The Walmart Deal: Meet One of the Only Israeli Women to Seal a Nine-figure Exit

The launch of a new fundraising round, the surprising acquisition offers, the pandemic shake-up – Yael Vizel, a founder of the virtual fitting room startup Zeekit, talks about the sale of her firm to the giant American Walmart corporation for an estimated $200 million, and what she bought the day after

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Zeekit’s Yael Vizel.
Zeekit’s Yael Vizel.Credit: Eyal Toueg

Late one evening in mid-May, during Israel’s Operation Guardian of the Walls, entrepreneur Yael Vizel, founder of the Zeekit startup – which, using artificial intelligence, enables clothes to be tried on via a dynamic virtual platform – left the den of her Tel Aviv home after concluding a decisive Zoom meeting.

Long months of negotiations, over minute contractual clauses, had ended, and a deal to sell Zeekit to the world’s largest retailer, Walmart, had been wrapped up. Its estimated sale price: no less than $200 million.

“I came out of the room,” Vizel tells TheMarker in an interview, “and I told my partner that the deal was done, we had signed. He suggested that we go out for some air and drink a toast to the event. A minute later there was a missile-alert siren, and we rushed to the security room. We did our celebrating there, and also called astounded family members to tell them about the deal.”

Your parents didn’t know about this beforehand?

Vizel: “No. I didn’t share during the acquisition period, I wanted to wait for things to become clear. But we knew that Walmart would report the purchase the next day, and it was important for me that the family hear it from me. So we sat in the security room with our young son and called them.”

And what do you do on the day after?

“You keep working as usual.”

The Walmart deal makes Vizel, 36, one of the few Israeli women who have led a company from its founding to a nine-figure exit. That’s no small accomplishment in an environment where women who hold key positions in high-tech, and in the business sector as a whole in the country, are still a rather shocking minority.

Contrary to what one might assume, Vizel relates that she is actually not such a big fan of buying clothes. “It’s no simple matter to buy clothes on the internet, because you don’t really know what you’ll get. For someone who doesn’t like buying clothes, Zeekit solved a problem for me.”

But Vizel wasn’t looking for a simple way to acquire a new wardrobe – she was enthralled by entrepreneurship. With her business partners Nir Appleboim and Alon Kristal, she established a company in 2013 and hoped that one day, when they were ready, they would get a good offer from a serious company and make an exit.

“A startup always has its ears tuned,” she says when asked whether the company was “on the shelf” (waiting to be bought), “especially for good offers.” In July 2020, Zeekit (“chameleon,” in Hebrew) was about to launch a second campaign to raise capital. Since 2016 the company had raised from private investors, among them Israelis Yanki Margalit and Avner Stepak, a total of about $15 million – a minuscule amount in the business climate of recent years. The goal was to raise another $20 million, which was to be earmarked for the development of new products.

But instead of investments, the company started to get offers of acquisition. “Good offers, substantive, strategically interesting, too,” Vizel recalls. In order to enter into agreements with any of the companies that were making offers, she notes, Zeekit was compelled to put a hold on contracts with some of the clothing chains she worked with and to which she provided services.

The clients, in turn, began wondering about the reason for the hold. “Everyone in the industry understood that something was happening with Zeekit, that the company was about to disappear and they would no longer be able to make use of its services,” she says. One company that realized something was going on and that quick action was needed, was Walmart.

A Walmart branch in America. Credit: Gunnar Rathbun / AP

In real stores, too

Zeekit developed a virtual fitting room that makes it possible to “dress” clients and mannequins in items from the catalogs of its clients – large chains – allowing them to get a precise impression of the clothes. How precise? Zeekit’s 2019 deal with Macy’s was signed following a three-month pilot, during which the American company discovered that Zeekit’s technology increased online sales by 43 percent and that not a single item purchased with its assistance was returned. Clients use Zeekit by uploading a photograph to the retailer’s system and entering their height – that’s enough for the technology to calculate the body measurements by itself. For the present, Zeekit supports only a front and rear display of the body, but is currently developing additional angles to enable clients to have a 360-degree view of themselves.

