by Arlene Marom

Friendly Technologies (www.friendly-tech.com) - an Israel-based startup (with offices in NYC and London) established in 1997 - has managed to survive these very lean years, despite a lack of current equity investment and the demise of many of its clients. This remarkable staying power is due in no small part to the efforts of its determined, and very practical CEO, Elan Migdal.

Friendly designs, develops and markets a wide range of Client and Server products for subscriber acquisition, connectivity, and self-support - including diagnostic and QoS agents - that create an end-to-end solution for ISPs, SPs, and Telcos who offer dial-up, xDSL, cable and wireless services. Through channels such as Level 3 and Sprint, their products offer seamless migration between networks, and enable subscriber problems to be quickly and easily solved via the Internet

Like so many other companies active during the heyday of the dotcoms, Friendly dreamed of capturing significant market share - estimated at that time in the tens of millions of dollars - and in fact, in their first year, before the crash, they signed contracts with major customers valued at USD 4.5 million. But, like so many of their peers, they were hit hard by the sudden downturn in the communication and SP markets. Many of their clients went bankrupt, others survived but didn't pay their bills or honor their agreements, and others simply stopped buying Friendly's - or anybody's - software.

Ironically, because Friendly had never been well funded, and was never a rich company, it was able to survive, since, from the beginning, they were forced to focus on sales, and not on dreams. Out of necessity, they built real marketing channels, cultivated real customers, and managed somehow to live from their own income. When times got tough, they tightened their belts, reduced costs to a bare minimum, cut down on marketing and manpower, and even on R&D … and today, they are completely self-sufficient, with no outside funding whatsoever. They have become not only lean, but also mean - competitive and aggressive, they reduce prices along with salaries, and do whatever it takes to get and keep their customers. And, according to Elan Migdal, they can continue this way indefinitely, until the market improves - as long as their customers pay their bills.

And, when things start to look up, they have plans for a very bright future. Though some of their competitors are considerably larger than Friendly, they also have considerably larger problems. Some have solved their problems through mergers; others have been unable to develop long-term survival techniques. So, it may turn out that Friendly will be one of the few left standing in the field. And, there will be many opportunities for companies like Friendly, who offer much-needed services, simplifying high tech for novice users.

When the company first opened its doors, everyone was using dial-up. Today, many have switched to broadband - and Friendly was ready for the switch. They developed products and found partners that would assure the company's future. They have already signed an agreement with IBM, through which IBM will distribute its products to the Broadband market with Friendly's PPPoE Client inside. According to Migdal, "We have undergone a lengthy evaluation process at IBM bringing further proof of our position as a provider of carrier class solutions for Broadband. I believe that this agreement will help us enhance and promote Friendly's products." This cooperation is expected to result in an ongoing, long-term source of revenue for Friendly.

In the future, the market is expected to shift to wireless home networks that connect several PCs to the Internet. Since most homes don't come with a systems administrator, help will be needed for these networks, creating a potentially huge market as private people buy second and third PCs and other devices. Migdal believes that within 3-5 years, this market will mature, and Friendly is ready for the changeover - they have the basic technologies and solutions for both pure wireless and WLAN.

Friendly has learned a lot - both from what it has done right, as well as from the few mistakes it has made along the way. First and foremost, they learned to listen to the customer. "You must always understand the true value of your product for the market. Be honest; find out what your customers think you are giving them and what your real value is to them. Without real value, you can't survive", advises Migdal. Talk to the customers, again and again. Understand exactly why they are willing to spend money to buy your product.

Migdal takes his own advice very seriously. For example, when large telcos began asking for integrated VPNs and solutions for management of different networks, Friendly created new products to answer these needs. Now they are getting requests for products designed for the future residential LAN market, and are hoping that these requests represent a real market.

The best advice Friendly ever got was to concentrate more on sales and less on marketing - and not to be pushed by time-to-market pressures. Migdal says it is crucial to hook up with partners who are bigger and better known than you, since they give you credibility in the eyes of the customers. Without the right partners, your chances to sell while you are unknown are significantly lower. And, it is easier to convince potential partners that the partnership will increase their sales … easier, that is, than convincing a potential customer who has never heard of you, to buy your relatively unknown product. For the partner, while it is true that you must fill a real gap, since it is technology you are selling, it is less important to your partner that you are small.

The biggest mistake that Friendly may have made is not having hired enough of the right people at the right time, especially to handle the vast US market. And, if he had it to do over again, Migdal would have opened the company in the US. Hopefully, Friendly will still have the chance to correct their errors - by stubbornly surviving until things start to look up again.

Arlene Marom, the Director of Tech River Ltd., is originally from Miami, Florida. She moved to Israel in 1976, and since 1995, has been working with Israeli high tech startups. She can be reached as follows: Tel: 972-3-6419107, Cell: 972-52-4527179, E-Mail: arlene@tech-river.com