude”
The 56-year-old Siboni, an Israeli patriot to the core, still lives in Lod, “a city with a complicated image”, where he arrived from Morocco when only eight years old. When the conversation gets to this point in his story, he drops his laptop, on which he’d been showing me actual discoveries of infiltrations on different borders, with swimmers coming out of the water or figures crawling through vegetation, and pulls out his mobile phone. “Look”, he says, pointing at a beautiful landscape with a stream running through greenery, “This is the view from my balcony. Admit you would never believe it was from Lod.”
Due to a clerical error when his family arrived in Israel, he was placed in fourth grade instead of second. “I was out of my depth, I only knew a little Hebrew from the prayers. Only in sixth grade did I start to catch up,” he recalls. Siboni studied electronics in high school, and because of that fateful clerical error finished his studies a year and a half ahead of his enlistment date. So he went to work at Telrad Networks, and the company even wanted to send him off to Japan, but the army refused to accommodate his request to postpone his enlistment.
He served in the Armored Corps during his IDF service, and he commanded a tank in the First Lebanon War. After finishing his term, he moved around for several years. First he had an electronics lab, and then he entered the investments sector with a partner, plying his trade in the stock market for three to four years. “That’s an area that never took off, and even ended in a crash with losses,” he remembers. For two years he worked as a marketing VP at an electronics firm. Afterwards he developed marketing projects for Elbit, “and that was very successful and it helped me shake off the bad period in terms of debt.”
He made his first foray as an entrepreneur at the age of 40, close to the birth of his son, when he had the idea to develop radar to identify birds the ones that fly into jet engines and can cause aviation accidents.
How did you think of that?
“I can’t explain it. It’s from God, not me. Suddenly, in mid-thought, it came like a flash. Truly, because it doesn’t happen every day no matter how much you try and how hard you think.”
After his eureka moment, Siboni researched the idea, gathered data from El Al, the Israel Airports Authority, and the Israeli Air Force, and discovered that the difficult issue had been left unsolved. But because he is not an engineer, he turned to his brother in law, Levy Zruya, a Technion graduate who worked for the MLM division of Israel Aerospace Industries. Zruya said his idea was feasible.
“He must have told himself, ‘I’ll help this madman,’” laughs Siboni, “not knowing he was setting himself up for the position he will hold for the next 15 years.”
They took their idea to the incubator in Dimona, received a budget from the Office of the Chief Scientist, and “after two years we saw that, despite the successful trial with the air force (at its Tel Nof airbase), the investors were not backing the venture. The technology was sound, but it is the type of product that needs to be explained to the market, and the investors weren’t excited. It was also after the crisis in 2000. I realized that if I continued, it would be like water to a rock.”
Magna had barely gotten its feet wet, and it was already teetering towards its end. “I was in a situation where I had sent termination letters, but I told the workers to not open them, that I would get the money.” At the last minute, he raised funds from an old army friend to keep the company in business.
“We sat in the car and he wrote me a check for NIS 406,000 and grumbled about the lack of major investors. I told him that sometimes it’s harder to raise small amounts from them than big investments.” His friend, Hadar Halevy, continued to invest in the company over the years and holds a 10% stake. The termination letters were collected and a new path was forged.
“It’s a message to entrepreneurs,” he says. “On the way, you are faced with hitches, most people give up, break down, and you say, ‘It’s not over, just a little more.’ It requires mental fortitude and it’s that extra little bit of strength that holds the key to success. An entrepreneur who has never lost in his life, who has not tasted the bitter nectar of loss, will not know the sweet taste of success.”
War is good for business
In the civilian sector, sadness set in after the bubble burst; but, the defense industry flourished. The intifada led to investments, and Siboni decided to pivot towards the security sector. He presented his system to the Administration for the Development of Weapons and Technological Infrastructure, where it was well received, he says, because of its clear advantage it does not produce false alarms, one of the worst challenges to radar systems of this type.
In his typical manner, Siboni provides a colorful explanation for this unique advantage: “We are the only ones in the world that started looking at a spatial unit like the Creator, with both eyes and not like the others myopically.” His system deploys two cameras instead of one and will in the future include a four-camera option and it seems that the advantage does not stem from the heavens but from the simple fact that it is impossible to identify birds at a range of one hundred meters with only one camera. But, obviously, it’s not only about the cameras but also the complex algorithms, which neutralize the effects of variables like birds, dogs, rain, winds, cloud movements, and the likes.
The Ministry of Defense decided to invest in Magna, and in their footsteps followed Aeronautics in 2004 with an investment of $1 million after a successful trial at a Marines base in Arizona. Later, Magna was hired by Ben Gurion Airport, which asked for a comprehensive package to defend against infiltrations setting Siboni on the path to his next challenge, a trial with the IDF’s Infantry Corps of an early-warning system for terrorist infiltration.