Some chains, including Macy’s, Tommy Hilfiger and ModCloth (a virtual retailer of vintage apparel that was formerly owned by Walmart) also use Zeekit in their brick-and-mortar stores. They invite their clients to be photographed in the store and to try to get an impression of what’s on offer without having to stand in line for the fitting rooms. By scanning the item’s barcode in the chain’s application, the clients can see themselves wearing the item.

Until now Zeekit’s business model was based on the sale of a license for the use of technology involving the SaaS (software as a service) model – to the tune of an annual rate of hundreds of thousands of dollars per brand – with that rate set partly by the number of uploaded items and the number of users.

Zeekit also has an independent app by means of which users can try on its clients’ apparel; if they want to buy something, the app directs them to the purchase pages on the appropriate sites.

“For fashion buffs, our app is a carnival,” Vizel says. “You can dress digitally there in clothes from a few different brands – a Gap shirt and Adidas pants, say – and buy the whole outfit. Even if you wander around in a mall that has a range of stores, you have to pay to take the clothes out and then go to the store across the way to complete the look. That is compatible with the Walmart idea: of being a department store of brands. Today your experience on digital platforms is that every item is presented separately, with one product per page. With Zeekit you can dress yourself in several items.”

The idea to create the startup came up when Vizel and Appleboim were working together at Elbit Systems, a defense electronics company. “We were involved in developing computerized vision systems for fighter planes and helicopters. We extracted the topographical structure of the terrain from radar images and overlaid it on a three-dimensional surface that we created from intelligence images which we received from a different source. We called the process ‘dressing mountains,’ and one day it suddenly came to us that we could dress people the same way,” Vizel explained in a previous interview with TheMarker. Their first phone call was to Alon Kristal, a childhood friend of Vizel’s who was then working as a web developer.

Zeekit’s 2019 deal with Macy’s was signed following a three-month pilot, during which Zeekit’s technology increased online sales by 43 percent and not a single item purchased with its assistance was returned.

“With artificial intelligence, we can take entire catalogs and let the machine run on them. It reads the text that describes each item of clothing, looks for the best picture of the item in the catalog, and uses a series of algorithms to divide it into 80,000 tiny segments, which allows us to dress virtually a photograph of a model, or any client, in the same item of clothing, in a way that is faithful to reality,” Vizel explained.

Selling clothes online doesn’t sound like something that should require highly sophisticated technology.

“Even though buying clothes on the web falls under the category of fun, it requires a big range of technologies. These technologies are intended to bridge the gap between the scant information that is available about the item on the website, and the client’s need to obtain as much individualized, accurate information as possible.”

Meaning?

“Clothes come in a very wide range of colors, shapes and sizes. There is a big difference between one item of apparel and another. ‘Small’ is not an identical size everywhere, not all colors are the same, and customers wonder what they will look like in the clothes they see on a site. Unlike the purchase of land or of a smartphone, you don’t know in advance here how suitable something you’ve bought will really be for you. It’s a little like buying food in a restaurant you’ve never visited: Until you taste the food, you won’t really know whether it’s to your liking.”

Models dressed by Zeekit. “The retailer can dress hundreds of virtual figures with millions of different clothes with just a push of a button.” Credit: Gil Levinger

And what do you offer, actually?

“We give personally adjusted recommendations. Through our site you will be able to understand how the item looks on your body, or on the body of a model with your measurements. You won’t have to imagine. From the company’s point of view, we replace the studio productions and allow the retailer to dress hundreds of virtual figures with millions of different clothes with just a push of a button.”

You can get lost in the sea of clothes.

“When you enter Walmart’s physical or virtual store, the options are almost endless. In contrast to what we might think, excess choice makes decision-making difficult. What we offer the client, based on their preferences and data, is a range that is narrower and adjusted to the individual. From a vast pool of 38 million items, we will present you with 1,000 or 2,000 that may suit you.”

But even so – to pay something on the order of $200 million for this?

