The mother of Shahar Smirin's inventions
A 36-year-old start-up whiz operating on several continents, Shahar Smirin spends most of his time in the air; his companies both break technological ground and create new business models. And every idea, he says, grows out of necessity.
When he was 16 years old, Shahar (Waiser ) Smirin boarded a train from Russia to Hungary and asked for political asylum. His parents stayed behind, and when he arrived, he did not have a penny to his name. He did, however, have a clear goal: to get to Israel. Now, 20 years later, he is one of the brightest technological entrepreneurs Israel has had - though you have probably never heard of him.
Smirin is a start-up entrepreneur, and British-based billionaire Len Blavatnik invested in each of his initiatives. He is the manager of Groupon Russia's toughest competitor, Vigoda.ru, which offers online discount coupons and this year will chalk up revenues of $50 million, a figure it expects will rise to $200 million next year. Today, the company employs 200 people, and it anticipates hiring another 300 staffers by the year's end.
Smirin also has Blavatnik's backing for his new Israeli start-up, Get Taxi, an application that allows anyone with a smartphone to order a taxi at the push of a button. It also offers a business solution to companies, restaurants and hotels that routinely order taxis for their clients.
"The idea of Get Taxi was born out of personal experience," explains Smirin, adding that all of the companies he has created "were born out of a need that I had encountered, whether it was when looking for a car or apartment, or getting a discount coupon."
Smirin discovered the need for taxis in Palo Alto, California, when he interviewed someone for a job. That person had come from Seattle: "His return flight to Seattle was about to take off. We waited for a taxi and I thought it was absurd that you can order a taxi when you are in a hurry, and not know where it is, or when, exactly, it is going to show up. In the end, the same person who has ordered a taxi by phone may end up hailing a cab in the street. This does not happen because people are bad, but because they are under pressure."
Smirin says it seemed "impossible that there was no service that could let the customer know when the taxi would arrive, or that a business that regularly orders cabs has to give the taxi station its address anew each time. I wanted to create a situation in which you order a taxi by pressing a button, you do not need to talk to someone, and you know exactly when the taxi will come and who your driver will be."
Smirin also thought that a taxi application could also help with expenses reporting and accounting. " When I quit [telecoms company] Comverse [in 2005]," he explains, "I had to file travel reports for the previous three years, because I had postponed doing it the entire time. I hated turning in travel reports - it was a real headache. I realized that a computerized Internet travel-management system could solve this problem." He also thought it could eliminate the need for business travelers to have to pay in cash. Smirin began showing an interest in the subject of applications and Internet systems for ordering taxis in 2009. "I found a lot of applications that order taxis for you, but they all operated on the same basis: They provide you with the phone numbers of taxi stands in your area," he says. "Get Taxi is different in that you do not have to make a phone call. You press a button, the application will determine where you are and a taxi is sent. If there is no available cab working with Get Taxi, an operator will immediately send you a cab from one of the stands that does not work with Get Taxi. The idea is that you should be 100 percent certain that you'll get a taxi, it doesn't matter from whom. The days when you would call a taxi stand and they say they have no free cars and you have to approach another company are over."'I just wanted to go to Israel'
Shahar Smirin was born in Moscow. His father was an electronics engineer who worked on development of missile systems. "In Russia," he says, "Jews did not generally work for the army developing sensitive items. But my father did. He was a Zionist and was involved with the Jewish Agency. He was a proud Jew. I always knew I would go to Israel. It's not that I felt anti-Semitism or racism in Russia, I just wanted to go to Israel. My parents were elderly and for economic and health reasons it was difficult for them to migrate with me, so I came on my own. Eventually my mother came to Israel. My father preferred to live in Los Angeles."
Smirin made it to Israel in 1991, amid the big wave of immigration from the Soviet Union. "I arrived in Hungary as a tourist. It was sort of an escape. But I had no doubt I would manage; that's one of my characteristics. I am an optimist. Perhaps too optimistic. I have a friend who says that to be an entrepreneur is to be a naively optimistic person.
"I landed at Ben-Gurion. The Jewish Agency people did not believe I had come on my own. I didn't know a word of Hebrew, so they suggested I live in the Hadassim boarding school in Netanya. I did not exactly understand what a boarding school was, but I decided to give it a try." In addition to learning Hebrew, Smirin completed his high school matriculation at the Hadassim school.
In the army, Smirin joined the Quartermaster Corps, where he was involved in managing computer networks. That was when he established his first start-up company, InfoAuto, which he says collected data on sales of second-hand cars and real estate.
"At the time," he recalls, "the Internet was taking its initial steps. My website collected all the advertisements for cars and apartments that were offered in papers and on the Internet. In the morning I would buy newspapers, get advertisements by fax and from the Internet, and people would call us and get all the published announcements that they wanted. If someone was looking for a Subaru he would get all the announcements regarding that car. Within a year I sold the company. By then, I was already able to bring my mother over and buy an apartment."Four apartments
The next chapter in Smirin's professional life was work for Comverse as a sales manager in Eastern Europe and Russia. "In a company as big as Comverse you discover the world of big organizations. When I entered Comverse, in 2000, its sales totaled $1 billion a year - of which $17 million were in Russia. Comverse Russia had five employees. I returned to live in Moscow and within three years managed to increase sales to $300 million.
