Google-Waze deal investigated by FTC


The Federal Trade Commisssion is examining Google’s $1 billion deal to purchase the Israeli navigation start-up Waze to see if the purchase violated any antitrust laws.

After the deal between Google and Waze was finalized June 11, Google believed it didn’t need to submit the deal for review because Waze’s revenue in the U.S. is less than $70 million. If the FTC determineds there were violations in the deal, Google will most likely have to re-sell Waze at a loss. Apple, Facebook and Microsoft all previously wanted to purchase the Israeli start-up.

Even if no violations are found, Waze could still be determined to be a “firm that plays a disruptive role in the market to the benefit of customers,” which is possible since there is no other social-based mapping service like Waze on the market, the New York Times reported. In that case, Google’s purchase can also be invalidated.

Billion-dollar Waze


UPDATE [7/29/13]: Google bought Waze for $966 million.

Just a couple of years ago, the Israeli entrepreneurs behind the traffic-fighting smartphone app Waze were knocking down the door of every news outlet in Los Angeles. They were seeking publicity to help forge their way into the iPhones and Androids of L.A. drivers by promising some reprieve from “Carmageddon” weekend on the 405 freeway. Waze argued that its brave new method of crowdsourcing map and traffic data — via social media, with input from an active user base — would be the perfect tool to navigate drivers around the monster 405 freeway project and resulting traffic jams. The company needed press, and bad — because if enough people didn’t use the app, it wouldn’t work for anyone.

Well, they don’t need the press anymore. On June 11, Google Inc., the American tech giant at the forefront of online mapping, bought Waze Mobile for between $1.1 billion and $1.3 billion, according to various media reports (neither company has disclosed the final sum). Google’s acquisition is one of the largest in the history of the Israeli tech industry and stands as a major vote of confidence for both Waze and Israel’s startup scene at large.

These days, the Waze guys, who once reached out to Los Angeles eager for attention from any reporter, are mum. They are happily cloaked under Google’s strict no-press policy. “We are Google employees” now, says one of the app’s three founders over Facebook chat, “and we cannot speak to the press.”

Even without Google, Waze picked up a fast and loyal following in its first five to six years on the market: The app already boasts almost 50 million users in 190 countries and counting.

But no one will ever love Waze quite as fiercely as Israel.

[Related: What is it with Israelis and high tech?]

The buzz of the billion-dollar sale could be felt last week through the summer heat in Tel Aviv and environs, where Waze has long been regarded a national treasure — the top of the class in a nation of 1,000 startups. “Congratulations, you have reached your destination,” cheered Israeli Prime Minister Benjamin Netanyahu in a reported phone call to Waze’s founders on the night of the sale.

“The Israeli people feel that they have some part in this huge success story,” said Izhar Shay, head of Israel operations at venture capital firm Canaan Partners. “We were the test group. We were the first users of an international breakthrough project, and we were part of the reason why Waze was so successful.”

The local market may only be about 7 million strong — a shortcoming that some say has slowed the overall progress of consumer-oriented invention in Israel — but it’s famously hands-on.

“By nature, people here are happy to try out new technologies, new concepts, new ideas — especially if they’re introduced by Israelis,” said Shay. “When Waze started, everybody knew somebody at Waze. So if people had bugs or issues with something that didn’t work properly, they would pick up the phone and call to yell at somebody at Waze.”

There have been local concerns, over the years, that large foreign companies are harvesting many of the best Israeli business ideas at an unripe age. But industry analysts who spoke with the Jewish Journal argued that the Waze buyout, which reportedly includes an agreement to keep Waze’s headquarters in Israel for at least the next three years, is the best possible scenario for a local company looking to go global.

Gil Ben-Artzy, co-founder of UpWest Labs — a training program in Silicon Valley for Israeli startups — called the sale a natural and smart evolution for Waze, and a “beacon” for other Israeli entrepreneurs.

“I find it hard to accuse somebody who sold their company for over $1 billion of selling too early,” said Jonathan Medved, head of Israeli crowd-funding venture OurCrowd.

Waze “fought like a lion to keep its development in the country,” Medved said. “The fact that these guys showed that you can fight that battle and win, and still sell your company for a good price, means that everybody’s going to try to do it.”

