S.F. CEO leads Israeli high-tech firm to interactive success

JERUSALEM — "It's been an interesting ride," said Joanna Shields, the chief executive officer of interactive programming developer Veon Inc., sitting down a little breathlessly behind a desk in her makeshift office in Herzliya Pituah.

She isn't referring to her journey from the company's headquarters in San Francisco to the new research and development offices in Israel. Instead, she's talking about the whirlwind both she and her company Veon, formerly Ephyx Technologies, have experienced in the last two years as it redefined itself for an Internet age.

Today the company appears to have made the switch as recent licensing agreements with America Online and [email protected] testify. The question now is whether it can overcome obstacles to become what Shields hopes will be the standard in the interactive video market.

Shields, 38, is a new breed of Israeli high-tech executive. She's American, a woman, and the mother a 1-year-old. It's a mix that isn't necessarily easy here, where many still have old-fashioned prejudices about women's role in the high-tech community and society at large, let alone reservations about U.S. CEOs in the Jewish state.

Shields takes this in stride, in part crediting her Israeli husband and familiarity with Israeli companies.

"I felt I had a commitment to other women to prove this was possible," she said. "I wanted to show that a woman could run a company, have a baby and continue to drive the business — not just to sustain it, but to drive it to new heights."

Veon was founded in 1994 by Avner Peleg, Yossi Hermush and Eliahu Efrat, who had developed a sound technology for video-publishing systems for use by CD-ROM developers. However, the company's direction was unclear and it had not found a suitable market.

Gemini, the lead venture capital fund, insisted that Ephyx bring on an American CEO who could help the company redirect toward the U.S. market.

Shields, who is based in San Francisco, was hired soon afterward, bringing with her vital marketing experience from a post as vice president of global sales and marketing for Electronics for Imaging, founded by Israeli Efi Arazi.

Her first task was to redirect the company's technology from CD-ROM applications to the Internet and Interactive TV — in the process, changing the name to Veon. Today the company develops interactive broadband Internet programming, combining the Web with video and other forms of rich media, like animation for use in e-commerce and advertising.

Viewers, using the free downloadable VeonPlayer, can watch a video, movie trailer or other entertainment programming on the computer and click on various images within the video to obtain more information. The technology also enables advertisers to track consumer habits and trends.

Other indicators suggest Veon's early success. The company signed an agreement with [email protected] in October to develop interactive advertising for its broadband audiences, and AOL agreed to use Veon's software in its high-speed AOL PlusInternet service in January.

"AOL and Excite gave us legitimacy and ubiquity," said Shields. "These agreements validate what we're doing."

Like all Internet companies, the key question is how the company intends to make money and, as for most, the answer is vague. Shields believes it will be easy, as sites now pay a click charge to other sites that have channeled a visitor their way. Shields envisions a similar concept, with firms paying Veon for every customer brought to the site or purchase made through their technology, with additional revenue being brought in by creating content for the sites.

Veon has no intention, however, of charging for its technology. "Our intention is to become the de facto standard for the industry and to do this our technology must be free," she said.

Shields says Veon now has the luxury of being virtually alone in the market, but she knows it won't last.

"We fully expect to see someone soon but don't know who they'll be. Ephyx had competition in the CD-ROM area, but we don't see anyone on the horizon now."

Since Ephyx became Veon it has held one private placement, raising $9 million in April of last year at a company valuation of $20 million. Investors included Hambrecht & Quist, the Eucalyptus Fund and Los Angeles venture capital company East West Capital. Previous investors include Japco, Transcosmos USA, the Gemini Fund, HK Investments and John Sculley, the former chairman of Apple. Another placement is currently in the works, with the goal of raising $25 million on a company valuation of more than $100 million.

"There's lots of venture capital out there, but we have to select the right money and the right investors," said Shields. "This is an important round for us."

The company also plans to open offices in New York and Los Angeles and to double its staff of 56 employees by summer.