“I think the companies understand the depth of the technology we’ve created. But that’s not all. Besides understanding the merit, they saw our people as constituting something like a commando unit that will enable them to preserve relative value and a degree of innovation in technology. It’s not something that can be copied relatively easily. To succeed in dressing people, you need to be an expert in many broad technologies: analysis of the human body, visual analysis of products. Maximum precision is required, and accordingly, the level of engineering we attained encapsulates a great many secondary capabilities, which are in themselves worth a great deal of money to whoever acquires the team, the knowhow and the technology.”

In a world where success is sometimes a zero-sum game, your accomplishment could well harm brick-and-mortar stores and malls.

“The site does not eliminate the stores. The big chains, like ASOS, Levi’s, Tommy Hilfiger and Bloomingdales, have big catalogs and they want to provide the client with personal service, because the client has no time. We’re all busy, we live at a faster pace than the previous generation did. The ability to buy online offers a solution for those who can’t or don’t want to shop in a store.”

‘Two sales channels’

The coronavirus pandemic, which revolutionized e-commerce, has provided clear corroboration of Vizel’s approach: Under the auspices of the lockdowns and social isolation, and perhaps also boredom and the desire for some sort of compensation, online consumerism surged – and so did the retailers’ budgets for implementing technological advances.

Vizel: “The clothing market suffered a large decline in business, because people went out less often to events and to work, so there was less of a need for new clothes. But everyone who sells apparel had to come up with creative solutions to adjust themselves to the changing circumstances, so they could keep their head above water.

“If up until then, physical stores accounted for 80 percent of the budget, and 20 percent went to online commerce, the proportions changed thanks to the coronavirus. The pandemic was also an opportunity for businesses to expand the scale of their online sales, where profit margins are higher than in physical stores that have to be maintained. Now people are continuing to buy online in higher volume than they did before. The shake-up caused by the virus made it possible for many businesses to expand their sales infrastructure and to enjoy two active sales channels.”

Demand for the services Zeekit supplies soared within weeks of the outbreak. The small Tel Aviv-based company, with its 40 employees, had to pick up the pace and provide a response to a rise of thousands of percent in orders for its services in the first months of the epidemic. At the same time, separately, an additional process is underway: The social networks are also starting to become more oriented toward electronic commerce, and the economy of social media influencers is becoming more central. For example, in May 2020 Facebook declared it was launching “Shops on Instagram.”

“The giant search engines understand that the ability to simulate wearing of different brands creates a new conversation and content. You try on a garment, and share it on the web, asking your friends, ‘How is it?’ For the social networks that capability is worth gold,” Vizel explains. “As part of the same big bang and the huge demand, we were also approached by a representative of Walmart to buy our services, and a regular sales process took place with him. At the same time, we started to get acquisition offers from other giant companies.”

Zeekit’s Yael Vizel.Credit: Ofer Vaknin

Retail giants or technological ones?

From the company’s point of view, we replace the studio productions and allow the retailer to dress hundreds of virtual figures with millions of different clothes with just a push of a button.

Yael Vizel

“I won’t go into the identities of those who made offers, I will only say that the capability that we developed is a key element in social interaction. Instead of buying a Gucci dress for $2,000, a client can share from home a photo of herself with a digital dress for $5 and no one will know the difference.”

And then Walmart entered the picture as a potential buyer.

“Yes. Walmart understood that something was happening, and decided to make an offer of its own. That was the most interesting offer, and it contained a great many elements that we felt were more beneficial for Zeekit. For example, all of our company’s employees were hired by Walmart, the company is staying in Israel and it’s becoming a base for a very large technological development center, under my leadership.”

Does Walmart have any special affection for Israel?

“Walmart has been active in Israel for over five years, including in a program called the Bridge, which connects Israeli startups to nontechnological retailers. It acquired the Israeli startup Aspectiva, which has some 15 employees, but there was never a critical mass of Walmart in Israel. Doug McMillon, the CEO, was here for a visit three years ago, and he was taken to Haifa, to the Matam high-tech park. There’s a building there with all the logos of the world’s big companies. He saw Amazon, Google and Yahoo, and asked, ‘Where’s Walmart? On my next visit I want to see Walmart.’ And since then Israel has been on their radar.

