Three kilometers from Gaza: Israeli startup poised to lead AI chip cooling revolution | CTech (2024)

The Sapirim industrial area, near the city of Sderot, appears gloomy. It is a pleasant sunny day in the middle of May, yet the streets are deserted, and there is not a soul outside. Additionally, this morning, a red alert alarm was activated here, serving as a reminder that the war is ongoing, and the Gaza border area is still under missile threat. However, while the Amdocs' parking lot is sparse, that of ZutaCore and its sister company, Carrar, has a surprising presence. "We don't have many high-quality high-tech jobs in the south, so you really want to keep your job," says Victoria Tsentsiper, ZutaCore’s procurement and supply chain manager.

ZutaCore employees faced numerous challenges in the past year as residents of the Gaza border area. Tsentsiper herself resides in Kfar Aza and, on October 7th, she was besieged for 17 hours in her home bomb shelter when she was five months pregnant. During the same time, Nukhba terrorists also infiltrated the industrial area in Sderot. "We have a video of a jeep shooting at our building," says Erez Freibach, CEO of ZutaCore and chairman of Carrar. "After the evacuation, we couldn't get to work at all because the area became a closed military zone."

What happened after they reopened the area? How do you return to working from your office after terrorists attacked your building?

"It was not easy. Some workers were scared to death, while others had terrorists break into their homes or settlements, with friends killed or kidnapped. Many workers were evacuated to different places throughout the country, from the north all the way to Eilat. It was a new situation for all of us, and there was no one who could advise you on what to do as the CEO. So, I started going through the employees one by one, asking them how they were doing and what they needed: a computer, a bicycle, a car. I saw that work created some kind of anchor of certainty for them. It was important for them to have a horizon for the future, to know that the company would exist and continue. People wanted to come back, even if working remotely. They are very attached to what they do; they are mentally strong. You understand that recovery is also part of healing. It directed me to invest energies in the way the company can emerge from the crisis. We went through three very challenging months, and we came out of them as a family."

Weren't you afraid that the company would fall apart?

"I'm an entrepreneur; I'm not afraid. I see problems as challenges. That's my approach to life. From the viewpoint of a CEO, I said: 'I'm getting my company back to functioning.' We looked for ways that suited each employee to return. We are at a critical stage of sales, and with all the empathy for the situation, no one is sitting and waiting for us. Therefore, there was a real need to return to work quickly while dealing with the challenges of the people at home. It was a journey, and it's still ongoing."

Established in 2016, ZutaCore develops unique technology for cooling chips in server farms using a liquid that does not conduct electricity. The liquid absorbs heat from the chips, thus cooling them in a way that consumes less than 50% of electricity compared to air conditioning. "And we also have the option of reusing energy, which will bring us to zero carbon emissions," Freibach says.

You have been in the market for eight years. Why do you assume that a breakthrough will happen to you right now?

"First of all, it took us seven years to get permission to enter the servers - that is, to get permission from the chip and server manufacturers. This required a year to a year and a half of tests with each of the companies. And during the process, you have to constantly go back and change because each company has unique needs. Today, more than 90% of server farms use air conditioning, but in the last six months, as the field of artificial intelligence continues to expand, the world moves to use more powerful processors, which means they are hotter and consume more energy. Therefore, liquid cooling becomes the necessary solution; otherwise, the whole field becomes uneconomical. Air is not enough to remove the heat generated by the new chips. In the past, chips consumed 100-200 watts, and in the age of AI, they need 2,000 watts. This is changing the entire cooling market for data centers exponentially, and this is our time to break through. We already have more than ten times more customers than last year."

So far, ZutaCore has raised about $60 million dollars, of which $22 million was raised in the last year, according to the company - which allowed it to almost double its workforce, which now stands at about 70 people (ten of them abroad). Among the prominent investors are The Mitsubishi Group, the German corporation Rittal, and Marius Nacht. Mitsubishi's investment ($8 million) came at a critical time - when the company's resources began to run low, two weeks before the outbreak of the war, which stopped its activities for a while.

Some employees think that if it weren't for Mitsubishi, you wouldn't be here today.

"There is no way we would have lost the company. I would have put in money and solved it. Every startup goes through a near-death experience. We are not unusual in this. And since then, we have raised more investments and got out of the danger zone. There are also other people interested in investing in us, and we will make it come to fruition in the coming months. Now our main challenge is to supply the market with products, not to survive financially."