"We sold collection systems, systems for voice messages, and SMS and multimedia systems. Comverse Russia grew from a market share of 5 percent to 80 percent in Russia. By 2005 Comverse Russia became the biggest player in Russia, in the field of added-value services for cellular and collection systems." Comverse Russia now employed 80 people.
"In 2005," reports Smirin, "I returned to the world of start-ups and since then have built five new companies."
Smirin solidified his economic base, got married - and then divorced. Today he has a son who lives in Israel, but it is difficult to say that Smirin, too, lives here. He has four apartments: in Tel Aviv, Moscow, San Francisco and London. Scheduling an interview in Israel took some careful coordination.
Smirin's next stop, after Moscow, was San Francisco, where he opened his second company, Trusted Opinion, in 2006. Trusted Opinion is a social-media site that allows surfers to get recommendations for entertainment based on their social connections. It is very much reminiscent of the current concept of Google Circles, used in the social network Google Plus, which allows a user to determine his social circle and share information based on the closeness of his relations with others.
"People looked at me like I was crazy," he recalls today. "How was I going to establish a social-media website? But it interested me."
Smirin confirms that the idea for Trusted Opinion also sprang from a problem he had faced: "I wanted to know where the best entertainment places were, and for the recommendations for these places to come from my friends."
Today, Smirin admits he was overly ambitious: "After Comverse, I felt like I could do anything. And that's not what happened. The company raised $5 million and reached a million users, but it is not a success story."
"The whole story with Trusted Opinion was important. For four years I struggled with this company and in a way it reminded me of my immigration to Israel. But it was a good experience. Not every initiative that you build succeeds, and the experience you gain from a failure is important. Sometimes it is important to fail at an early stage. Trusted Opinion did not crash, but it is not a success story. I always prefer hiring for my companies a worker who failed. I like aggressive people who know that they will not always succeed."
Using Trusted Opinion's technology, last year Smirin launched a start-up called Loyalize, which allows media and content companies to let surfers share and rate online while watching broadcasts of reality shows, sports or political events. Its clients include ESPN, MTV and Yahoo Content.
"We launched the product half a year ago, and so far it is a great success. Forbes selected us as one of four 'Hot Online Ad companies promising companies. It is quite amazing. We had difficult years with Trusted Opinion and reached one million users. We used the same technology with Loyalize, but took it to a different market and succeeded."
Three years ago Smirin opened another company: "That was when Groupon's revolution was beginning. Quite early it became clear to me that the company's business model was different than anything previously known. This was a company that was changing people's purchasing practices, and it was going to be impossible to turn back after the concept of coupons at a reduction was born."
Realizing that Groupon would be copied all over the world, Smirin decided to establish an imitation in Russia, where he hooked up with a successful Internet entrepreneur named Roi Mor. Their firm is called Vigoda.ru, which was the first of 20 such Groupon copycats in Russia.
"When there is a new business model, whose innovation is not technological but is based on marketing, there will always be companies that will imitate the first company that came out with the product. In such a situation, out of the 20 companies that hurry to enter the market, the first five will end up controlling 80 percent of it. This is what happened in Russia too."Three months, 100% growth
Today, Vigoda has 20 offices in Russia, and Smirin says it is active in 216 cities. "Later," he says, "we bought a Ukrainian coupons website and are leading there too. We have reached revenues of $50 million a year, and every three months the number of users, revenues and net income all grow by 100 percent."
Smirin got funding for Vigoda from Blavatnik, and so far the company has raised some $6 million. "In a business like Groupon, the most important thing is to be the leading element in as many areas as possible. This is what I did in Russia. A business's success is based on the quality of the deals it offers, because in the final analysis, there are only a few good deals in each city, and everybody wants to offer their coupons. Comparing it to Israel, it would be like everybody wants to offer coupons of Aroma and Sushisamba. All the coupon sites compete over the same slots and the businessmen too want to work with the leading coupon sites only."
Have you thought of opening a coupons site in Israel too?
"When I started, there were no coupon sites in Russia or in Israel. But Russia has 200 million people, and here there are seven million. At Comverse, I learned that the effort you invest in closing a $1-million or a $100-million deal is exactly the same, and that's why I chose Russia."
But Smirin did not want to limit himself to Vigoda and Loyalize, and when he decided to launch Get Taxi, he received, again from Blavatnik, $9.5 million. This project, too, he did in collaboration with Mor. The idea behind Get Taxi is simple and the question is why a cellphone application should require funding of almost $10 million.
"I see something else in Get Taxi," Smirin says. "It is an initiative that has to do with a new trend of Internet initiatives, and links the online world with the offline one. Internet initiatives have gone through an evolution. At one time, businesses aimed at getting "hits" from surfers. That is when the EyeBalls model [in which what matters is how many surfers open your Web page] reigned. Then people started thinking how to translate surfers' hits into revenues. Then a generation of initiatives emerged, that lived only in the online world. An initiative such as Craigslist, for example, totally changed awareness and made a lot of money.