“There was a certain stage when Walmart was looking for the engine that would make the push toward fashion, and they encountered us at that strategic point. The development center in Israel will expand beyond that category and will provide a solution for the whole [Walmart] organization in terms of technology, investments and acquisitions.”

One of the reasons for Walmart’s interest in Zeekit is naturally related to the considerable information it can collect about consumers’ preferences and choices.

“Walmart’s challenge is to expand in the clothing sector. Many clients buy their bread and cheese, as well as their vegetables and home products, on the web, but when it comes to clothing everyone goes to their favorite brand,” Vizel says. “Like its competitors, it too is not a star in the realm of apparel and understands that it’s missing money that’s lying on the table. There’s a category that is not appropriate because of branding or technology. Zeekit’s technology creates a new retail reality that is appropriate for the next generation. Beyond that, there’s also a possibility for contextual purchases: In other words, if the company sees that you have searched for yoga pants, they will also be able to suggest supplementary products like a yoga mattress, a towel or a water bottle. In the category of apparel, the client effectively reveals their plans, and that’s an invitation to a full basket of products.”

Vizel won’t say whether Walmart made the highest offer, making do with noting that it obviously “was not one of the lower ones.” From that moment negotiations were conducted in a world in which the coronavirus has been carving out the path – as she puts it. “The Walmart team knows me from the work we did together before, but like everywhere in the world in this period, the acquisition process took place on Zoom.”

And does it work?

“The significant thing in the transaction was the feeling that there is compatibility between the Zeekit people and the Walmart people – that we can be one team. You have to remember that the acquisition includes our company’s personnel and its culture. When that matches, people learn how to feel close even via Zoom. The Walmart people gave us the feeling that we are part of them, even though it’s a conglomerate with 2.5 million employees.”

A Macy's branch.Credit: EDUARDO MUNOZ REUTERS

Part of the feeling of belonging has to do with the fact that Zeekit employees’ contracts will include grants and bonuses.

“Yes, all the employees of Zeekit stand to benefit from the sale, in one form or another.”

Katrina Lake, the founder of Stitch Fix, which developed a personal styling service and is now being traded at a value of $6 billion, acknowledged two years ago that her company always suffered from under-appraisal. She said that she had to downplay certain aspects of her operations, because she found it difficult to persuade male investors that women would want to use the service. There were some who said to her, “You want $2 million to buy dresses?” What was your experience like?

“I said many times that Zeekit is an AI [artificial intelligence] company in which the number of data scientists wouldn’t shame a cyber firm, yet we’re still called a fashion startup and not an AI startup. Maybe because I am myself very technological and the company’s character has always been technological and not ‘fashionable,’ the attitude toward us was more serious both in fundraising and in the appraisals of the company, but that meant seriously explaining the company’s narrative. I always felt that our starting point looked to investors that were more ‘low tech’ as compared to cyber, fintech and so on.”

We are at the height of a wave of IPOs and huge fundraising of companies that claim they want to maintain their independence. What do you think to yourself when you see this happening?

“The ability to raise capital is also largely a function of market and trends, not necessarily of achievements. Every initial seed-funding round today is higher than most of the [subsequent] Series A rounds of companies that were founded five years ago. In my view, what an entrepreneur does with a company is a more meaningful indication than ‘entrepreneurial ability.’”

The Zeekit-Walmart deal was finalized 10 months after negotiations began. Betwixt and between, Vizel also brought a child into the world. “The discussions took place as planned, and also around the birth,” she says, offering a glimpse into the complexities faced by young women in key positions like this. “My son was born before Christmas, so I had a few days of quiet. I took a two-week maternity leave, but everything proceeded according to the timetable that was set in advance. Some of the meetings took place on Zoom while I was still in the hospital.”

