At the end of the previous decade, it was one of the most promising hi-tech companies in Israel. In 2009, Yishai Green, an entrepreneur and celebrity, and his colleague Tomer Dvir, were ambassadors of Israeli high-tech: they presented Soloto to delegations of foreign investors, used to appear at entrepreneurial events, and Green in particular shared with the public the first years of its existence when he photographed himself and his colleagues for the second season of the series “connected”.
In 2009, the company was managed for three months by former Prime Minister Naftali Bennett, who was brought in to raise the first institutional capital for the company. Immediately after that he left to manage the Yesha Council and the management of the company was returned to the hands of Dvir.
In any case, Soloto has become a symbol of the developing Rothschild Boulevard, as it dictates a trend in which technology companies provide employees with proximity to the place of residence and the possibility of getting to work by scooter or bicycle. In 2010 it became even more talked about after it won the prestigious award of the American technology blog TechCrunch as the most promising startup.
But at the beginning of the week the dream ended. The Ashurion company, the owner of the Israeli Soloto, decided to close the development center and lay off the 120 employees in two strokes: 80 employees immediately and another 40 employees who will help transfer the company’s technology down in Nashville, Tennessee.
■ The dream of the high-tech company in question from Rothschild has come to an end: 120 Soloto employees will be laid off
The decision: a suggestion that came from the management in the USA
The layoffs were held in Israel, it is true, on Sunday, but already at the end of last week, news began to emerge in the US, mainly in local communities in Tennessee, Florida and Arizona about cutbacks in the global company. “Employees talked about it and it put some of them under pressure,” said a source close to the company. That is why the company wanted to conduct a move already on Sunday. They brought in one of the people who was responsible for the purchase, John Leonard, who is responsible for the product in the company, to talk to the workers here closely. It was important for him to be present on this day in Tel Aviv.”
We planned the layoffs in the company two weeks ago, and in the last few days it has become more tangible. “It came as a decision from above directly to the management in Israel, and from the moment it happened they wanted to get it out as quickly as possible,” says the insider. “They gathered all the employees for an intimate conversation. There was a lot of sadness, people were in the market, and on the other hand things were done in a planned and quiet way. There are many old employees here who have been together for many years.”
Programmer Ethan Hollander uploaded a humorous video to his TikTok account right after the announcement, in which the employees are seen digesting the news that landed on them all at once. “Everyone is at Atref, drinking alcohol like there is no tomorrow. Half of the company is at Atref, half of the company is crying,” he said in the video. Hollander also presented his LinkedIn profile and showed that immediately after the news broke, he received many inquiries from hiring and placement managers. The fired employees, with the exception of the 40 employees remaining until the end of the year, receive a hearing process but are exempt from work and are effectively free to look for a new job.
The development center in Israel mainly employs development, product and design analysts. In advance, there were no marketing, sales, finance or a group of management personnel working there, so the employees who are being laid off are all at the core of technological activities. In the existing team that will remain in the company until the end of the year, about 40 development, product and customer support personnel.
Reason 1: The global insurance market is under pressure
Ashurion purchased Soloto in 2013 for about $100 million, according to research firm PitchBook, and since then has operated it as its software development center for technologies that provide remote support for smartphones, laptops and game consoles.
What led the American company to give up Soloto’s dream, which promised to make remote support in the maintenance of smart phones and game consoles easy, cheap and accessible? The American Ashurion now faces quite a few challenges that put it in a problematic position in the market. First, it is an insurance company that sells policies to the final consumer on a variety of electronic products such as smart phones, laptops, game consoles, refrigerators, washing machines and ovens.
The insurance sector, and in particular for consumer products, is now under significant pressure due to the global increase in product prices and interest rate increases that reduce the purchasing power of consumers. On the one hand, the manufacturers of chips for phones and computers – such as Intel, Micron, Samsung and TSMC – are lowering their production forecasts, and on the other hand, online insurance companies are under erosion. They are finding it difficult to sell insurance policies at the same rate as in the past because of the economic slowdown, and on the other hand they need to raise capital non-stop.
Israel’s Next Insurance, for example, a private company that provides insurance to small businesses in the US, just recently announced a 17% layoff from the company, about 150 people, after it apparently had difficulty raising a capital round of the value it wanted in order to continue employing 800 employees.
Lemonade and Hippo, two Israeli companies traded in New York, also continue to take hits: Lemonade shares, for example, have dropped 55% of their value since the beginning of the year, compared to 14% declines in New York Stock Exchange shares, while Hippo shares have crashed by 90% of their price at the time of the merger The SPAC and last week received a warning letter from the management of the New York Stock Exchange for non-compliance with trading conditions, after its stock was locked for over 30 consecutive trading days at a price below one dollar. A series of American insurance companies such as Bistow, Genius Policies, Sidecar, Kotri and Roth Insurance have made cutbacks in recent months.
Reason 2: It’s hard to raise when the financial markets are bleeding
In addition to being an insurance company, Ashurion is a private company, which further depresses its ability to raise capital these days when financial investors – including private equity funds, for example – prefer to invest in profitable and efficient companies. Ashurion usually raises a credit line of hundreds of millions of dollars from funds and investment banks every year, and apparently this time too it needed to raise such a loan.
Moody’s agency, which rates companies that are in debt, last year gave it a not low rating, B1, after Ashurian asked to distribute dividends to shareholders. According to Moody’s, the rating came after Ashurian raised $500 million as an addition to a $2.8 billion loan program that it is required to repay by 2027.
However, Moody’s admits that the fact that the global company occasionally takes out large loans to finance dividends to shareholders is a constraint on the company’s neck. For example, the line of credit it took last year was for a plan to spend 3.25 billion dollars to pay dividends to shareholders and to pay expenses and fees.
The agency also claims that Ashurion’s insurance business is in decline due to the loss of large business clients. Apparently, these are device manufacturers and cellular operators that provide a similar service.
Reason 3: Soloto has become irrelevant
But you don’t have to work at Moody’s to understand that Ashurion’s support activity is not required as it was in the past. On the one hand, the issue of maintenance and support is increasingly in the hands of device manufacturers such as Apple and Samsung, and is less in the hands of third parties. In the US in particular, these are the communication providers – such as Verizon or AT&T – who provide their own maintenance service. The trend is similar in personal computers as well: the issue of support and maintenance has passed into the hands of the manufacturers.
In addition, the devices themselves have become simpler to operate, and consumers are more technologically literate. The proportion of consumers who purchase computers and mobile devices for the first time is decreasing and the need for software support and training from a third party has decreased.
In the corporate field, dedicated support companies or internal information systems departments usually make use of other companies’ software, such as TeamViewer for customer contactless support, while in the mobile field, the Israeli Communitech, which in the past helped telecommunications operators provide remote support, has changed its direction to the field of medical devices.
The vision around which Soloto was established – to greatly facilitate the use of software for personal computers or mobile devices – especially for senior citizens, has become less relevant in the new reality. In the field of hardware, repairing a broken phone or a cracked screen, there is a place for insurance companies or repair laboratories, which is why Ashurion purchased uBrakeiFix, an American chain of device repair laboratories, about three years ago. But there is almost no market left for Soloto’s software support dream.