Israeli Internet Startup Concentrates on Customers as Dot.Coms Fall

[JERUSALEM] – When confidence falls in the high-tech sector and financial resources dwindle, what can startups do in order to survive?

That’s the situation facing thousands of businesses globally. In Israel, Zoomix, a small, Jerusalem-based, B2B ecommerce software company, faces the difficult challenges posed by a hostile market climate.

Venture capital companies, which used to be friendly to small startups, are colder than before, says chief executive Avinoam Omer.

“They used to come looking for us, with money to offer,” he says.

Now, investors are more conservative and tight-fisted with their investments. As a result, the time isn’t right for his company to turn to venture capitalists as a source for money, Omer says.

“Not now,” Omer says. “We would not get a real valuation. We will not settle for a low valuation.”

Similarly, Zoomix does not expect to receive lucrative merger or takeover offers. Instead, the company is hunkering down with a strategy it hopes will sustain it until market conditions improve.

Although the company no longer has the option to hire staff at the rate it had hoped, Zoomix moved up product deadlines in order to meet its goal of serving paying customers. That accomplished, Omer says, the goal is to stop acting like a startup and focus on taking care of clients.

“This is not only so that we have something to show venture capitalists in the future, but also so that we can function as a traditional company and not just as a,” he says.

Zoomix is counting on customer satisfaction and loyalty to ensure a steady cash flow that will keep the company viable.

It is an uphill battle but not one that will last forever, Omer says. Because the company still has “safety nets,” about which Omer would not elaborate, the situation for Zoomix is not as dire as at some other companies.

The company’s strategy is to concentrate on the present and work toward a future sure to improve, Omer says, even though the industry is in constant flux.

“The B2B segment is considered by many analysts to be the hardest-hit sector of the dot.coms [during this industry downturn],” Omer says. “This is the part of the market that we’re involved in.”

However, when Zoomix began operations in September 1999, B2B was one of the hottest markets for startups. Omer says he believes the realistic state of the sector falls somewhere in the middle.

“The [market] isn’t as good as people thought it was back then, and it’s not as bad as they say it is now,” he says.

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