A serious dispute between institutional investors and the founders of Israeli company OrCam, which develops devices for visual and hearing impairments, is delaying the company's recovery plan, which includes spinning off a company and raising funds. Consequently, OrCam, founded by the former Mobileye founders Prof. Amnon Shashua and Ziv Aviram, is stuck in a business crisis.
About a year ago, Shashua and Aviram, together with BRM and other private investors, initiated a $12.5 million financing round for OrCam, of which about $7 million came from Shashua's money and a few million more from Aviram. The intention was to carry out a number of moves that would lead to the company's recovery, due to two blows it had suffered: competition from AI companies, like OpenAI and Apple, which launched a hearing product that competed with OrCam's hearing product; and the war in Gaza, which led philanthropic foundations to stop purchasing its smart glasses, since many customers come from Arab countries. The company's revenue fell from $45-50 million in 2023 to $16 million in 2024, mainly from OrCam's smart reading glasses.
The planned funding round is intended to finance a process of rehabilitating the company, which includes splitting it into two companies: one for the smart glasses, which are very profitable and responsible for the company's revenue, and the other for smart hearing aids, which allow the hearing impaired to focus their attention on a specific speaker and filter out all other noise. As part of the rehabilitation plan, the founders planned to sell the vision products division, which is profitable and lucrative, but faces very strong competition from products based on language models, such as those from OpenAI and Google. The money raised would be used to finance development of the innovative hearing devices.
However, several OrCam investors including Leumi Partners, Harel, Meitav and Clal, as key investors, must agree to the move, and inject capital. These institutional investors approved the split and the financing round initiated by Shashua and his associates, but refuse to participate in it, reducing the company's available capital. In addition, in order to rehabilitate OrCam, which is seeing talented staff leave, an additional $12-15 million must be raised. However, the financing round is not moving forward, because OrCam has not presented a viable recovery plan, but only a plan for a $2 million loan, which would only keep the company afloat for a month or two.
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In order to approve a new plan, the institutional investors have demands: full protection against dilution of their shares. This is an unusual investment term that is not currently accepted in tech investments, as it dictates a significant dilution of the shares by the entrepreneurs and other investors if the company's value declines. However, the very existence of this protection for institutional investors makes it difficult for the company's capital structure and its ability to raise additional capital, as it dictates negotiations with the institutional investors on a restart of the capital structure – a rare move in companies with a recovery plan, and also constitutes an acknowledgment by the institutional investors of a decline in the fair value of the holding. According to estimates, the company's valuation has fallen by more than 90%, so that it is now valued at about $150 million, down from $1.5 billion in 2021.
The crisis at Orcam leaves it one product and less than 100 employees
Orcam grew as a company that draws on the advantages of Amnon Shashua's group of companies – international expertise in AI technologies, and many years of knowhow in developing chips and hardware systems. The company was founded to improve the quality of life of people with visual and hearing disabilities, through smart glasses and headphones that would make large parts of the real world more accessible. The glasses enable people street signs when outside and books at home. For the hard of hearing, OrCam targets noise filtering and focusing hearing on speakers that the user chooses.
However, market conditions and competition from AI has left OrCam with less than a 100 employees and only one product of the three it had previously developed. The company even fantasized about an IPO about a year ago, and carried out an organizational separation between the products, in order to remain profitable in some of them. OrCam has realized that language models that provide high-quality solutions in image and text recognition pose an immediate danger to the company's business model.
Shashua and Aviram's "egalitarian" philosophy in distributing common shares to investors, based on the concept of zero class differences between investors at different stages, has attracted many investors, including institutional investors, with the expectation of profiting from the "next Mobileye." Based on this approach, the institutional investors came up with an irregular investment strategy of direct investment in the company, which is not typical for them. None of them expected the company to decline in value by 90%, and so protections against dilution has become illogical. This has created a conflict between investors, preventing the next financing round, and harming OrCam's ability to recover.
Published by Globes, Israel business news – en.globes.co.il – on March 13, 2025.
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