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How two ultra-Orthodox men created Israel’s most promising Startup

Yoni Luksenberg relates that when he walks around Bnei Brak, the ultra-Orthodox city in central Israel that he and many devout Jews call their hometown, young Haredi men will occasionally stop him to tell him about their idea for a great new app or website. It began after the first time he appeared in the newspaper. Word got out. “I’m an anomaly,” he admits. “I do it all: pray, keep kosher and maintain a Haredi lifestyle, but I don’t wear a suit.”

To the wider public Luksenberg and his business partner, Ariel Klikstein, are indeed anomalies – not because of the black kippa that each one wears and is associated with the particularly strict form of Judaism, but because of the startup that they established.

Their company, Elementor, developed a website builder that interfaces with WordPress, the most popular website and blog publishing platform in the world, bringing them fame for reaching millions of users and for turning a profit with minimum fundraising.

In less than five years, nearly seven million active websites have been built using their platform. The tool has been translated into 56 languages so far, and its annual recurring revenue (ARR) – has already reached $30 million.

“They don’t want only to share their ideas with me,” Luksenberg adds. “They also want to jump in and to work at a startup. There’s a Haredi guy who begged me three years ago to hire him. I told him that I couldn’t because I need people who speak English. So he went and designed a CV for himself using Elementor and sent it to me. He persisted and refused to give up. In the end I took him on. He impressed me because he simply would not take ‘no’ for an answer,” Luksenberg says.

It might come as a surprise, but Luksenberg himself didn’t speak English until he was in his late 20s. In 2012, he sat down with Klikstein, in their former office in the ultra-Orthodox stronghold of Bnei Brak, and learned for the first time how to conduct a real conversation in English. “We had a tutor come in twice a week, for three hours, for a period of two to three years,” Klikstein recalls. “He brought us children’s books to read. The first book I read in English was ‘The Wizard of Oz.’ I was 27.”

When Luksenberg was invited to speak at a conference in New York, through the Haredi startup accelerator KamaTech, he memorized his presentation, but he was worried about having to make small talk at the event. “My teacher advised me to sample keywords and answer however I wanted. It was so useful. I had responses ready. For example, to the question ‘What’s the difference between your product and Wix,’ I’d say, “same-same, different ballgame.’ Today I’m not afraid to speak before a publicly traded company and I don’t care if my English is good or not as long as I can get my message through. The other side respects me even if I’m inarticulate. When I need to send important emails or text messages, there are people who help me write them.”

Cracking the code

The story of Elementor began in August 2010. Luksenberg and Klikstein met through a mutual friend. Luksenberg was a graphic artist; Klikstein built websites using WordPress and HTML. A partnership, they believed, would enable them to offer customers better service for the websites they designed. They named their web studio Aryo Digital, combining the first two letters of their first names. They rented a room in Bnei Brak and began to issue invoices. Most of their customers were from the ultra-Orthodox community.

“We were 25-year-old children who wanted to earn a living. We thought we would get some small-medium deals, one customer will pay us 5,000 shekels (about $1,050) and another one would pay 15,000,” says Luksenberg. “For years, we didn’t make much money from our projects. We learned to work together, and we saw that we had problems working with the existing tools, so we learned to solve them ourselves. We wanted to grow and we thought we could market a product that could solve problems that are common to many website builders. Who even knew what a startup was. We just went to a bank and took out a 300,000 shekel business development loan and mortgaged our homes. The funny thing is that we thought we were the best in the world, and we never thought for a minute that there were [people who were] better. We were naive. We thought we had no limits,” Luksenberg says.

Of the nearly 2 billion websites on the web, 39% use WordPress, according to W3Techs. But WordPress has a 64% market share of the websites making use of what is called “a content management system” (CMS) – a must-have for websites like news outlets or blogs that need frequent post updates that do not require coding. Other popular CMSs include the Israeli platform Wix (2.5% of CMS-based websites), companies such as Squarespace and Webflow and industry-specific platforms like Shopify (5%) which is used to build e-commerce websites. There are also specialized CMSs for building conference and convention websites, among other industries, like news.

Most professional websites are built by people who do so for a living, not by the business owners themselves. Many professionals prefer WordPress over Wix because the former is an open-source software, meaning that users can use it as they see fit and even change it to suit their needs, as well as share the new code with their modifications freely, for the good of the community. The use of open-source software eliminates the fear of professional website builders that they will be held “hostage” by their software supplier, which can raise its prices or complicate an eventual move to a different service.

“Professional website builders choose open source because they want their business to remain stable. So that even if the company changes, the product still exists and the community (website builders) take care to develop it,” Klikstein says.

But WordPress is far from being easy to use. It was created as a platform for bloggers, not for hotel bookings, for example. In the world of WordPress, every programmer needs to “reinvent the wheel” to a large extent, writing plug-ins and patches to enable new capabilities such as check-clearing, calendars or distribution systems, to name just a few. Klikstein and Luksenberg built their “dream tool” on WordPress in a way that simplifies the work and allows for the quick and easy addition of functionality. WordPress is the “Android of the internet,” they say. They explain that they didn’t want to compete with WordPress, so they built a product on top of it, just as smartphone manufacturers such as Samsung and LG provide their own user experience on top of the Android operating system. In a simple analogy, they say, “We’re the Photoshop of WordPress.”