Up until now, Google Maps has been a dirty word in Israel; everyone wants to support the home team, plus Waze appeals to the Israeli nature to jump into the conversation, so the app has become extremely accurate due to all the input. But the two companies’ new all-star collaboration has now set the tech blogs on fire with speculation on the future possibilities of online mapping.

One thing they all can agree on: Waze’s secret weapon in a world clamoring with startups — and undoubtedly one of Google’s top reasons for scooping it up — has always been its devoted army of Wazers, who together helped the app reach the critical “viral” stage by telling all their friends and helping chart new territory within Waze’s virtual map system.

In combining their strengths — manual and social-media mapping, respectively — Google and Waze have hit such a sweet spot in the online map market that Southern California-based interest group Consumer Watchdog has even expressed concern that the duo might become a monopoly.

Facebook and Apple, who were also rumored bidders in the race for Waze, can’t be too happy about the new superpower.

“When you are driving in your car and you’re using Waze … you’re stuck in traffic, and all you have is this small screen in front of you that delivers the most important news to you,” Israeli investor Shay explained. “Now Google has access to our hearts while we are at a very significant part of our day, and we have nowhere to go.”

Israeli techies and investors are also touting the Waze acquisition as a ribbon-cutting of sorts for the new and exciting “consumer-oriented” frontier of Israeli innovation.

In the past, the country has been known more for its security software, semiconductors and other business-to-business (read: boring) technology. 

Waze is the polar opposite — a people’s product to the core. With its cutesy icons and game-like elements — including swords and badges for those drivers who submit warnings about “objects in the road,” police stakeouts, etc. — the app has proven as addicting as any Farmville or Angry Birds, only loads more useful. For the Waze addict, a commute is no longer complete without the soothing voice of Waze’s token she-bot, coaxing her customer through each lurch and turn.

To be sure, the app has had its detractors. Some traffic-safety advocates have worried that Waze’s highly interactive, video-game-like experience can prevent drivers from paying attention to the real-life road in front of them. The company has responded by installing voice-command and motion-sensor functions, as well as a keyboard lock for when the vehicle is moving — although drivers can easily override the latter by telling Waze that they are in the passenger’s seat. Last week, New York Magazine blogger Kevin Roose wrote in a concerned post on the acquisition: “As Google considers adding revenue-generating features like local advertising to Waze’s already-packed interface, it may raise the question: How much information is too much for drivers to handle safely?”

Yet, for Waze’s defenders, the proof is in its adaptability — and with Google’s latest infusion of cash, the app will no doubt keep adapting to meet user demands. 

Consumer-oriented innovation “requires a certain aesthetic understanding, and a certain design excellence” that Israel hasn’t necessarily been known for in the past, said Mick Weinstein, a longtime tech writer based in Jerusalem. “And that’s part of what’s so wonderful about Waze, is the user experience.”

In the wake of Google’s winning bid, Oren Hod, co-founder of video creation marketplace VeedMe, which connects videographers with prospective clients, said startups like his are catching Waze fever.

“I think [the sale] gave hope to some entrepreneurs and Israeli startups that are not super technology-oriented … to make it big in the U.S. market,” said Hod.

Local and international investors, too, are apt to be inspired by Google’s big move, said Shay — and “we should expect to see additional votes of confidence in Israeli startups as a result.”

Medved added that he has “never seen a time when there have been more good-quality Israeli startups that are really attracting worldwide attention — I think it’s a golden age.”

Waze, for one, doesn’t need the press anymore, nor the hasbara. As Google’s gorgeous Tel Aviv campus buzzes with new life and Waze enjoys its hard-earned spot on top of the world in Ra’anana, it begins to sound superfluous — even old-fashioned — to rave about Israel’s “Silicon Wadi” as if it were a niche or an underdog.

New Doheny Meats owner explains his purchase of scandal-ridden store


Shlomo Rechnitz, a prominent local businessman and philanthropist, has purchased Doheny Glatt Kosher Meat Market, the scandal-plagued kosher meat retailer and distributor.

Rechnitz, who co-founded TwinMed, a large medical supply firm, and owns a number of other businesses, purchased the store and its distribution arm for an undisclosed sum from its former owner, Mike Engelman.

The sale closed late in the day on Sunday, March 31, just one week after its former kosher certifier, the Rabbinical Council of California (RCC), revoked the store’s certification and hours before the beginning of a two-day holy period celebrating the end of Passover.

