Unlike market leaders WeDo and Subex, analysing Israeli RA vendor cVidya always causes me headaches. For example, they tell their customers they are headquartered in the USA, but they submit their figures to a Deloitte ranking for fast-growing companies headquartered in Israel. But cVidya are backed by venture capital, which means they are under no obligation to tell the public anything about their results, never mind telling the truth. So over the years, I have relied upon piecing together scraps of data from here and there, not least from the numbers reported by cVidya to Deloitte’s Israeli Fast 50. cVidya once again features in the Fast 50 for 2013, being ranked 29th fastest growing firm in Israel. This was achieved by delivering 175% revenue growth between 2008 and 2012. And from that, I estimate they probably suffered a 20% fall in sales between 2011 and 2012, with revenues dropping from around USD52mn to around USD42mn.
Archimedes said: “give me a place to stand on, and I will move the Earth.” He was discussing the principle of leverage, which seems oddly appropriate. To calculate cVidya’s revenues from the Israeli Fast 50 numbers requires two fixed points, for security. Then we can plot the curve of cVidya’s growth over time. After following cVidya for ten years, I finally have two fixed points suited to the task.
The crucial first point is found way back in 2004. We know, with a very high degree of certainty, that cVidya’s 2004 revenues were just less than USD63k. How do we know this? Because in 2008, cVidya received a ‘special mention’ from Deloitte, despite failing to qualify for their Fast 50 Index. At the time, cVidya was very proud of this, and issued a press release. Why did they fail to qualify? It had nothing to do with arguments about where their headquarters were. The growth of a Fast 50 business is always measured over a 5-year span. cVidya’s 2004 revenues fell below the USD63k threshold to be included in the Fast 50 ranking.
Step forward to 2009, when we can be confident that cVidya’s revenues were around USD20mn. The backers of cVidya and ECtel negotiated their merger, there was good evidence that the two firms had roughly equal revenues, and ECtel’s revenues were in the public domain by virtue of their stock market listing.
It is important to emphasize that cVidya has never publicly admitted to falling revenues. They have, in contrast, often stated they were growing. So if the 2009 revenues were higher than the 2008 revenues, and the 2012 revenues are 175% higher than the 2008 revenues, we know that 20*(1+1.75) = USD55mn would be the high end of the range of possible 2012 revenues. But this would assume negligible growth between 2008 and 2009. This is unlikely. At the time, cVidya frequently reported new sales and were very upbeat about their growth. So the more that cVidya grew between 2008 and 2009, the lower their 2012 figure would be. I came up with the following growth estimates, based on the Fast 50 numbers and by setting the 2004 revenues and 2009 revenues to USD63k and USD20mn respectively.
Numbers below the red line are for the post-merger cVidya, incorporating ECtel. Numbers above the red line are estimates of growth between USD63k in 2004 and USD20mn in 2009. From 2009, all revenue estimates are consistent with the 5-year growth figure reported in the Fast 50.
There is some guesswork here, but the numbers make sense. Crucially, it would be very hard to engineer a model to fit Deloitte’s Fast 50 numbers, without showing cVidya had a downturn somewhere. In the past, cVidya have talked big about their growth. This year, they were quiet about growth. Hence, I make the rational assumption that the start-up did grow impressively during its early years, but it plateaued following the merger with ECtel. If the model is wrong, there are only two ways to find out: wait for the figures in next year’s Fast 50, or wait for cVidya to be more transparent about their financial performance. I know which I think will come first.