Hola regains investor trust – and takes in $17 million
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Hola regains investor trust – and takes in $17 million

An Israeli Internet service battered by critics has come back strong, with a major investment in its new project

Hola screenshot (Screen capture)
Hola screenshot (Screen capture)

After a brush-up in which it was accused of misleading users and jeopardizing their computers and reputations, Israeli VPN start-up Hola has apparently recovered the trust of the public – or at least of investors. Hola announced Wednesday that it had closed $17 million in Series C funding in order to roll out its new video distribution network.

The funding round was led by Iris Capital (an Orange and Publicis Group strategic partnership), which joined existing investors, including Magma Venture Partners and DJF, in providing the new funds. Hola’s CDN (content distribution network), the company said, “will enable Hola to cut video publishers’ costs for delivering video by 90%, while increasing reliability and speed.”

Hola’s free VPN (virtual private network) allows users to watch video and access sites that would usually cost money, anywhere in the world, or to access video in restricted areas. With a VPN, a computer displays a phony IP address, fooling a content site into thinking that a connection was made from a specific location.

The most popular use of VPNs is by viewers of Internet-broadcast sports matches and TV shows who want to see the content in a restricted area – such as Israeli viewers who want to watch American sporting events that, for legal reasons, cannot be viewed outside the US.

Usually, VPN services require a monthly subscription, but Hola broke that mold, offering free VPN to anyone who installed their code. But hosting the VPN servers and managing the IP numbers needed to run the service costs money – and to pay for it all, Hola ran its free service as a peer-to-peer (P2P) network, in which users shared their computers’ idle processing power with Hola, which in turn sold it to commercial customers. Members thus helped build a strong network capable of crunching large amounts of data. Such networks are used for a plethora of purposes, from analyzing scientific data to analyzing mathematical problems to finding a cure for cancer, to searching for alien life by analyzing radio signals from outer space.

According to critics, the company did not inform users that their computer’s bandwidth would be used for this purpose – and even worse, Hola was accused of selling that bandwidth to nefarious users, who might use those resources to run a botnet, stringing computers together in order to hide the origin of spam, and similar undesirable purposes.

To its credit, Hola faced the charges head-on, changing its terms of service and shoring up its customer list to prevent illicit use of the network. But the damage was done; after weeks of awful press, Hola saw its user base drop (the company won’t say how much), as thousands of users uninstalled its software.

But while Hola may have been down, it’s definitely not out. With its new CDN project, Hola “aims to make the video viewing experience on all sites be as good as it is on YouTube,” according to Hola CEO Ofer Vilenski.

“Have you noticed how YouTube delivers video flawlessly? It starts fast, hardly buffers, allows you fast forward seeking, and lots of cool features on the player? Why don’t all other video sites work just as well? A major reason for this is that YouTube provides technology on both sides of the connection – software on the browser side that communicates with software on their servers, that together create a great viewing experience,” according to Vilenski. “Our new Hola Content Distribution Network (CDN) delivers a YouTube style video viewing experience for any video publisher, by using technology on both sides.”

The system is already being tested by prominent video publishers, he added, and it will rolled out officially later this year. Hola anticipates such a positive response to the product that it is planning to more than double its workforce – from its current 75 to 200 within the next year.

“Making the Internet faster has always been our passion,” said Vilenski. “We’ve taken everything we’ve learned from building and managing a P2P network with our 52 million consumer users and built a P2P CDN network that pools server resources to create new cost efficiencies and capabilities that provide video publishers unmatched cost savings with increased quality.”

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