Orr Danon On Raising $90 Million To Drive Artificial Intelligence To The Edge

Orr Danon is the co-founder and CEO of Hailo which has developed a specialized deep learning processor that delivers the performance of a data center-class computer to edge devices. The company has raised $90 million from top tier investors including Easme, Maniv Mobility, ABB Technology Ventures, Glory Ventures, NEC Corporation, and Latitude to name a few.

In this episode you will learn:

How big Hailo is today
The day they lost their CEO
Orr Danon’s top advice for other startup founders
Raising capital from top tier investors

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About Orr Danon:

Orr has over a decade of experience working at leading IDF Technological Unit. During this time led some of the largest and most complex interdisciplinary projects in the Israeli intelligence community. Orr has received for the projects he developed and managed the Israel Defense Award from the president of Israel and the Creative Thinking Award from the Head of the Military Intelligence.

Orr holds a B.Sc., Physics & Mathematics from the Hebrew University as part of the ”Talpiot” program and an M.Sc. in Electrical Engineering (cum laude) from Tel Aviv University.

Connect with Orr Danon:

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FULL TRANSCRIPTION OF THE INTERVIEW:

Alejandro: Alrighty. Hello everyone, and welcome to the DealMakers show. Today we have another founder from the Startup Nation, and I think we’re going to learn a lot. He was in the army for 13 years, so you name it when it comes to really understanding how to be with uncertainty, how to turn things around, how to find optimism, and possibilities where others perhaps see problems. He’s definitely been at it, and he’s been scaling, building, raising, so without further ado, I’d like to welcome our guest today, Orr Danon. Welcome to the show.

Orr Danon: Alejandro, it’s a pleasure to be here.

Alejandro: So, originally born and raised in Israel. How was life growing up there?

Orr Danon: Life in Israel is fantastic. It was very relaxed, as it always is in our country.

Alejandro: I hear you. Was there anyone in your family that perhaps was also entrepreneurial, or how did you get that?

Orr Danon: That’s a good question. I guess it was sort of a rebound. As you mentioned, I spent many years in the Israli Organization. I got to see how it works at a place where it’s not [2:37], so I wanted to experience that.

Alejandro: Of course. Typically, in Israel, my understanding is that you go to the army for about three years. What happened to you? Why did you stay there for ten more years?

Orr Danon: Well, it just kind of happened. Actually, I had a dream of being in the army, I read a lot of books about the Israel [3:14 – 3:12]. The army is a significant component in the Israeli technology scene, and there are a couple of units that are heavily technology-based. I was interviewed and recruited for a program for the [3:36], which is a nine-years’ deal. You get 3+6 for free. The first three years, you study physics and math [3:50] very extensive set of military training, basic training. I am a certified squad commander. [4:01] You learn about how the army works, aircraft, intelligence, and so on. Afterward, spread throughout the different military units, and I was stationed in the Israel Intelligence. That’s where I spent the next ten years of my service in the army. I stayed a little bit more than I had to.

Alejandro: As an entrepreneur, I’m sure that there were many lessons learned and many things that you took away from so many years in the army. What would you say are the top three things that you took away from the experience being in the army, and how do you go about applying them as you build and scale a business?

Orr Danon: That’s an interesting question. I think the first and foremost lesson that I learned is that the scale of opportunity or the scale of the possibility of what you can do depends on what you allow to be done. The army generally are very, very young – people that are doing topnotch activities. That’s very clear. The average age is well below 30. They are achieving amazing things. It’s not about whether you’re young or old, it’s much more about how much you allow yourself – people like to take risks. It’s more important to take responsibility and understand you need to take risks to be able to accomplish what you need to accomplish. This is one thing. Nothing is impossible – only if you believe it’s impossible. Good talent and good spirit will make up for many, many things. Not for everything, but for many, many things. This is, I think, one lesson that was very, very clear seeing how things work. This is one thing that was interesting for me to learn.

Alejandro: For 13 years, I guess without going into classified information or anything like that, but is there anything there that was a crazy event that perhaps you will tell your grandkids that maybe you can disclose?