Entrepreneurial urge

Vizel grew up in Ramat Gan and attended Ohel Shem high school. Her mother is a lawyer and her father, an electrical engineer; she’s sandwiched between two sibling-physicians and is married to a physician. “Now I’m a little less the black sheep,” she laughs.

I took a two-week maternity leave, but everything proceeded according to the timetable that was set in advance. Some of the meetings took place on Zoom while I was still in the hospital.

Yael Vizel

She is a “graduate” of the Israel Defense Forces’ prestigious Mamram (Center of Computing and Information Systems) unit and the first woman to serve as an officer in a serious command position combining technological expertise with work in the field. During her stint in the career army she fell in love with electrical engineering and afterward majored in it at the Technion – Israel Institute of Technology in Haifa.

From the outset, she relates, she was drawn to entrepreneurship. “I like competitions, and at the Technion there are quite a few entrepreneurial competitions. That was my hobby. One time I signed up for a competition in ‘agricultural tools for the next generation’ in the Faculty of Agricultural Engineering.”

Did you win?

“I came in last, but I competed, and that’s something, too.”

On a scale of 1 to 10, what was your feeling during the negotiations with Walmart?

Credit: Eyal Toueg

“As an entrepreneur, I have learned over the years not to celebrate successes before they happen or are signed and sealed. From my viewpoint, until it happens, it doesn’t exist. I went through the whole process in a totally businesslike way, without an iota of sentimentality. I can say that along the way there was more apprehension than excitement, because the entrepreneurial world is such that today you think you’re about to sign a deal and tomorrow it’s not signed, and you have no choice but to keep going. So we develop a protective layer – you don’t celebrate excessively and you don’t crack. You’re no longer a leaf tossed in the wind. That’s the reason I almost didn’t think about the implications of the process.”

How did you feel personally, the day after the sale?

“It wasn’t easy, at the level of the entrepreneurial feeling. Zeekit is like a bodily organ, it’s part of me, and now it’s being sold. It’s also complicated at the practical level. We are used to working in a mode where everything happens very fast, and creativity bursts out all the time. The team that works in Zeekit creates and builds capabilities at a dizzying pace.

“With an acquisition, things change and take more time. You have to understand the [other] organization, know whom you’re working with, make adjustments, reorient. On the other hand, the door to a huge audience has now been opened for us. The influence that Zeekit’s capabilities have when they are assimilated into a corporation of this size is unparalleled.”

It’s not easy to work with a giant corporation.

“Walmart actually intends to maintain Zeekit as an independent company. We were not dismantled. We will have absolute independence in recruiting employees. In the life of a startup you can’t allow yourself to spread out, because there isn’t always time or money. Now we have that.”

Throughout the interview, Vizel carefully projects a business-as-usual attitude. Not to allow the fact that just two months ago she signed a huge deal that put tens of millions of dollars in her pocket to disrupt either her worldview or her agenda. “I believe in being a working woman. I haven’t changed anything in my life, and I still drive my Hyundai i10.”

You’ve become a member of the multimillionaires’ club.

“I want to believe, and I’m working with myself on this, that things won’t change now, either. Professional life is what interests me. I want to get up in the morning and go to work, and I am happy in what i do. It’s exciting when one of the world’s biggest companies wants your technology, too, and also me as a manager.”

The money doesn’t blind you?

“There’s a sigh of relief. But that money arrives after years of living in a state of high tension, in which entrepreneurs earn significantly less than the average, certainly compared to the world of high-tech, and plenty of personal costs are paid.”

Did you buy anything special after signing?

“No. Well, actually, I bought moisturizing cream that I’d always wanted but was expensive for me – 70 shekels [$22] a tube. After the acquisition I bought it for myself and for my mother, my mother-in-law, my sister and my son’s nanny.”

Wow, you really went wild.

“Totally. I don’t think the money will change me. I don’t want that to happen. I will think very highly of myself if I remain a modest person.”

What’s next? Will you be a Walmart employee until retirement?

“The entrepreneurship feeling is still there and always will be. It hasn’t cooled and will certainly burst out. It’s only a matter of time.”

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