"In the last two years a new type of initiative has been emerging, combining the real world with the network. These are initiatives like OpenTable, Groupon and Get Taxi. The OpenTable company is a system that on the one hand lets people reserve places in a restaurant and on the other hand helps restaurants manage customer relations." In the case of Groupon, customers receive coupons in the online world and use them offline; in Get Taxi customers order a cab through an application and get one immediately "in the real world."
Smirin says that he considers those three companies to be "creators of leads to businesses. This is the holy grail of the business world. What business doesn't want more sales? What taxi driver does not want more calls from as many people as possible, rather than hoping that the dispatcher at the taxi stand will send him fares?
"All the businesses that combine the online and offline worlds are businesses that have a steady flow of income. They also appeal to limitless markets. The problem with such types of initiatives that it is very difficult to build them. It is not enough to create an application. You have to build a logistical system, you need salesmen, and you have to build a product.
"Get Taxi has a service center that operates 24 hours, seven days a week. Every taxi driver installs a box in the cab, which allows him to get orders directly from people who use the application. In London, this box also enables people to pay with credit cards rather than cash. This feature doesn't exist yet in Israel, even though we have launched the service here, but it will happen soon. Beside the complexity of establishing the enterprise, in contrast with other applications, the barriers to entry are also greater: You cannot develop a competing application so quickly, that's the beauty here."
At this point Smirin's service has been launched in London and Tel Aviv. "In London there are 60,000 taxis, whereas there are 8,000 in the greater Tel Aviv region. Actually, in terms of the taxi market, Europe is bigger than the United States. In the United States, there are 200,000 taxis, as compared with 600,000 in Europe. That is probably because every person in the United States has a car and most of the taxis are concentrated in New York. In Europe most taxi drivers are self-employed; they decide which taxi company they want to work with. In the United States, 80 percent of hacks are employed by specific companies."
How do you make money from taxi drivers?
"Today taxi drivers pay, on average, about $5,000 a year for the right to belong to a taxi company and get calls for rides. The driver [effectively] pays to get leads.
"In Israel, the payment is a bit lower and in Britain it is higher. Now crunch the numbers: 600,000 taxi drivers, in Europe, times $5,000, makes for $30 billion a year. And here you suddenly have a market, a market that we did not invent and so far no one else has entered. Now it is clear why Blavatnik invested in Get Taxi. He loves businesses that try to crack the traditional thinking.
"A taxi driver in Europe pays Get Taxi 1,000 euros a year for getting fares routed to him. In Israel the taxi drivers pay $1,200 a year and since it is much cheaper and they don't need to depend on the taxi dispatchers, the drivers prefer us. We are also very 'viral' - the word spreads quickly. What do taxi drivers do most of the time? They are at the taxi station waiting for a ride. That's also when they talk among themselves and hear about Get Taxi. I do not consider the traditional taxi stands to be competitors, not in the level of service and not in the price.
"We are a service that is suitable to anyone who wants to order a taxi at a specific moment, businesses that use taxis and want to monitor their rides through a designated portal and businessmen who regularly use taxis. Most businessmen now have smartphones., be it a BlackBerry, Android or iPhone."
What kind of service exactly do you offer businesses?
"Our service is particularly appropriate for companies that frequently use transportation services, such as restaurants that order taxis for their customers, or hotels. Installing the system is free ... The goal is to give businesses the ability to manage their entire travel system from one spot, and to give their financial directors access to statistics on travel costs ...
"[Our Internet system] enables managers to know who is traveling and how much. Our experience shows that the employees' volume of trips drops by 60 percent after our system is installed. In the past they would report they were going to a certain place while in fact they went home. Our system documents each trip and it cannot be fooled."
Most of your activity is in Europe. Why establish the start-up in Israel with a development center at Ramat Hahayal?
"Why are we here? Because there are good developers here, just as expensive as in the United States, but still - it is here that we develop our core technologies."
I want you to think back to the moment when you arrived in Israel, with nothing. Did you believe you would end up where you are today?
"I didn't think of it. True, I came here penniless. But I managed. I moved on and every time I entered a new arena. That is how it was in Comverse Russia, that it how it was with the opening of the first company in San Francisco. That wasn't easy. It would have been much easier to stay at Comverse. I had an excellent salary there, but I guess that is what makes me an entrepreneur."
What does your typical day look like?
"Every day I am in a different place. I land in London, hold meetings and then fly overnight to San Francisco. At night I leave and return to London. When I'm not on the London-San Francisco route, I am in Israel and Moscow."
Do you have any hobbies except for Internet matters?
"I love to dance salsa and tango. I listen to electronic music."
What is your vision for Get Taxi?
"We want to conquer Europe, to launch our service in every European capital. We are not an application's feature company. Getting into every country will cost us quite a bit of money ... Our goal is that whoever lands at an airport in London will use the Get Taxi service, and then when he lands in Paris will continue to use it, and so on in all the other capitals - in Russia, in Germany, in Italy and in Spain, and then in the Far East and in the United States."
Are you planning another start-up?
"I have a new start-up company that I am working on, but for the time being, I cannot disclose details about it."