Catching up with BidChip’s Moshe Hezrony

Estimated reading time: 9 minutes

I love talking with start-ups, and I’m always on the lookout for interesting ones to feature. It was with great pleasure that I learned about BidChip, a new company focused on helping companies find the best value in chips and other components, especially ones that are hard to find. I spoke with founder Moshe Herzony about his novel approach. I learned a lot, and I think you will, too.

Dan Beaulieu: Moshe, thank you for talking with me today. What is your background?

Moshe Hezrony: My pleasure Dan. My background is in security. I developed a secure USB device that can encrypt information without leaving any trace on the computer. This development occurred during the early stages of ARM technology when online communication was just beginning. The secure USB was used for encrypting confidential documents within a corporate environment. This experience also exposed me to the hardware industry, including manufacturing and purchasing components.

Beaulieu:  That’s interesting. Now tell me about your company.

Hezrony: Our company was established in stages. We offer two main services, and one of them is BidChip. While developing my hardware (HW) device, we encountered difficulties sourcing electronic components. This sparked the idea I had with my son Nitsan, and our partner Noam. Our idea was to become the “Uber” of electronic components. We wanted to make it as easy as possible to find the chips you need when you need them and at the best value through a large network of suppliers that we would set up.

We believe that today's buyers are burdened with the need to adapt to numerous systems and handle hundreds of request for quotations (RFQs). Additionally, buyers become addicted to RFQs, as screen prices are readily available online, discounts are predefined, and registration prices are pre-negotiated. Furthermore, there's a risk of inventory loss between the time of the RFQ and the purchase order (PO). Why all this complexity? Is it merely to create more work? This system becomes burdensome for both buyers and suppliers.

We feel that the best approach is akin to what governments or large enterprises do when creating tenders, using a reverse auction model. In this setup, suppliers bid on products that are more generic, and prices associated with the product. 

In our industry, we deal with very specific part numbers and manufacturers; it's a straightforward process: Can you supply this part or not? Even if some may disagree and consider it a non-commodity, it is, in fact, a commodity. 

Beaulieu: You say that chips and components are actually a commodity. Can you expand on that?

Hezrony: Sure. In the realm of semiconductors, there's a wealth of technology, and when OEMs select parts, it's a highly intelligent and scientific process. However, once the OEM has made its part selection and the design is stable (that is, until they introduce a new design), that part number becomes a commodity. So, why treat it differently than a commodity? For example, the U.S. Army, one of the largest buyers in the U.S., buys everything through tenders, providing equal opportunity to any supplier and improving the bottom line. We choose to follow that same line of thinking.

Beaulieu: That makes sense. How does BidChip work exactly? 

Hezrony: Our goal is to make acquiring components as easy and simple as possible. We are a safe hub that facilitates transactions between buyers and sellers, effectively balancing supply and demand to ensure risk-free and profitable transactions.

We offer two products: auction and reverse auction. Users can either post available inventory or post demands for specific parts. Our services include lab testing and escrow. By integrating these two services with any of our products, we create a win-win solution for both buyers and sellers.

Beaulieu:  Who are your customers?

Hezrony: All of our users are customers, and they are equally important to us. We act as the intermediary in every deal, and as a result, we cannot have a preferred “son” seller seeking financial compensation while buyers aim for authentic parts. Our goal is to balance these needs and ensure a fair and trustworthy marketplace.

Beaulieu: Who are your suppliers? Where are you getting the components?

Hezrony:We are working with several independent distributors to fulfill the demand and continually expanding our network of suppliers. We believe that small suppliers or individuals working as brokers will open supplier accounts with us and establish their own brokerage. We say this because they will need only a small initial investment. With a transaction cycle of just 14 days, they will be able to maximize their profit without requiring any infrastructure, marketing, or past credibility. Moreover, people from all over the world today are looking for opportunities to earn extra money. They have the contacts on one side and are missing the opportunity. A good example of this is Alibaba.com.

Beaulieu: How do assure your customers they are getting the highest quality components?

Hezrony: At present, we primarily focus on lab testing and perform AS 6081 tests. We strive to meet high industry standards. Our funds are deposited in a special account known as a special purpose vehicle (SPV) for the duration of the transaction. The SPV can be used to isolate financial risk. This provides a guarantee that the money is allocated solely to the buyer or seller and cannot be used for any other purpose.

Our goal is not just to grow through a few transactions; we aim to increase the volume of transactions. This can only happen if we provide strong value and excellent quality. A good example about the importance of maintaining high standards can be seen in eBay. They could have followed the same path as Amazon, but they initially allowed a marketplace without strict quality control, which led to a decline in transaction quality. However, they later tightened their monitoring, resulting in more transactions.

