SpeedBit's Incredible Shrinking Download

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Video sites such as iTunes or YouTube don't have to be specially adapted to support SpeedBit, and users only have to download the software to enjoy its benefits. The first version of the download accelerator, due out next week, is adapted specifically to work with iTunes. SpeedBit aims to release versions in the near future that work on videos sold via other distributors. And Feigenbaum's 30-person tech team is scrambling to squeeze download times even further.

Profitable Premium Versions

The technology behind the video accelerator was originally developed by SpeedBit to shorten software downloads. The company's Download Accelerator Plus (DAP) software program, introduced in 1999, has already amassed nearly 140 million users. Israeli Internet guru Joseph "Yossi" Vardi, an investor in SpeedBit and one of the original backers of instant-message pioneer ICQ, says SpeedBit's success with DAP "…was the second time in my Internet career that I've witnessed such huge numbers of users."

The potential for the video accelerator could be even greater. For one thing, the basic YouTube version will remain free. SpeedBit used a similar business model for DAP, where it gives away the basic tool and makes money by selling premium versions with better performance and enhanced features such as privacy controls. Customers will have to pay for versions of the SpeedBit video accelerator adapted to sites such as iTunes, Wal-Mart, and Blockbuster, but the company hasn't yet disclosed the price.

Little Competition—Yet

For a startup with such grand ambitions and potential, SpeedBit keeps a pretty low profile. It raised a mere $1.5 million in funding back in 1999 from Vardi and local investment house Pitango Venture Capital when it was founded by Feigenbaum and his father. "Most of the money is still in the bank since we've been profitable almost from day one," says Ariel Yarnitsky, chief executive officer at SpeedBit, who previously held the top spot at Mirabilis, the company behind ICQ. Yarnitsky is tight-lipped about financials, saying only that SpeedBit booked "several million dollars" in revenues last year and is looking to double that, or more, this year.

As for competition, SpeedBit doesn't appear to have much—yet. Security Pacific analyst Hargreaves believes that industry giants such as Microsoft and Apple are likely trying to solve the digital downloading problem. But in the meantime, SpeedBit is here with a solution that could set it up for big growth—or make it a prime acquisition target.

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Israel Business
Business Innovation

Sandler is a correspondent for BusinessWeek in Jerusalem .