Mellanox – Passing the Billion Dollar limit

4 years ago I wrote an article for Venture Beat, "the search for an Israeli Nokia". Back then, I was trying to list the reasons for the lack of large venture backed companies (large = $1bn valuation and above). 3 major reasons were listed, and also a small prediction that things will change in 5-10 years. 4 years have passed, are things changing?

This week Akamai announced their planned acquisition of Cotendo for approximately $280M. I had the pleasure to work with the 3 founders 10+ years ago at Commtouch. They definitely deserve it. The Cotendo acquisition came a few days after the announcement regarding the Anobit acquisition (by Apple). Overall, 2011 was a great year with over $3bn of value realized (Remember Provigent, and MediaMind). We even had an IPO (Imperva).

Great year, but not a single $1bn valued transaction. Still, times are changing, as can be indicated by the story of Mellanox. Founded in 1999, the company went public in February 2007. Post IPO, Mellanox was valued at ~$500M. Another sub $1bn Israeli company. But since then, Eyal and his team have been pushing hard to grow the business, growing organically, but also through acquisitions. Early this year, they acquired Voltaire for over $200M. And since then, the company has continued to grow and is currently valued over $1.2bn. Yes! A true $1bn Israeli company.

The Mellanox $1bn story will not be covered in the Israeli papers summarizing 2011. Why? The papers prefer the "instant hits" and not the slow and patient growth of companies. But Mellanox is an example of the model that will be repeated many times in the next few years. Following Mellanox, Imperva will grow to that valuation, and soon after we will see similar growth stories from companies like Primesense (A Gemini Portfolio Company), Outbrain (Another Gemini Portfolio Company), Wix and others. Constant growth, IPO, and then more constant growth.

As I mentioned in 2007, between 2012 and 2017 we will see a lot more companies like Mellanox. The quest for an Israeli Nokia is finally over.

Comments

[Uriel Katz]

What about Conduit?,they are valuated(as much as a private company can be valuated) more than 1bn dollars.
Also the management there has a big inspiration to grow and aren't planning to sell the company any time soon.

[Uriel Katz]

btw imperva market capital is 754.11M according to Google finance :)

[Daniel Cohen]

Uriel - I agree Conduit is a great business, and maybe worth at this point north of $1bn. As you mentioned, they are private, so hard to know what their exact valuation is (if they were public). In addition, not sure how sustainable their business will be over time. But I could be totally wrong about that.

[Mporat]

Great post Danny.

I actually agree with Uriel re Conduit, and think it highlights another welcomed trend (together with Mellanox) of Israeli companies growing inorganically through acquisition.

Another thing worth highlighting on the less positive side is that 2011 has been the year of the internet IPO (Linkedin, Zynga, Groupon, Pandora, TripAdvisor) and 2012 will continue this trend (Facebook, Yelp). Slightly disappointing that we have yet to grow a company of that caliber.

Something to look forward to. 2016?

[Daniel Cohen]

Micha - I think we will see the Israeli Internet IPOs before 2016. I actually think great companies will go public as early as 2013. Hopefully, at least a couple will be Gemini companies (and Genesis of course...).