PALO ALTO - Two years ago, when it looked as if everyone was selling, going public or merging, no one would pay any attention to a $145-million cash deal, but in 2002 such a deal is unusual. This is the sum Symantec paid this week for Riptech, the company owned by brothers Elad, Amit and Dov Yoran.
The brothers enjoyed enthusiastic responses to the sale. They say that bank managers with whom they had been in contact, and who had hoped that the company could go public when the stock market recovered, telephoned to congratulate them, noting that this is one of the biggest high-tech deals in 2002.
Elad, 33, and Amit, 31, founded Riptech in 1998, at the height of the Internet boom. They were later joined by their younger brother, Dov, 27. For a long time they built the company and did not raise capital from venture capital funds. The main investor was their father. The sale of the company has made the Yoran family very rich, but Elad says that he has still not digested the change in his life. He only hopes that he will finally be able to allow himself a vacation. "For three and a half years I didn't take even one day off," he says.
In an era when everyone is altering his strategy and seeking out new horizons, Riptech has remained practically unchanged. The company's headquarters are in Virginia and from the outset focused on security and offered an innovative solution.
"Our customers are large multinational companies that have been exposed to security risks through the use of the Internet," explains Elad. "A customer hires Riptech to secure its networks 24 hours a day, 7 days a week, to identify attempted internal or external breaches and to issue warnings that include an urgency rating.
"We didn't have to change our strategy," continues Elad, "because our service was never part of the dot.com bubble." The only change in the company's activities after the bubble burst was in its work opposite service providers. "The service providers were hurt in the crash, and that forced us to become more sophisticated in sales and marketing. It is our job to understand the client's needs, to try to solve his problems, and thereby increase our sales."
Amit came up with the idea on which Riptech is based while he was serving in the intelligence corps in the United States. Amit and his two brothers were born in New York to Israeli expatriates. Their mother, whose family lives in Ashkelon, had gone to the U.S. to study for her master's degree and their father, who was a young doctor from Kfar Sava, went for continuing education courses. At the time the Yorans were sure their stay in the U.S. would be temporary, and they gave their children Israeli names. The boys spent their summer vacations with their relatives in Ashkelon and they speak fluent Hebrew. They met the company's development manager, Amir Hirsch, while on a visit to Israel, and brought him to the U.S.
When Elad graduated from high school he decided to enroll in the West Point military academy and Amit followed in his footsteps. Elad was drafted into the parachute corps upon the completion of his studies and was sent to Somalia. After his discharge he completed an MBA at Wharton University, joined the Broadview Investment Bank and focused on mergers and acquisitions in the technology industry. During his three and a half years at the bank, he worked on 15 Israeli deals, including Abirnet and Memco.
Amit studied computer science at West Point and went to work in the computer security department at the Pentagon. Among other things he led the team that was responsible for catching the Israeli hacker nicknamed the "Analyzer," Ehud Tannenbaum. While at the Pentagon he completed his master's degree in computer science at George Washington University. A short time after commencing his doctoral studies he conceived the idea on which Riptech is based. He founded the company together with Elad and Tim Belcher, a friend from the Pentagon.
The three refused to recruit other investors apart from their father because they were not interested in giving up large chunks of the company in exchange for financing. They decided to take care of revenues themselves, by developing the consulting aspect of the company. "We had a lot of customers," says Elad, "and the advantage was that the companies we advised were also potential customers."
There were also difficult periods. There were weeks in which they had to phone all their customers and pressure them to pay. When the founders began contacting venture capital investors about financing the company's expansion, they were already on a better footing. The security aspect was well developed and Riptech's board of directors included internationally renowned names in the field. Riptech made the headlines, including in USA Today, and the events of September 11, 2001 increased the demand for security products. These factors attracted investments from some of the best known and most respected venture capital funds on the U.S. East Coast, including Providence Equity, Columbia Capital and Broadview Capital. Raising $24 million in three rounds of financing, Riptech was able to grow.
The Yoran brothers managed the company by themselves. Elad, who specializes in finances and marketing, is the CEO, while Amit is in charge of the technology and operations and Dov is in charge of marketing. "There is instant trust between family members," says Elad of the brothers' teamwork, "and it's nice to work with your brothers, although sometimes it's difficult not to bring matters concerning work home. It's also hard to stop disagreements at work from influencing the family. Our experience was very good, but it is problematic."
The three months during which negotiations for the sale of the company were being conducted were the hardest of all. "We are different from one another," Elad, who led most of the discussions, describes that period. "Nevertheless we are very close to one another, particularly during difficult times. I am very analytical, while Amit is very intuitive in stressful situations. I conducted the discussions, but beforehand we would sit down and formulate strategy."
The brothers had not planned to sell the company. "Our goal was always to build Riptech into a large independent firm," says Elad. That changed about three months ago when Symantec, a giant company in the information security field, offered to buy Riptech.
"At first we said, `No, thank you,'" says Elad. "We had already received a few offers and declined them." This attitude changed when Symantec offered the brothers an agreement of principle, and the brothers realized that the deal was good for both the investors and the workers. Under the agreement, some 130-150 of Riptech's employees will work for Symantec.
This week the final agreement was signed. "The sale was very difficult for us emotionally," admits Elad.
"We still haven't absorbed the fact that we've sold the company," says Dov. "We're busy with meetings and we have to make sure the merger goes smoothly. [Symantec] bought the company because it is a leader in its field and both sides are interested in ensuring that after the acquisition, that does not change."