“I knew that success in this trial would allow us to raise funds, and that failure would result in our demise,” recalls Siboni. “As an entrepreneur, you experience death anew each time gasping for air, choking. We arrived at the trial on our last fumes and we finished it successfully. One of the officers then asked me, ‘what if you don’t raise money?’ wondering if it was all for naught. I told him, entrepreneurs never hear the word ‘no’.”
The IDF was pleased with the trial but said it would only purchase the system from Magna if it could provide a comprehensive solution to infiltrations, including a control room. At this stage another million dollars was raised from Psagot, and French giant Thales began hinting of its potential interest.
Magna was invited to hold a trial in France, with a potential payout in the form of orders worth dozens of millions of euros. The trial succeeded, but to no avail. The government in power was replaced and the orders dropped. “We again reached our limit and again raised money,” recalls Siboni. The new round of $2 million from Psagot was budgeted for the development of the interface for several radar systems and detection improvement in all weather conditions.
As the years and the trials have passed, the clientele continues to expand the IDF, the prison service, the Temple Mount Complex, factories looking for infiltration prevention systems, and foreign customers from Japan, Singapore, Mexico, and Russia. Magna’s product line has similarly grown to include radar systems for sea, land, and a variety of other terrains and conditions. And now a new product is set to roll off the development line a system to detect unmanned aerial vehicles.
But the company’s growth rate is not stellar. “Growth is slow,” agrees Siboni, “It’s a market of projects, which could suddenly dry up for a period. There is no clearly-defined order where you can say this year we will grow by this percentage and by that point next year. You can plan however much you want, but every tsunami in Japan and budgetary tightening in the IDF and they cut you off; finding new clients can take a year or a year and a half. It feels like you worked hard and yes, you overcame Everest, but you are not holding anything big, anything real, in your hands.”
“Exit? No thank you”
Siboni believes his efforts will pay off this year “this year will see the company’s big breakthrough” and that is precisely why he wants to break into a new sector. Magna has six products still in development which will work together to become the “brain” behind its autonomous driving program. They are based on the integration of a number of technologies, which “contain all of our 14 years of experience and development. An autonomous vehicle cannot afford a false alarm because, for example, an unnecessary braking maneuver could lead to an accident.”
Siboni refuses to provide details on the aforementioned products including their development schedules especially before the agreement with Asia Development is signed. But he does reveal that the name of the public company will be 4Eyes, and that it has received $5 million of investment.
The sector might have similar technology, but the defense industry and the high-tech, transportation sector are different worlds, and there you have no relative advantage. What’s the rationale?
“The military sector isn’t particularly indulgent. You reached your target, won the project, and you’re already battling for the next one. It’s like I married my wife but still need to court her anew every month. On the other hand, in the automotive industry, the moment you’ve crossed the hurdle and you have a big client, you’re looking at a five-year contract, and you get paid for every car that comes off the production line. You need to keep courting, but less so.
Should we mention Google already has an autonomous car?
“We will face off with Google and we will beat them despite their size. I have already proved that you could beat out bigger firms like Rafael and Elbit, that have hundreds of engineers and budgets unimaginable to you. In the end, the spirit conquers, not the size. And in any case, I think the Google story is a promotional gimmick.”
Well, that statement requires explanation.
“Google is doing this for promotional purposes. Not that its car doesn’t work, but I do not believe that they are going to develop an automotive industry. Their solution is very expensive and I don’t see how they lower the costs. To enter the automotive industry, the product cannot cost more than a few hundred dollars.”
Let’s leave Google aside. Tesla, Audi, Volvo, and another half of the world are all trying to develop an autonomous vehicle. Doesn’t the field seem a little crowded?
“But there is a massive prize behind this Everest. If you work in a market of $100 million, you are competing with everyone over a small sliver of meat. Here, the market is worth billions, and the person who puts forth the best and most reliable system free of false alarms will win, and no amount of politics will help.”
The car industry is known to be strictly conservative when it comes to its suppliers replete with long waits for approvals and it is known to be difficult to work with them. And you’re just a small company from the Middle East.
“That’s true, but in the automotive industry you do not have to sell straight to the manufacturer. You can hitch a ride on one of its suppliers at first.”
Let’s look at Mobileye. Wonderful success story, but look at how many years it took, with investors that are vehicle importers and have ties in the industry.
“We have also been running for 14 years, and we invested tremendous efforts in our technology. I have no doubt that we will be one of the three leading players in the world; most importantly, we will employ hundreds and thousands of people.”
And selling the technology to a larger company, is that a possibility?
“We are not looking to exit. We want to cooperate with a strategic or financial investor.”
Published by Globes [online], Israel business news – www.globes-online.com – on September 1, 2015
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