Vidyo Digs a New Channel in Crowded Teleconferencing Market

Fast and cost-friendly video conferencing could son become as commonplace as cellphones at home and at work, and the firm Vidyo hopes to cash in on the trend with a new, specially designed architecture.

The New Jersey-based startup recently took the wraps off an HD-quality personal telepresence it designed to take high-def video conferencing into the range of pennies per minute.

Vidyo's approach to video conferencing engages a full spectrum of participants. Users range from the executive board room to telecommuters on Macs and PCs, even to smartphone users on the run.

Vidyo, so far a small player in a big pool, got a great deal of momentum after receiving a US$25 million Series C round of funding from bullish investors across the country in early April. Those funders include Rho Ventures, Menlo Ventures, Four Rivers Group and Sevin Rosen of Texas. Last year, Vidyo snagged about $15 million in funding.

But first, Vidyo needed a working product to demonstrate to angel investors.

"Our biggest hurdle was that business perspective. The only time I was worried was during the process of getting capital," Ofer Shapiro, Vidyo CEO and founder, told the E-Commerce Times.

Eyeballing a New Way

Vidyo's technology utilizes the new H.264 SVC (Scalable Video Coding) video compression standard. This technology enables natural communications over any IP network, including the Internet, LTE, 3G or 4G networks.

Positioned in price and access for deployment everywhere for use by anyone with a digital device, broadband connection and a camera, Vidyo makes real-time, real-presence, intimate and interpersonal HD video communications possible, according to Shapiro.

"We are solving high-contrast video on the Internet. This is not new technology. Rather, it is a new approach to making it work," Shapiro explained.

Vidyo Primer

Shapiro's concept of reinventing a better video conferencing system grew out of inherent problems and user dissatisfactions.

"I realized that there was much to be done in the video conference space. I took a look from the outside and saw the problems. People weren't happy with what existed, and I wanted to make it the idea of the century," Shapiro said about his founding motivation.

He joined forces with partner Avery Moore and Alex Eleftheriadis, a video compression expert who receives a royalty on every Blue-ray system sold today.

Prior to founding Vidyo, Shapiro spent eight years designing video conference architecture. He initially designed the video gateways that became the first commercially viable generation of video conferencing. Together, they reduced the delay in videoconferencing and devised a system to deliver it in a natural picture offered at a price they considered affordable to even SMBs.

When the concept hinted at being viable and Shapiro formed his Vidyo company, it took three years to get to a working product. The first funding came in April 2005. By October of the same year, he had a prototype. It took until the early part of 2007 to make it market-ready. In early 2008, the company basics and product were ready to market.

Seeing a Problem

The video conferencing field is replete with theories on why this space hasn't developed as an indispensable communications tool. Shapiro had several lines of conjecture to follow in working up a solution.

The debate includes explanations about people not wanting to see themselves to user expectations of how their live performance should look. Other explanations include the inherent latency delay that makes holding a normal conversation anywhere from frustrating to virtually impossible. Users also want the same cost as a voice call, Shapiro summarized.

Whatever the cause blocking the proliferation of video conferencing, Shapiro knew that any explanation was hard to prove, and better video performance was extremely hard to achieve. He saw something really wrong and sought a solution.

"Our goal is to put price and performance together. The basis of our business plan is that goal. Our mission is to make it universally available. I realized that a new architecture was needed. I sought what is the right one," he said.

Right Choice Indeed

One of the reasons a new platform for video conferencing was sorely needed is the way the industry dealt with legacy issues. This industry is a slow mover with technology, noted Andrew W. Davis, partner at Wainhouse Research.

"Video conferencing over the last 20 years, every time a new protocol came out, that new system supported all the old ones. That's why the software is very bloated," Davis told TechNewsWorld.

Shapiro believes he has a better mousetrap. There is tremendous potential for him to disrupt the industry, he noted. The only disadvantage to the new platform is that it is not interoperable with old systems. However, Shapiro build in a work-around that bridges to other systems.

The New Standard

Scalable Video Coding's chief advantage over other video architecture is that is easily runs on the Internet. It also is easy for ISPs to offer to their customers, said Davis.

SVC is approved by the ITU, or International Telecommunications Union. This agency, run by the United Nations, sets the telecomm standards internationally, he said.

Growing Success

With the new architecture in place, Vidyo had to gain traction in the industry. For a small-time company, that was easier said than done.

Vidyo's first achievement was getting a few OEM licensing deals, according to Shapiro. First to come on board was Shoretel, a company he described as very visionary. He then got other big companies, such as Google and Hitachi.

"That brought us to the next level up. Then came customer traction," said Shapiro.

Another positive omen was a growing interest in the new standard and his video architecture. The most recent sign of making an impact was seeing big companies starting to copy what he was doing with the technology, he said.

Traction Reaction

"We got to the point where we changed the game with new architecture. This proved that we established the category and validated it," Shapiro added.

Still, Shapiro knows that Vidyo is a small firm in a market dominated by big companies. Despite the uphill battle for customers, he plans to focus on strategies and investing in both marketing and R&D.

"That's a very ambitious goal, but we succeeded in getting very high growth in 2009. I see that acceleration continuing. We expect to finish 2010 as a significant player," Shapiro said.

Acquisition or Bust?

It is very hard to survive as a small company and do video. It has a very high risk of failure. He faces channel market barriers plus technology risks, warned Davis.

"I see him gaining customer traction and then being bought out. He stands a better shot at being bought than growing the company," Davis suggested.

Either way, the founder of Vidyo has his work cut out for him. But he has a chance with his new technology, said Davis.