Amazon, on the other hand, started with high standards, and the results speak for themselves. People often prefer to buy from Amazon rather than directly from the OEM due to the trust they have built. We would like to be in that place.

Beaulieu: BidChip is basically a brokering company, so why are you better than other companies?

Hezrony: We are not a brokering company; just as Airbnb is not a hotel. We connect supply and demand, effectively balancing the two. We don't claim to be better. We strive to be superior, meaning we will do everything to connect demand with the best suppliers, regardless of their size, as long as they can provide a legitimate part at a reasonable price, and we define it as a safe transaction.

Since we are not a broker, we do not profit from specific transactions. This allows us to see the bigger picture. We view every successful transaction as a layer in the larger building, with the emphasis on success rather than just the transaction itself. We prioritize differently from other brokers; our priority is quality and speed.

Beaulieu:  Why are you easier to deal with than others?

Hezrony: We believe in vetting parts rather than just vetting suppliers. Communication has proven not to always work, resulting in many misunderstandings. Therefore, we take every part and subject it to testing. Our supplier vetting process may be more lenient, but our part testing is much more rigorous. The fact that we hold the money in escrow demonstrates the buyer's commitment, which compels us to act with greater care and ensure they will return.

Beaulieu:  Moshe, why should people use your services?

Hezrony: It's a great question. Today, to locate parts buyers often spend hours scouring listing sites like Octopart, broker forums, NetComponents, and many others. They then send out RFQs, and if the supplier is familiar, they begin negotiations. Unfortunately, many times, the information presented on these sites is inaccurate, and the parts don't even exist. This leads to dealing with different time zones and negotiating with different cultures in an endless process.

However, when you buy products from companies like Tesla, Apple, or anything from Amazon, it's a different experience. No negotiation or complications, and your order is processed 24/7. Sure, the internet can facilitate this kind of transaction, but what’s missing is trust and being certain you are getting the best deal on the best products.

On our platform, we aim to reduce friction and mitigate risks. You can post your requirements at any time and get offers while it's your sleeping hours, without needing to answer phone calls, emails, or exchanging spreadsheets. You post, get the best bid, make the payment, and your package is on its way after testing.

Beaulieu: What types of companies as customers are you best suited to work for?

Hezrony:We are targeting small- and medium-sized manufacturers, as well as brokers of all sizes, including small, medium, and large. In the future, I believe that OEMs will be using us as well.

Beaulieu: How do you see the market today?

Hezrony:As I mentioned earlier, this is not a commodity for engineers; however, it is indeed a commodity for manufacturers. As such, we need to break free from several old habits, including reliance on RFQs, negotiation, and listing sites. OEMs sell products based on market demand, and they must fulfill this demand. Manufacturers are an extremely important part of the supply chain process. If they fail to respond on time, it can result in losses for the OEM. Therefore, manufacturers using our services have a better chance of responding faster, leading to increased demand from OEMs, something manufacturers appreciate.

Beaulieu: What are the challenges for competing in our market today?

Hezrony: Building trust with the first several manufacturers can be a challenge. Another barrier is that buyers often perceive us as a threat to their work rather than as a tool for progressing in procurement. Think about it: Pen and paper were replaced with Excel, yet the procurement department continues to expand. So, some change of old habit is one of the big challenges we face.

Beaulieu: What are your plans for the future?

Hezrony: We are exploring the integration of AI into our platform as part of our roadmap. However, not everything labeled as AI is AI; most of it is automation. Our clients are highly skilled individuals with significant responsibilities. If they don't perform their tasks correctly, the production line can stop. Therefore, we need to introduce technology in small, manageable milestones. They need to test it on a small scale and gradually increase its implementation. we understand that, and therefore, we have a clear roadmap. Our roadmap is more culturally oriented to help our client adopt it in a small process such as evolution and not revolution.

Beaulieu: Moshe, what are your thoughts on our electronics industry?

Hezrony: We are in the midst of a technological revolution and consuming more electronics than ever before. For the next few decades, we will be in a growing industry. In the future, electronics will operate as an ecosystem, and computers will talk with computers; we would like to lead this process and be there so we can be the hub that connects suppliers with buyers.

Beaulieu: You're off to a great start already. It’s fascinating. Thanks for talking with me today. I learned a lot.

Hezrony: Thank you, Dan. I appreciate the opportunity to talk about my new company.