Orr Danon: There was one time we worked on a project for a very long while, and it was tremendously hard. It was one of the hardest things I did in my lifetime – really complex like a system with 10, 12 [7:13] moving parts. It only takes a couple of weeks’ time – very complicated technology, innovation, and everything. It was a long project, and we were trying to achieve something that was very important. [7:33] it ended up in a computer that had to get some information. So, we had a first trial – a couple of years of work. We were waiting all night for something to work, and it didn’t. All the senior officers were there waiting to have an exciting moment. It seems like nothing happened. “Just go home.” After a few weeks’ time, we had a second try. This time, no senior officers came to waste the night in case it wasn’t going to happen. Then in the middle of the night, one of my soldiers [8:13 – 8:17]. The computer crashed. Everyone was saying, “Hum. That’s a bad problem. That’s a bad thing, a problem.” One of the other guys said, “If only we had tested the [8:31 – 8:36]. Everything worked well and succeeded. It was a very anti-climax moment. I learned [8:44 – 8:50]. That was one of the biggest achievements during my whole time.

Alejandro: I can imagine. Then, in 2016, you decide to leave. Why did you decide to leave?

Orr Danon: That related to what I learned. I also learned that in big organizations, no matter how exciting it is what you’re doing, it’s very hard at some point when you’re new to the position, you’re feeling that everything depends on you to make the impact. At some point, you realize the reality, which is a big place. You can just step down for a week, for a month, or a year, and basically, everything will go on. It’s not like everybody can just step down for a month. Then everything would collapse, but [9:54 – 10:01] and I wanted to do something in a small place. Somewhere I can build direct implications on things I’m doing well and on my failures. I wanted to have a real sense of the ability to say which is harder. It’s very hard to fail in a big organization and [10:29]. So, in both ways, I wanted something which was more mine and smaller. So, I told my mother that I intended to leave, and that’s what I did at the end of ’16. I started thinking about what to do next.

Alejandro: Why did you leave, Orr? Why did you leave?

Orr Danon: I felt like I’m not getting excited from things that no one person should be excited about and very frustrated about things that you shouldn’t be frustrated about. I realized that I just had enough, and I wanted to change. I wanted to change the biggest change that I could make without [11:20]. I decided I wanted to open something. I didn’t really care. I must admit, at that point, what I wanted to have a team and cybersecurity – semiconductor that would not be – just wanted to have this adventure.

Alejandro: Then, how did you go about it? You started coming up with concepts. I know there was a really interesting story as to how you came up with the idea. So, tell us. How did you come up with this idea?

Orr Danon: In the beginning, I was working with [12:04] army. One of the things I was working on was heavily related to cybersecurity with a large team in that. We wanted to do cybersecurity [12:32] about doing that. Don’t get me wrong. I’m not saying it’s not important, but for me, it seemed very boring to do it since it was something that I basically know, and I don’t see the tremendous challenge. I felt like I would not feel that challenge. So, I was still in the last week of my work in the army. I took two-weeks’ vacation, went traveling in the Southwestern U.S. area. When I came back, I set up a meeting with Romy. I told him, “I want to go to work. I want to do something different, so let’s quit.” [13:25] “Forget about that stupid idea of cybersecurity. That’s boring. I have really smart friends. I have an idea about something really cool. It’s called [13:35] Intelligence.” That’s where I met Avi, which became the third co-founder and CTO of the company. He told me about this deep learning [13:57]. “That sounds cool. That sounds useful.” We need to be professors for deep learning. I didn’t know anything about it, but it sounded cool. It sounded like there’s a huge gap between what is desirable, what is achievable, and what is out there today. It was very clear without knowing how we were going to do it. In order to do it, you need to combine the understanding of different disciplines, algorithms, software, engineering, and hardware design. So, it sounded like a good challenge, a good problem. You need interesting technology on one hand. And great need, on the other hand. So, we switched from all the cyber ideas to this idea. We joined a fourth founder on the business side of things. We went to [15:19], which is one of the leading figures in the high-tech industry and the startup scene. Angel investor in many companies in his past. He said, “Okay. I’m not sure I understand what you’re trying to achieve, but it sounds interesting, and we can save money.” He appointed himself the chairman of the company. That’s how we got started.

Alejandro: Very cool. How did you guys go about getting feedback to make sure that you were doing something that would address the need in the market?

