Itai Ben-Gal turned his passion, perfecting his home-entertainment system, into his profession with the new start-up
iRule.
About three years ago, the Novi resident bounced the idea of turning his iPod into his universal remote off his good friend, Victor Nemirovsky. The two programmers with good jobs and young families sat down at Ben-Gal's kitchen table the next weekend to flesh out the idea. They soon realized neither had a Mac and would need one to develop a software application for Apple's iOS operating system. A trip to the Apple store and an awkward conversation with Ben-Gal's wife soon followed.
"Both of us were walking down the hall and I see my wife so I said, ‘We're going to the mall,' Ben-Gal says. "Victor said, ‘Yeah, we're going to the mall to get a laptop.' I was thinking this is not off to a very good start. My wife looks at me like, we already have probably seven computers in the house."
That initial purchase to start
iRule was the easiest one to argue. Ben-Gal and Nemirovsky could always sell the laptop. The duo soon figured out they would need to sink thousands of dollars into licensing fees for various mobile devices and home audio equipment. Almost $20,000 in start-up costs, all boot strapped, and a year's worth of work, and they had the first app to sell for the iPhone in early 2010.
"When version one was released, a good friend of mine who owned a speaker company called me to congratulate us," Ben-Gal says. "I'll never forget his quote, ‘Congratulations, you have taken the first step toward ruining a perfectly good hobby.'"
iRule's app, which starts at $200 with the accompanying hardware, took off almost immediately. Both Ben-Gal and Nemirovsky left their day jobs to focus on iRule early this year. Soon after they raised about $500,000 in an angel round, including an investment from
Compuware's new venture capital arm. The company recently hired three people, moved from Ben-Gal and Nemirovsky's suburban homes to the Compuware Building in downtown Detroit, and is prepping to launch the Android version of its software.
Ben-Gal recently invited
Metromode's Jon Zemke into iRule's new office in the Compuware Building to talk about building a tech start-up to last instead of for acquisition, the emerging app economy, and his native Israel.
You and your partner built iRule to use at your homes. What happens if you are watching TV late at night at home and it starts to malfunction? Do you have to call the helpline like everyone else?
It used to be I was the world expert on this system and was the best and fastest at fixing it. Now that we have been hiring people to do that more full-time, I probably don't have that expertise on every component of the system. Luckily the system doesn't really fail.
We don't think of ourselves an an app company. We happen to deliver a solution into your home via the app because it's best way to reach your living room. They're choosing us because it's a better solution, not because it's $3,500 cheaper. It really just has to work and it has to work all the time. When you pick it up and press volume, it has to work all the time. When I was traveling and I didn't get a tech support call from my wife, I knew it was ready for prime-time."
iRule seems like a classic example of a start-up built for acquisition. Is that the plan?
Not at all. When we were doing our fundraising there were some potential investors who were put off by that. We're not against a possible acquisition, but our business plan doesn't really address it. We just want to build a solid company that is going to be profitable. If an acquisition comes down, so be it.
It's so rare to hear that from a tech start-up these days.
We got into it because we both wanted to be in it. We both had good jobs and gave up the security of a steady paycheck. You do it because you really want to do it. I laugh when I tell people that I haven't set an alarm clock in more than six months. Every night it's hard to go to sleep because what we're doing is so interesting.
Compuware's new venture capital arm made one of its first investments in iRule. How did that deal come to fruition?
All of our investment to date has been from local Michigan investors. When we started out looking for investors, our CFO said the amount of money we needed was too small for a VC to really care about. Their overhead is the same if they invest a dollar or $5 million. That's fine. Ours was a classic angel, friends and family round. ...I went to pitch Compuware because there aren't many billion-dollar high-tech firms in Michigan. It's a good relationship to build. I remember telling our CFO that it was probably going to be a waste of time, but it can't hurt. We started a conversation with Compuware in April. By early in the summer they agreed to be an investor. They are more than an investor. They're a great strategic partner. That lets us bring products like our new Android product to market sooner.
I've heard angel investors say the resources they bring to the table are key to growing start-ups and I have heard entrepreneurs say angel investors are little-to-no value added. What has been your experience?
Some of our investors are passive and in reality we are a diversification of their portfolio. Some of our investors are very active and very savvy business people.
Downtown Detroit has seen a burst of venture capital activity lately with the addition of new VCs like Detroit Venture Partners and venture capital subsidiaries for the likes of General Motors and Compuware. What do you think this says about the business leadership, long notorious for its overly conservative decision-making and suburban bias, in this region?
We're seeing a shift in people who appreciate the city and Michigan. When you see the
Quicken Loans, GM and Compuware VC arms, you see a recognition that growth in the future has to be a blended mix of some riskier, new and interesting investments. The idea that you can bring some new companies and investments into the area and electrify it is amazing. It really feels like a privilege to be a part of a solution and not the problem.
A lot of app companies start out as side projects for people working full-time jobs. Do you think the part-time, dipping your toes into the water is a better approach to starting a business than just jumping in heads first?
I like the idea of a crawl, walk, run. Once we saw things really taking off, it was a really easy decision to make. For us it was really the only way to do it.
There's a good bit of skepticism about the real staying power of the so-called app economy. Is that justified?
The app economy is a real economy because it offers a utility that doesn't exist with other things. These devices are changing how people consume information on any type of medium.
Mobile apps can now replace our remote and adjust our thermostats. What's the next frontier for apps?
Having seven different apps is like having seven different remotes. Having an app that just controls your lights isn't enough. I want an app where I can hit play on my Blu-Ray player and dim the lights. That's the next step, unifying the content in people's home so it's a richer experience and tying that into one solution.
Efforts like the Michigan Israel Business Bridge initiative are trying to create more entrepreneurial synergies between Michigan and Israel. What lessons should Michigan take from Israel when it comes to growing its entrepreneurial ecosystem?
Israel is probably the best place in the world for entrepreneurs and start-ups. You can't get a cup of coffee in Tel-Aviv without hearing three or four conversations about start-ups. There is a culture of entrepreneurship so people are unfazed by failure of a start-up. Here the idea of entrepreneurship is less developed.
What lessons can Israel take from Michigan?
Perseverance. One thing Michiganders do well is persevere and not just jump to the next thing. That's why you can have a company like Chevy that celebrates a 100-year anniversary.
Jon Zemke is the News Editor of Metromode and the Managing Editor of SEMichiganStartup.com. He conducted and condensed this interview. His last feature was "Straight Talk with Benzinga's Jason Raznick" .
All Photos by Matt LaVere