And The Huge Risks It Took On The Path To Success
We're Not Alone Anymore
In early 1997, Roee Nanas, a computer expert, was a guest at “Zombit”, an Israeli television show bringing the latest developments in the world of home computers. Nanas showcased a new program with a feature that was then-unheard-of. It was an instant messaging platform that could connect two people using two different computers, on two different networks, from two different places. “We are used to surfing the web by ourselves”, said Nanas on that historic broadcast, “but with the help of ICQ — meaning I seek you — every one of my friends who is currently online could send me a message or receive a message from me in real-time”. The internet never looked the same.
A few months earlier, four 25-year-old mostly long-haired men were sitting together in an apartment. Yair Goldfinger, Arik Vardi, Sefi Vigiser, and Amnon Amir were a diverse bunch. Amir and Goldfinger had an academic degree, Vardi and Vigiser were high school drop-outs. According to the book, “Companies that Changed the World” by Jonathan Mantle, the four friends decided to brainstorm until they would successfully find an idea for a product to develop. Their goal was to think of a platform that they, themselves, would also like to use.
It took a few days and the decision was made; They would create an instant messaging platform to allow users to easily communicate with their friends online. The four needed money so Arik asked his father for help. Arik’s father, Dr. Yossi Vardi, was a well-known engineer and entrepreneur. Arik didn’t tell his father anything about their plans, he simply asked for funding. “I knew they were a bunch of very talented kids, so I gave them a little bit of money”, said Yossi years later.
The work started and a company was formed. One of the guys' fathers suggested the Latin word “Mirabilis” (marvelous) as the name of the company and the boys loved it. When they found out the term is also the name of a flower they decided to create a daisy-like logo for their flagship program, ICQ.
Yossi Vardi tells that when he saw what they were working on for the first time he understood the world had changed for good. Although an experienced entrepreneur himself, he later found the young boys could teach him a thing or two about growing an online business.
“‘Sefi Vigiser was in charge of the features”, Yossi recalls and proudly tells this story. “I asked ‘which language is he programming with?’ They told me he doesn’t know how to code. I asked ‘what is he doing at the company then?’. My son, Arik, replyed ‘dad, you don’t understand anything. Sefi invented the uh-oh sound’. I asked ‘what is the uh-oh sound?’ When they played it to me, I thought it was terrible. Sefi was confident and explained that this sound will cause a viral spread of the product. I asked ‘what does this have to do with a viral spread?’. Sefi explained, ‘when you walk into a room and hear that sound — if you don’t know what it is, you will ask what it was. If you do know what it is, you will ask for the person’s ICQ number’.”
Development took less than 3 months and the first version was ready. Yossi Vardi understood the importance of growth and creating a large user-base. He suggested releasing ICQ as a free program. “The internet — back then — was similar to the wild west”, the book “Companies That Changed The World” describes. “Vardi understood in real-time that you must make yourself known. If users will join and your product will hit the rivals, then money and profits will later follow”.
ICQ started catching on like wild-fire. The founders, after raising a modest first-round sum, flew to California and worked tirelessly on improving the program. Certain features like offline messaging, a searchable directory, and a resumable file transfer were all insanely innovative at the time.
According to the book “Start-Up Nation” by Dan Senor and Saul Singer, 7 months after launching, and at a time when only 22% of American homes had internet access, ICQ reached 1 million users. It took another 6 months to reach 5 million. The small company saw some 100,000 new users signing-up every day.
Yossi Drives a Hard Bargain
While ICQ grew more and more popular, Yossi was attending dozens of conferences. Early-on he signaled two potential buyers, Microsoft and AOL, and eagerly presented the program to representatives of the two companies. Vardi kept telling them how fast ICQ is growing and piqued their interest. He was offered millions, and later tens of millions of dollars to sell, but Vardi declined. The price was not right in his opinion.
Vardi was playing tough but the reality was far from being stable. The company had little money due to its decision to minimize external funding. The servers were also starting to feel the weight of the millions of users chatting away all over the world. Lastly, although issuing two patents, Vardi was constantly concerned that another company will come by with a newer-better product and speed through the competition.
“To my wife, I say it [ICQ’s sucsses] was skill”, Vardi said, “but really it’s both luck and skill. If they came to me a year earlier, not in 96' but 95', there would have been too few people who were using the internet. In 97', there were already 7 competing products, and 2 years later there were 1,000 competing products. So they were incredibly capable of developing the product, but they also had a large amount of luck with the timing”.
In 1998, ICQ reached 12 million users. Yossi Vardi was called to a meeting in AOL headquarters and an amazing story occurred, as told in the book “I SEEK YOU, Inside Yossi Vardi’s Head” by Anthony David:
Vardi was sitting in the parking lot of the AOL headquarters when he called his young partners to tell them about the meeting. “I told them we have no deal”, Vardi said calmly to the anxious co-founders on the other side of the line sitting all the way in Israel. “What do you mean? how much did they offer?”, the three partners asked (by then Amnon Amir had quit and sold most of his shares in the company). Vardi responded, “225 million dollars”. The cries of disbelief coming from Tel Aviv were heard well over the phone line. “You said no to 225 million?!”, they shouted, “you have to call them back and tell them we will take it”. Self-doubt started creeping into Vardi who tried convincing the guys it’s worth waiting a bit longer for a better deal. They wouldn’t have it. Vardi hung up the phone and called his contact at AOL, planning to tell him that he will take the deal. Vardi’s contact didn’t answer, he was out of the office. Yossi Vardi then had a second second-thought, he came back to his senses and healthy instincts and decided to wait for a better offer as he planned.
It took 4 more months to settle the deal to Vardi’s liking. AOL bought ICQ for $407 million. That one missed call was worth $182 million. Mirabilis made it’s investors $130 for ever $1 they invested. The three remaining co-founders made $70 million each.
The “Mirabilis Effect”
18 months after that brainstorming session ICQ was sold for the highest sum ever to be paid for an Israeli tech company at the time. The story sparked a generation of Israeli entrepreneurs dreaming of making a big “exit”, selling a company for a huge sum. “Loaded”, a popular Israeli TV series was created based on the story of ICQ and was later sold to Fox and to British channel 4.
The three co-founders continued investing and forming companies. Some failed miserably. Yossi Vardi became one of the most important and well-respected angel investors in Israel and is still considered a “start-up guru” by many around the world.
AOL managed to grow ICQ tenfold. In 2001 the program reached 100 million users. However, with fierce competition emerging from the likes of Skype, Facebook, WhatsApp, and of course text messaging, AOL decided to sell ICQ to Mail.RU (formerly DST), a Russian company, for $187.5 million.
ICQ, you might be surprised to hear, is still active today enjoying millions of users and decent popularity mostly in Russian-speaking countries.