Orr Danon: That was actually a big challenge. When you’re building a product that takes a few years, you need something knowledge, which is very fundamental. It’s also impacting the way everyone has been dealing with deep learning. Especially with the deployment of deep learning, it’s something that is fundamentally different [16:34] classical software. There are new applications, new ways to develop these applications, different markets which are using. We’re using AI. We’re using deep learning. It was quite a challenge. First, we had to make our focus on what specific sub-category of the skill you wanted to address. It shows [17:04] processing. It sounded to us more plausible than Cloud. Not that common view at that point in time. Then, it was kind of a bet. Afterward, what I realized that we have to do [17:26] technology. As close to Azure as we can and do short iterations, closing a full stack for this problem, for the space, which is running your networks all the time and iterating. We did in one year four iterations on our bit of architecture and started showing things to customers who were willing to listen [18:06 – 18:18] Actually when we were working then, we had to find an industry that would be interested in what we were doing, on the one hand, and would be willing to work for the long term. That’s not what startups seek to do, but that was our schedule. If we would try to talk to someone who wanted the product in six months, it was just irrelevant. They wouldn’t want to talk to us. That was actually a very good method in the auto industry, which was a dire need for this technology. There still is a dire need for this kind of technology on the one hand. On the other hand, they look at a time schedule of two to three years, which was a good fit for us. We started with the automotive industry [19:03], customer which was accepting and providing useful feedback. There, we expanded to other use cases and other needs. The key point is to get constant feedback and iterate on your own technology. Challenge your people to do it no matter how complex the technology is.

Alejandro: Got it. In this case, I wanted to ask you, especially when you’re getting this feedback, you’re applying it, and you’re working on the execution, how do you know that you’re working on the right type of stuff? On the right type of technology?

Orr Danon: To some extent, you have to be a believer. For the things that you know, things that are certain, it’s already done in a market that is in the process of emerging. On some things, we just have to make a little faith. I believe the market will go in this direction. You try to validate this with customers. In many cases, they don’t know where they will be two years from now in this new playing field of AI. This is one. The other thing is to provide customers with something that is meaningful as soon as possible and get feedback on that. That’s a fundamental of a very important aspect of the process. Actually, the first thing that you do when you want to deliver something to a customer and get feedback on that is, you offer your services and then start thinking about how the customer will use this. This process of getting ready to work with someone makes you better. It’s really tempting. The deeper the tech is, it’s more tempting to evolve that and say, “Not everything is perfect. We don’t want to talk to the customers yet. This technology takes three or four years to mature. I think, let’s not disturb the R&D when we know they’re not working.” You have to invest a significant amount of time and purpose to get to the things that you know are not working because, in the process, you will learn five other things that you need to do that you did not think about. Do not wait two years, and then find out that you should have started two years ago to work on the other things.

Alejandro: Got it. In your guys’ case, for the people that are listening so that they get it, what ended up being the business model of Hailo? How do you guys make money?

Orr Danon: Hailo is described as a [22:16], meaning we design processor chips. We fabricate them in a Silicon foundry in the Far East where everybody is making their chips. We don’t own the factory, but we own the design. [22:35 – 22:48] The technology stack is [22:51] design of the hardware. The bigger part of the technology stack, which you already [23:01], which I used to ignore, but the compilations stack [23:05] that makes programs run on the hardware. So, all these kinds of compilations technologies. They’re the way that our users interact.

Alejandro: I know that in your case, you guys have raised quite a bit in terms of funding. How much capital have you guys raised to date?

Orr Danon: We’ve raised [23:36] million dollars overall over the years. Most of that is venture capital. We also use capital from the European Horizon 2020 program and the Israeli Provisional Authority, which were both very supportive and very helpful. It’s a long journey, and you need to find the mixture of things that will help you at different points in time. We recently announced an investor for our B Round. Our investors are joined by some of our customers, including Japan NEC, which is a huge company in computer analytics and [24:34] public safety, and ABB, which is a very big industrial information company based in intelligence in Sweden. We are very happy to see that customers are – it’s encouraging to see that your customers believe in the company in such a significant vote of confidence.