Starting on March 25, the day after the revocation, rabbis from the RCC reached out to Rechnitz, urging him to buy Doheny, and in an interview with The Jewish Journal on April 3, Rechnitz said he initially considered making the purchase as “a favor to the community.”

[Related: After Doheny Kosher scandal, what does the future hold for L.A.’s meat market?]

“Before I came out with the announcement that I was going to purchase [Doheny],” Rechnitz said, “there were already stores calling up different distributors, even being quoted prices 35 to 40 percent higher than their current prices.”

Doheny is believed to supply as much as 50 percent of the kosher meat and poultry in Los Angeles; its disappearance would have significantly reduced competition in the marketplace, which, Rechnitz said, “would have destroyed the kosher market in Los Angeles.”

RCC President Rabbi Meyer H. May said Wednesday morning that he was one of those who personally urged Rechnitz to buy Doheny Meats, and he was cheered by news of the sale.

“It’s really extraordinary,” May said. “He’s going to preserve the richness of the meat supply and preserve the price structure for consumers.”

Rechnitz was involved in the response to the Doheny scandal from its earliest hours. He was one of a handful of non-rabbis who attended a hastily organized meeting on Sunday, March 24, when Engelman spoke to the RCC’s leadership and rabbis from synagogues around the Pico-Robertson neighborhood about what he had done at his store.

Engelman, who had owned the shop for 28 years, was videotaped by a private investigator last month bringing unidentified products into his store at a time when its rabbinic overseer was absent. Engelman did not return repeated calls requesting comment, and has not spoken on the record since the scandal began.

At the March 24 meeting, Engelman reportedly told Rechnitz, May, and the other laypeople and rabbis present, that he had, on two or three occasions, brought unsupervised meat into the store.

According to multiple people who attended the meeting, Engelman claimed all the meat he had brought to Doheny was kosher, but he admitted some was not up to the RCC’s higher “glatt kosher” standard. Glatt kosher meat is more expensive than kosher meat, which itself carries a higher price tag than equivalent non-kosher products.

Rechnitz said that he believes Engelman with “99 percent” confidence.

Rechnitz did add a caveat.  “You can’t rely on someone like me, who got my information from someone who unfortunately has made mistakes, who wasn’t always as truthful as he should have been,” Rechnitz said.

Over the course of a week of negotiations, Rechnitz spent between eight and 10 hours with Engelman; he said he does not believe Engelman brought the unsupervised products into Doheny to respond to specific customers’ requests, as some have suggested.

Rechnitz said Engelman himself couldn’t fully explain why he brought the unsupervised meat into the store, but Rechnitz speculated that it may have been due to anger Engelman felt towards his main supplier, Agri Star, the large kosher meat processor based in Postville, Iowa. In 2009, Agri Star bought the Postville plant from the bankrupt Rubashkin-owned firm AgriProcessors, which had been shut down in the aftermath of the largest immigration raid in American history.

Money may not have been the motivating factor, Rechnitz said, “because it wasn’t that much of a difference, based on the quantity.”

In the private investigator’s video, a Doheny employee was seen unloading eight boxes from Engelman’s SUV and bringing them into the store. Based on additional videos received from the investigator, the May said the RCC estimates Engelman brought a total of approximately 1,200 pounds of animal products into the store over the weeks he was under surveillance.

Although Rechnitz’s initial reason to purchase Doheny was to maintain competing distributors for the city’s kosher-observant community, over the course of the week of negotiations he became a bit more optimistic about the business prospects for the company.

“I didn’t have time to send in a forensic accounting team,” he said, but Engelman told him that Doheny’s gross sales on the retail and distribution sides added up to approximately $8 million a year.

That said, Rechnitz said he hopes to remain a mostly silent investor in Doheny, and won’t aim to build its market share at the expense of other distributors.

Engelman won’t have any role in the business – Rechnitz said the agreement required the former owner to make a “complete” break, and included a non-compete clause – but the rest of the operation should remain mostly the same.

The RCC will once again certify Doheny’s retail and distribution operations, the name will remain the same and every current employee, Rechnitz said, has been offered his job.

The store, which is currently closed, could reopen as early as next Monday; Rechnitz said that the store, the utensils and dishes used there were being kashered — ritually cleansed — “just in case there was non-kosher meat being used.”

