Eight years after its first financing round, selling its technology to Microsoft for $20 million, Panorama Software Systems is holding a new financing round.Gilad Nass   13 Apr 03   16:32

Roni Ross

Roni Ross

Ross was the first Israeli to sell a company – to be accurate, most of a company – to Microsoft (Nasdaq:MSFT). At entrepreneur conferences, which are not exactly bastions of feminism, she and Ornet cofounder Dr. Orna Berry (now chairperson of Lambda Crossing) are always cited as proof that ?you don?t have to be a man to succeed in high-tech.?

After working for years in various positions in Israeli companies, Ross went to the US in the 1980s to complete a Ph.D. in computer sciences. She founded a company to market voice mail systems, which failed. After joining CAD/CAM (Computer Aided Design / Computer Aided Manufacturing) company MetalSoft, she returned to Israel, after convincing its owners to set up a development center in Israel. Ross later sought alternatives after it became apparent that global demand for CAD/CAM solutions was stagnant, and founded a new company to develop Microsoft Windows applications.

The company?s activities in Israel exposed Ross and her team to market needs, and she decided to switch to OLAP (online analytical processing) business intelligence software, which provide executives with graphic depictions of market conditions, instead of having to wade through mountains of data. In contrast to companies that still based their programs on DOS interface, Ross gambled on Windows.

Ross financed her company from her own pocket, after local venture capital funds declined financing. She did not want a grant from the Office of the Chief Scientist. She founded Panorama Software in 1993, and began amassing Israeli customers within two years. She still needed money, and in July 1995, Ross convinced Ariel Landau, a former executive at Elbit Systems (Nasdaq: ESLT; TASE:ESLT) and Elscint (NYSE: ELT ) and now manager of Pamot Rehovot Advisors, and another partner to invest $200,000 – less than half the amount she had asked of the venture capital funds.

Picture-taking in front of Microsoft

The rest is history. A stubborn pursuit of OLAP expert Nigel Pense led to a meeting in an English pub. Pense was so impressed that he promised to help the tiny company, and shortly afterwards published a report praising Ross?s technology.

At this point, Ross decided the time had come to expand outside of Israel. In 1996, she began meeting with international software companies, including forming personal connections with Microsoft staff in Seattle. ?I even traveled to Microsoft to be photographed in front of the company?s sign to tell them I had been there. I couldn?t think about anything else,? she relates.

Panorama Software?s staff presented their software to Microsoft?s team, after which they were asked to stay for another meeting. Three hours later, Microsoft offered to buy the company. Ross owned 87% of Panorama Software at the time.

?We had 60 customers in Israel at the time, including major companies like IDI Israel Direct Insurance, Sahar Israel Insurance Co., the Israel Prison Service, Cellcom, and Elite (TASE:ELEI1),? says Ross. ?Microsoft didn?t plan to acquire our product and sell it as is. They wanted the development plans in order to integrate them into their work environment.

?How would that have affected our existing customers in Israel? Who would support them? I therefore proposed they buy the technology, rather than the company. They also realized the logic of having a partner in at least one place who could sell existing customers the product developments derived from the technology that they would later try to market. They did not reduce their offer, but actually raised it a little, because the Israeli customers were a kind of liability, and they would have had to invest more resources in continuing to handle them, were they to take over the entire company.?

?Globes?: It was widely rumored that the deal was worth $20 million. You?ve always declined to comment about the amount, despite attempts to reveal such information.

Ross: ?It was in the area of the amount you mentioned. I?m so used to being careful not to reveal the price that I don?t even talk about it to myself.?


The deal was completed in October 1996, and Panorama Software?s original development team moved to Microsoft?s offices. ?The fact that Microsoft bought the technology and not the company kept me alive,? admits Ross. ?If I had sold the company, I?d have been left without a framework to exploit opportunities that came up a few months later, when Microsoft decided to stay in the field and provide the technology on the server side. In effect, Microsoft enabled us to reenter the field by offering client-side products. As in similar agreements, we signed commitments not to work in the side for five years afterwards. Since they stayed in the server field, they didn?t care that we sold supplementary products to the other side.?

Because the Microsoft deal caused Panorama Software?s original development team to move to the US, the company hired a new team, headed by Kobi Averbuch, who,four years later, is still R&D director . The old team trained the new team for a few months to support the company?s existing customers. Once Ross realized that Microsoft was leaving the client field open, the new team began working on new developments.

The five-year non-competition clause in the agreement ended in 2001. Coincidentally or not, Microsoft then acquired Israeli start-up Maximal, which became the basis for Microsoft?s Data Analyzer. This is a wholly client side product that, for $150, displays the user?s Excel data graphically .