A seemingly obvious business decision would have been for them to build a company along the lines of Wix on WordPress – meaning a ‘walled garden’ or closed platform. But the secret of Elementor’s success and what sets them apart from their competitors, is their choice to go the open-source route. It worked better than expected right from the start. “When we launched Elementor, in a presale to customers, we bet on how many subscriptions we’d manage to sell. The highest guess was 400 subscriptions at an average price of $100 a year. In the end, 1,200 people bought the product,” Luksenberg relates. “PayPal blocked our account due to ‘unusual activity,’” he laughs.

Dozens of developer communities have been established around the world that have built hundreds of features for users of Elementor. They offer them away at no cost, out of ideology. “Someone created an Elementor Facebook group. It grew to the point that one day they offered it to us to manage. Today the group has 60,000 members,” Klikstein says.

“There’s crazy mutual aid between group members. It takes the burden of training and user support from off our shoulders. We don’t need to have someone in the company responding to emails. Today Elementor has an entire market of expansions created by external programmers, some of them for pay. We decided not to take any commissions from the sales. We are focusing on growth for now, but just think how much that enhances the system.”

Elementor has hundreds of thousands of customers, website builders who pay them $100 a year. They subscribe to Elementor even though they could go to a site like GitHub and download the entire platform for free. “People who base their business on Elementor cannot download a pirated file because it puts them in danger. That’s why it doesn’t worry us,” Klikstein explains.

At the same time, the intensive interaction with the community can also create some unpleasant surprises, the pair admits. “We released a buggy version and we got Balfour,” Luksenberg says with a smile, referring to the protest movement against Benjamin Netanyahu that is often called by the street in Jerusalem where the prime minister and his family live. “People shared memes of Freddy Krueger with a cover of ‘A Nightmare on El(e)m(entor) Street.’ Being part of a community means realizing that you don’t live alone. You’re not sitting here on the 16th floor of an high-rise office building, making all the decisions.”

‘I’ll sell when I’m bored’

Tal Morgenstern – a partner in Lightspeed Venture Partners, which invested a little more than a year ago about $15 million in Elementor – met Klikstein and Luksenberg in March 2019.

“They had six developers, the support was mainly based on people from the community and there was no management as such. It was all small,” he says.

“I don’t remember such a clear case of users’ love for a product, it simply jumped out of the data. When they showed me the numbers I almost fell off my chair. They achieved it without external funding and somethings they did looked so completely crooked that I simply couldn’t believe they did them, but they worked.”

Like what?

Morgenstern: “For example, every online service has an automatic subscription renewal at the end of the month or year. In Elementor at the time, when the user’s subscription expires, they had to figure that out for themselves and then go to Elementor.com and pay for a new product key and then go back to the program and enter that key. When I understood all the figures were obtained despite this exhausting process – I was in shock. I imagined what could have happened if they had only toed the line with what was acceptable in the business.”

And how did they receive this proposal?

“They taught me that things that sometimes seem crooked to us investors, for example extreme transparency, are appreciated by the community. In the dialogue between us I’m mostly in the role of the cruel, greedy capitalist and they represent the users. Yoni and Ariel are the embodiment of the Elementor community. They insisted, for example, on a button that enables you to export the whole site you built to another place. I agreed, because that’s the thing in open code, but that button doesn’t have to be so conspicuous.”

Since it received Lightspeed’s investment, which was completed in August 2019, Elementor has been growing rapidly. It currently employs 200 workers worldwide and has 200 open positions. Before Morgenstern, the first investor to believe in Elementor was Paul Packer, a Jewish American who managed the investments of several wealthy businesspeople in the United States.

Packer invested $850,000 in the company in exchange for a considerable share of its holdings – more than customary in such rounds (in other words, more than 20-30%). Luksenberg and Klikstein say they haven’t used the money, but don’t regret giving up a significant part of the company’s ownership.

“We got someone who believed in us from the outset, with no proof of success and no previous experience in hi-tech management, and that gave us wings to fly. When there’s money in the bank and you don’t need it, it gives you the peace of mind to know you’re betting on the right thing,” says Luksenberg.

And what does he say today?

Luksenberg: “Before we raised the money from Lightspeed, we sat in a restaurant in the United States and Paul asked me if we wanted to sell the company. I asked ‘why, what will I do the day after?’ We could have made a great exit, there were offers of up to $100 million on the table. He said to me: ‘Let’s sell, you’ll have a ton of money, you’ll be able to do anything you want.’ I told him this is all I know how to do. During the corona outbreak I received dozens of Whatsapp messages from investors begging to meet us. Money can be confusing, so can the value and the numerous workers. I’ll sell Elementor when I get bored.”

Source: Ruti Levy and Refaella Goichman – HAARETZ