Early in June this year, SaverOne went public on the Tel Aviv Stock Exchange, in one of the first IPOs after the outbreak of the Covid-19 virus (and the first IPO in a long time by a technology company on the local stock exchange).
The pandemic itself did not significantly harm the company's activity - it develops technology to prevent distractions from mobile phones while driving - and SaverOne has even recruited workers in a difficult employment market. But the coronavirus is front of mind in my conversation with SaverOne’s management: CEO Ori Gilboa, and director Gil Sheratzky, VP Business Development and Director of International Operations at Ituran Location and Control Ltd. (Nasdaq:ITRN); TASE:ITRN), a major shareholder in SaverOne.
At one point, when Sheratzky (whose family are controlling shareholders in Ituran) wants to explain how big the market is for SaverOne - which has developed technology to prevent distractions from mobile phones while driving - he says: "We see how much money is being invested in achieving a coronavirus vaccine; they’ll invest any amount to get to market three months ahead of the others.
"So, coronavirus is a big problem, and it has better PR than traffic accidents, but there are more deaths from people texting and driving than from the coronavirus," he says. SaverOne hopes and believes that governments, in Israel and around the world, will understand the problem and take action, and that regulation will propel the company into another league.
SaverOne was founded in 2014 and raised $10 million before it went public. In Tel Aviv float, it raised another NIS 26 million at a valuation of NIS 87 million "before money". The company is currently traded at a market cap of NIS 110 million after yielding a 10% return since the IPO about two months ago.
Gilboa arrived to manage the company less than a year ago, after serving in management positions in the automotive industry, as well as at James Richardson Duty Free, and at floor tiles and home design company Negev Group, which was acquired by the Viola Group. "I'm not exactly the usual profile of a startup CEO," he says. "It's true that I’ve run companies of hundreds or thousands of people, and that SaverOne is a small company, but both I, and the company’s investors, see in it the potential to become a huge company.
"The company was founded with the vision of providing a life-saving technological product to deal with the number one problem in traffic accidents: distractions caused by mobile phone usage. This is a very complex technological problem," Gilboa continues. "First, SaverOne actually recognizes phone signals from inside the vehicle space. Next, the system’s hardware and software are able to distinguish between a phone located in the driver's area and phones in the passenger area. The wavelength is 20 centimeters, and to the best of our knowledge there is no other technological solution in the world or any other way to identify which phone is the driver's."
Once the phone in the driver's environment is detected, the system prevents certain applications from working, with no need for the driver to take action. "We’re talking about an addiction," Gilboa says. "People do more and more things on their phones, so an effective solution won’t ask drivers to limit themselves. You have to download the app one time, but once the system is installed and running, it connects and sets the phone automatically to protected mode, whereas if the phone is in the passenger area, it can operate.
"We understand that because it's an addiction, we need technology to help us limit ourselves. Otherwise we would turn the phone off when we get in the car, because we all understand the danger of answering WhatsApp while driving - but it's hard for us to refrain from it."
According to Gilboa, the United States has defined three features for an effective technological solution: no need for cooperation on the part of the driver; the ability to distinguish between driver and passenger; and a dynamic, selective solution, meaning drivers can block certain applications so that, if the phone is moved, they are unblocked accordingly. "There is no solution that addresses all three features except for SaverOne," he says.
Sheratzky: "From Ituran's point of view, I can say that we didn’t get to SaverOne just by chance. Ituran markets solutions that improve driver behavior, whether to insurance companies or car fleets. We also have collaborations with the Or Yarok Association for Safer Driving and emergency medical services organization United Hatzalah, and we’ve identified many models of dangerous driving. We’ve seen the huge problem of traffic accidents due to cell phone use.
"We've also seen a lot of driver-dependent solutions, from systems that depend on the drivers switching the phone into passive mode, to gamification apps that award points if you use the phone less. That's nice, but it doesn't offer a total solution. It’s like putting a box of cigarettes on the table next to a person who wants to quit smoking, and seeing how they cope. SaverOne is the only one we’ve found that provides a solution. I come from a technology company, and I see that SaverOne has a very complex product, with high barriers to entry; it’s very hard to produce a solution of this caliber."
Why did Ituran invest in the company, but not acquire it?
Sheratzky: "Most of Ituran's solutions are developed in-house, and our investment strategy is to take a significant stake, as we’re not a venture capital fund, but we are capable of providing the company with an incentive to run independently. We believe startups have the energy to do things that take more time at big companies."
Gilboa: "I'm also not sure that SaverOne wanted to sell. There’s an understanding here of its potential."
The true potential will come, as noted, if and when a regulation comes into effect requiring the use of a system to prevent mobile device distraction while driving. According to the company's presentation (in advance of the IPO), the total market potential in this case will reach $70 billion, and the regulation is seen as a game changer.
"Solving the problem of distraction has two components: technology that is not driver-dependent, and regulation, which a total solution also needs," says Gilboa. This sort of regulation could be a requirement to install the system in heavy vehicles, for example, as a condition for obtaining a vehicle license, or it could promote installation by offering users a discount on insurance.
"The processes take a long time," says Gilboa. "We believe and know that the world is heading in that direction. The EU has already drafted a bill that mentions requiring installation of a mobile distraction system in vehicles from 2022, at the production stage. Right now, there’s no binding requirement anywhere in the world, but there is an understanding that this is the way to go."