Rechnitz is currently Doheny’s sole owner; he said he is in negotiations with another investor who might buy into the business. The deal with Engelman included a non-disclosure agreement about the price, Rechnitz said, but he described the negotiations as “amicable” and described the final selling price as “sizable,” but not as big as it might have been prior to the scandal.

“It definitely came at a major discount due to the fact of what [Engelman] did, or what he tried to get away with,” Rechnitz said. “He definitely was not rewarded for his actions.”

Rechnitz has experience working with organizations at times of crisis. In his role as CEO of one of his companies, Brius Management Co., which manages multiple nursing homes across California, Rechnitz told a reporter in 2011 that his company looked mostly for “distressed facilities.”

In his philanthropic work, Rechnitz has also come to the aid of embattled organizations. Last year, in the wake of Hurricane Sandy, Rechnitz donated $1 million to an organization that supports Jewish day schools in the New York area. In 2011, Rechnitz donated $5 million to the Mir Yeshiva in Jerusalem, which was struggling under millions in debt following the death of its chief rabbi and fundraiser. That same year, Rechnitz also helped save Chabad of California’s headquarters from foreclosure.

But Rechnitz is also known for charitable giving of a very different sort. Every Saturday night, Jews line up outside his family’s home. Until six months ago, those who came walked away with checks; now they leave with gift cards to one of two kosher markets in the area near Fairfax and La Brea.

Rechnitz announced his purchase of Doheny at his synagogue on Sunday evening, March 31, just hours after the deal closed. He said the reaction there was muted – “It was kind of almost expected,” Rechnitz said, adding that his goal in making the announcement was to change the conversations that observant Jews in Los Angeles were bound to have over the two days that followed, the last two days of Passover, during which work and the use of any electronics is prohibited.

“I wanted to stave off two days of people creating rumors and completely defaming the place,” Rechnitz said.

In that regard, Rechnitz appears to have succeeded already. Just hours after Passover ended on Tuesday, April 2, after sundown, at least one person had reported the news in a comment on Facebook.

Web site launched to counter calls to boycott Israeli goods


Israeli businessmen have launched a Web site to help counter calls to boycott products made in Israel.

The campaign, called Shop-A-Fada—a play on the word of the violent Palestinian uprising, the intifada, was launched Monday. It encourages the public to counter anti-Israel boycotts with the purchase of merchandise manufactured in Israel.

Shop-A-Fada was developed by a team of Israelis who own and operate the Web site JudaicaWebStore.com, an online clearinghouse of more than 8,000 Israeli gifts and Judaica manufactured by 120 Israeli companies.

The campaign is intended to “Fight back against those who think that they’ll be able to destroy Israel by waging economic warfare,” said Israeli sports star Tal Brody, who serves as honorary chairman for the initiative.

“The time has come to show our enemies that as resolved as they are to practice hate against us, we’re equally committed to come out in unwavering solidarity for Israel,” Brody said in a statement.

For the next month, 5 percent of all sales will be donated to American Friends of Magen David Adom.

Arik Barel, CEO of JudaicaWebStore.com, said the economic toll exacted on Israel by the Boycott, Divestment and Sanctions (BDS) movement is “by no means negligible, and we wanted to respond on behalf of the business community before the damage is irreversible.”

Last month, a major British supermarket chain announced that it would halt trade with Israeli companies that export goods manufactured in the West Bank, at a cost of hundreds of thousands of dollars to the Israeli exporters.

Israeli start-up XtremIO acquired for $430 million


EMC Corp. acquired the Israeli storage systems start-up company XtremIO for more than $430 million.

The sale completed last week is EMC’s sixth and largest acquisition in Israel. Senior executives from EMC had been in Israel in recent months holding acquisition talks with XtremIO, the Israeli daily Globes reported.

Xtremlo, which has offices in Herzliya and San Jose, Calif., was founded in 2009 by a group of Israeli high-tech veterans. It has raised $25 million in two venture capital financing rounds.

“This is an inspiring event, as it shows once again that Israel has the skill set and drive to create exceptional cutting-edge companies,” Erel Margalit, founder and chairman of Jerusalem Venture Partners, which owns up to 30 percent of XtremIO, told JTA in an e-mail.

EMC also operates an Israel R&D center with 700 to 800 employees, according to Globes.