Ross was not satisfied with just one exit. In 1999, she signed an agreement with Canadian business intelligence company, Cognos Incorporated (Nasdaq:COGN; TSX:CSN). The agreement stipulates that Cognos will have exclusive worldwide marketing rights (outside Israel) to Panorama Software?s second-generation product. Ross says that after waiting for Cognos to act, she realized they had no intention of marketing the product, and she cancelled the agreement in 2001.

The contract stipulated that Cognos would pay several million dollars in advance on future royalties, with no right to demand a refund if sales failed to materialize. ?There?s never any harm in earning money, especially for a small company,? said Ross, with a mischievous smile.

?I add every function the customer wants to the product.?

Ross has said in the past, and reiterates now, that she preferred not to get a grant from the Chief Scientist, in order to avoid future obstacles, in the event that she wanted to sell the company to a foreign buyer.

Did you always plan to found a company for sale?

?It was a very hard decision to take. I had received a grant from the Chief Scientist for my first company, so I knew exactly how the procedure works. I nevertheless decided to fund Panorama Systems myself. When I met with Microsoft, they asked me if there was any reason that deal might not go through, and I could tell honestly them, no.

?It?s not that I had planned from day one to found a company for sale, but it was obvious that if I wanted to reach international markets, I had to plan in advance to collaborate with international companies. There aren?t any clever tricks – in order to break into the international market, and grow over time, you have to enter into these partnerships.?

The decision not to seek the assistance of the Chief Scientist was just one facet of Ross?s three-step plan. The second stage was a mad rush to win Israeli customers, in contrast to most Israeli high-tech companies that view the Israeli market as a secondary market at best. ?I believed that if I could approach a large partner with a large customer list, I would be more credible. When I told Microsoft that I had 60 customers in Israel, some of them major companies, it proved I was serious.?

Panorama Software?s third facet is its technology, and Ross claims it is the secret of the company?s current success. ?I add every function the customer wants to the product. That?s a heavy burden on my development team. At one point, I had 20 versions of the product. Since all the customers were only a half-hour drive away, it was a lot easier to visit them and meet their demands. An international company can?t do that.

?Sometimes, the weirdest customer demands have become our most popular products. In Business Intelligence, you almost always find to an enterprise that already a particular kind of system, and they know exactly what they want the next product to do. It?s therefore crucial to listen to each customer?s specific demands. I worked with Cognos?s staff, and it was another world. Their development guys never saw or spoke with a customer in their lives.?

Leaving the driver’s seat

The interview with Ross was conducted moments after she had lectured at a joint Panorama Software-Microsoft conference. The companies maintain close cooperation. It took place two weeks after it was clear that the company had completed a multimillion dollar financing round, its first since 1995, from US venture capital funds Ross declined to name them.

Panorama Software moved its development center, which has 35 employees, to Toronto, after the company?s Canadian investors proposed that city as the base from which to conquer the North American market. The fact that besides, New York, Toronto is the only North American city with direct flights from Tel Aviv was also a consideration, says Ross. In a related measure, Janice P. Anderson, a former director of customer relations at Lucent technologies (Nasdaq:LU), was appointed CEO. Ross kept her position as executive chairperson.

Ross naturally decline to expand on the company?s revenue, noting, ?Part of business intelligence includes keeping secrets from competitors. She claims revenue in 2002 was 40% higher than in 2001. Ross believes it is now easier to explain to companies why they need business intelligence solutions. ?Despite the cuts in IT investment, companies need to know why and where they?re losing customers more than during the period of euphoria. We provide the tools to help them figure it out,? she says.

On stage before 300 conference participants, Ross looks like someone to whom it is important to clarify that a financing round is not a sign of financial distress. ?Following the announcement about the round, people began asking me what had happened. We managed for so long without external capital, and suddenly we were raising money. The financing round is intended to invest more in growth, including paying an American CEO and opening a regional office. The fact that we now have more partners in decision-making processes improves our position,? she says.

I envision a different scenario: Panorama Software has acquisition offers, possibly from Microsoft, and you want to raise the value of the company. You?ll use the money in the coming months to win new customers in precisely those regions that are important to the potential buyer.

?This investment is intended to raise the company?s value, but we have no acquisition offers at the moment, not from Microsoft or anyone else. At least, no offers that are relevant to us. We believe that the IPO market will recover in three of four years, and we?re definitely considering that option. But Microsoft has already surprised me once, and they might do so again.

?I think that until now I?ve done the best I can for me and my partners, but the time has come to begin something different. After driving for many years, it?s amazing to sit in the passenger seat and watch the awesome ride.?