"In Israel, too, the National Road Safety Authority appointed a committee which recommended requiring the installation in heavy vehicles of a system that would prevent drivers from using dangerous applications. We’ve called on the Ministry of Transport to take action in that vein. Until something happens, we’ve simply set our sights on car fleets, which have a kind of internal regulation; the managers of large haulage companies and vehicle fleet safety officers, for example, understand the economic importance.
"We also have pilot projects with the IDF and the Israel Police. We’re developing a product for buses and hope to launch it by the end of the year - all of the public transport companies are waiting for it."
The company also notified the TASE that it had entered into an agreement with a company that will assist it in entering the international car fleet market, and that several fleets have already expressed interest in a pilot project.
"We are B2B company and not currently built for B2C. We’ll extend our reach to include private customers when the insurance companies get involved and can offer differentiated policies. Again, the importance of regulation here is critical. As a business, we find our way to those customers who understand the economic value, but to really solve the problem and save human lives, there has got to be regulation. Without a ‘Big Brother’ to require it, we won’t be able to provide a solution. And I believe the world is heading in this direction."
Is there interest at the Ministry of Transportation?
"Definitely, we have future meetings there. The new minister (Miri Regev) has stated that she wishes to leave no stone unturned in finding a technological solution to fight traffic accidents, and we believe and hope that is what will happen."
Before the IPO, you said that in the United States, 25% of accidents are caused by cell phone usage. What are the data for Israel?
Gilboa: "There are lots of studies and the percentages range from 25% to 70%. I spoke with the head of the traffic department at the Israel Police, who estimates at least 70%. There are no exact data, but 25% is certainly the minimum."
Sheratzky: "There are also small accidents caused by mobile phone use, which attract less attention because there are no casualties, but they do create traffic jams, for example."
Meaning, the cost to the economy is both the direct damage caused by accidents and the indirect damage from things like traffic jams.
Gilboa: "The direct cost of a traffic accident is big enough that you don’t have to lok at the indirect damage in order to understand . Every injured person, every stuck truck loaded with goods."
Sheratzky: "This problem will not get better. The next generations of drivers will have a higher level of distraction because they have almost no use for voice calls- everything is WhatsApp and social networks, where the distractions are greater."
How is Covid-19 affecting your activity?
Gilboa: "Some of the milestones we were discussing, pilots in Europe and the US, have been delayed because, like many businesses here, we can’t get out at the moment. That’s the only immediate effect. It’s making us focus us on the Israeli market. When there are outbreaks, it’s bothersome and then we have meetings with vehicle companies on Zoom. But when things are stable, we’ll be able to act according to plan."
The company currently employs 24 people as well as a number of subcontractors, but Gilboa emphasizes that the company is "in the process of expanding. We have a very challenging roadmap, and we plan to recruit at least ten more workers in the coming months."
SaverOne hopes that the Israeli market, its beta market, will serve as an example for the whole world. "Because this technology was developed here, by way of regulation we could create a breakthrough example of a worldwide solution to the problem," says Gilboa.
"We all do business. I’ve run other companies, but this is the first time I’ve run a company that can be both an amazing business, and also do good for humanity. If the Ministry of Transport gets on board, we can produce something amazing, and I will be happiest of all."
"Regulators give a company credit for trading on the Israeli market"
SaverOne is currently joining the TA Tech Elite index, and the company expects this move to increase its exposure and tradability.
Many Israeli technology companies want to go public in Australia, Canada and the like. Why did you choose the Tel Aviv Stock Exchange?
Gilboa: "We are an Israeli start-up, operating in the local market, and we are familiar with our capital market and the regulation, so it was very natural. There was no advantage for us to go to Australia or anywhere else. The Israeli market is a huge 'beta market' for us, with access to international companies, heavy vehicle fleets, public transportation - all the markets we appeal to."
Sheratzky: "For a company like SaverOne, regulatory support is important. Being traded in Israel gives a company credibility in dealings with the regulator and the ability to be transparent for the main regulators."
In this context, we will mention that Ituran was actually delisted from trading on the TASE in 2016, and currently trades only on the Nasdaq.
You went public with a "going concern" qualification and a shareholders' equity deficit of NIS 19.8 million. Was this a case of "IPO or no cash flow"?
Gilboa: "Every start-up company in this stages lives like this: raising funds and spending money, burning cash and fundraising. The qualification was a technical one."
Sheratzky: "Our existing investors, who’ve been with us all the way to productization, continued injecting funds to provide stability. Once we had the product, only then did we enter into IPO mode. It’s more appropriate for a company like ours to be traded publicly for the sake of transparency vis-à-vis regulation. Our veteran investors also participated in our public offering."
What was it like to do a pre-IPO road show during the Covid-19 crisis?
Gilboa: "Luckily, the peak of the road show was when the economy started opening up, so 40% of our meetings were on Zoom, and 60% were face to face. It’s definitely challenging. We started the process just before the coronavirus hit, and kept on going during the strange days afterwards, but we had full cooperation from the stock exchange and all those involved - attorneys, accountants, etc."
SaverOne Business: Development of technology to prevent mobile distraction while driving Founded: 2014 Location: Petah Tikva CEO: Ori Gilboa Chairman: Yaakov Tenenbaum Entrepreneurs: Ami Gur and Yossi Cohen Number of employees: 24 Major shareholders: Ituran 11.2%, UMI 8.5%, Yaakov Tenenbaum 5.3%, Ronen Weisberg 5.2% Market cap: NIS 110 million