Alejandro: Yeah. I hear you. Now, talking more about the team, I know that there was quite a dramatic event that happened. You originally didn’t start as the co-founder and CEO of the business. You started more on the R&D part of the team, co-founder, and R&D. I know that your co-founder, there are certain events that happened there that ended up having you as the CEO. So, what happened?

Orr Danon: That’s right. I’ve mentioned Romy previously in this talk, and he was managing the unit that I’m serving, and he started as the CEO. He was an extremely good partner and a fantastic leader. Five months after we started the company, it was a solid time. He was in the Mediterranean Sea. There were very strong currents. He was swimming there. It was a very nice weekend, but the Mediterranean can be very misleading in that sense, and he got carried away with the current and drowned. It was a complete shock. I was on vacation. I got the phone call from a friend. I said, “You’re mistaken. It cannot happen to Romy.” He told me, “It happened.” I remember the day after, [26:41] of the main investor sitting in his office talking, “What are we going to do?” It was my two co-founders and me. The first instinct was, “We need to find another Romi. We need to find someone as charismatic, easy-going, and on the other hand, knows a lot about technology, and is able to delegate decisions. We need to find another person like him.” It was the first thought afterward, and we went afterward to the company, the offices, 15 people, I think. “Okay, guys. We keep on working.” We knew that we had to give everybody the feeling that things were under control. That’s what they needed at that point in time. Of course, we let them express their emotions and thoughts and everything. The problem is that they don’t show too many emotions, but at that time, they did. Afterward, we started looking for a CEO. [28:30 – 28:38]. We realized that “We’re not interviewing a CEO, we’re interviewing a co-founder, a partner.” We realized it was more about the team. Then, at some point, I told my other two partners that I think that I should take the job. They agreed. I took the position. It was an instinctive decision. I have a very comfortable life as a [29:23] take care about this technology, which is very well-behaved. Then you go out into the real world. That’s how I became the CEO.

Alejandro: Wow! Well, I’m sure that your co-founder is looking down and is proud of you. You guys definitely have come a long way – what a remarkable journey. For the folks that are listening, just to get an idea of your company’s size, anything that you can share like around the number of employees or anything?

Orr Danon: Yes. The company is 90 people strong. The headquarters is Tel Aviv, the [30:13] the different geographies. As usual, with Israeli startups, they don’t serve the open market like most American startups. It seems a bit odd. There is almost no open market in Israel, so you have to be international from day one. Another thing is that since you’re not inside their IT company, our audience is spread throughout the world, so we have quite a couple of customers in the Far East, in Europe, and also in North America. We started our first office in Japan. Afterward, we went to other geographies. Most of the company is still R&D – 80% of the company. It’s a really big project to build a processor. As we are moving toward from technology to product and productization, we’re starting to look at the scale of things where different from working with a few customers, with a few dozens, and scaling up is interesting. Naturally, our customers are big companies. If you think of the automotive industry, the big names that you know and they’re demanding skill.

Alejandro: Orr, your journey as an entrepreneur, is remarkable and also all the years that you spent in the army. One of the questions that I typically ask the guests that come on the show is: if you had the opportunity to go back in time and have a chat with your younger self, with that younger Orr that was thinking about launching a startup. If you could go back in time and speak to yourself, knowing what you know now, what would be that one piece of business advice that you would give to yourself before launching a business and why?

Orr Danon: First of all, I would not allow myself to talk to my younger self. That would be a disaster. I think there are quite a few lessons. I would still have to learn it. The people that you choose to work with, there’s no overstating the importance of the team that you’re building. Every selection that I made, from [33:05] to the employees, every good character that I was able to get and be on my team. Every problem created by keeping the wrong people at the wrong position was amplified. Everything is basic, so think really, really careful about both who you’re putting in which position, who you’re taking with you on the journey, and who you’re saying, “Sorry, but it just won’t work for both of us.” Everything in a startup is based on the people that you take with you.

Alejandro: Absolutely. I love that. Orr, it’s all about the people, for sure, and the people that you share the journey with. Orr, for the folks that are listening, what is the best way for them to reach out and say hi?

Orr Danon: Just shoot me an email: or*@ha***.ai – feel free.

Alejandro: Amazing. Well, Orr, thank you so much for being on the DealMakers show today.

Orr Danon: Thank you, Alejandro. It was very nice.

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