CoolIT, the better-known company in the field of liquid cooling, has been around since 2001 and was sold for $270 million only a year ago. What is your added value in relation to it?

"CoolIT has a solution similar to ours, except that it uses water, which conducts electricity, and if there is a leak - the servers will be damaged. We, on the other hand, use a dielectric liquid, which does not conduct electricity. Even if you take an entire server and immerse it in our liquid, it will not break down. Today, one server costs $250,000. Imagine what happens if there is a water leak in the cabinet of eight servers at once; that’s $2 million in damage."

Carrar, the sister company established in 2019, is trying to adapt ZutaCore’s technology to also remove heat from electric vehicle batteries. Carrar is still in the pilot phase with the car manufacturers and employs 30 people. "The speed at which you can remove heat from the battery determines how quickly you can charge it," says Freibach. "Today, batteries are refrigerated in primitive forms, which is why we hear about batteries burning or exploding all the time. With us, they are immersed in the cooling liquid. We are manipulating the content in an interesting way, and in the future, we will also manipulate their coating. This is completely different from cooling data centers."

But Carrar's path to the heart of the automotive industry will be more complex and difficult due to the nature of the industry. "The real difficulty is getting into the production lines of the car manufacturers," Freibach explains. "The introduction of central technology into a vehicle takes many years because the solution has to meet a lot of criteria."

This gives the impression that you lack a big, life-changing deal, like CoolIT had, to break through.

"It is true that we no longer have installations of hundreds of megawatts, but many relatively small installations, but in the last five months, we have done ten times what we did last year, and we are talking about transactions of tens of millions of dollars."

A drop out as a pilot, an entrepreneur in the field of flight

Freibach (60) was born in Nahal Oz. About a year ago, he moved to Mountain View, in the heart of Silicon Valley, to devote himself to accelerating fundraising and sales, but then October 7th came. Freibach was forced to leave everything and resettle in Sde Boker to navigate his companies in the chaos. Ironically, October 7 is also his birthday. "From now on, I will switch to celebrating on the Hebrew date," he says.

Where were you on October 7?

"In the living room of our house in Mountain View with my wife. It was eight o'clock in the evening at our place when the messages started pouring in. When you correspond with people in a bomb shelter, there is no difference between sitting in Tel Aviv or in Mountain View. My 85-year-old mother, my brother, and his five children - they all live in Nahal Oz. I have dozens of employees whose safety I took care of, and hundreds of friends from the Gaza border area because I grew up here. To be a member of a kibbutz is to grow up with 400 neighbors as a family. This reality is a tangible part of my life - so much so that every Friday and Saturday, I am in the abductees' protest tent."

How does a kibbutznik evolve into entrepreneurship?

"After serving as a naval officer on a missile boat, I was discharged in 1987 with the rank of major. My wife Hagar and I decided to fly to Guatemala to work in agriculture. We arrived at a half-destroyed melon-growing farm, which was owned by three Israelis, and within a few months, we made it prosperous, bringing everything we know from the kibbutz. At one point, we had 250 employees. We continued like this for two years until we returned to Israel to complete our matriculation and then study at the university."

Didn't you have a high school diploma?

"It was not high on the list of priorities when I was growing up. I would then get up every day at a quarter to four in the morning to work on the farm, and what interested me was climbing the hierarchy of the tractors." After graduating with a bachelor's degree in agricultural economics at the Faculty of Agriculture, Freibach began working as a financial manager for hardware companies such as Indigo and 3Com, and from there, he advanced to management positions - first at OzVision, a security systems company from his kibbutz, then at Clarizen, which developed a solution for managing collaborative work in the cloud. In 2007, he moved with his family to Palo Alto, California, where for the first time, he founded a start-up in the field of flight.

What made you go from being a sailor to wanting to be a pilot?

"When I enlisted in the IDF, I started a pilot course, and I dropped out of it. So, I got a Cessna (light plane) flight license. Psychologists can probably give reasons for it. From there, I rolled into establishing a start-up for a flight training system - it records the entire flight, and then the trainee can learn from it what to do. It was a small venture, and several hundred units of it were sold. After I returned to Israel in 2014, the other entrepreneurs continued with it for about another year."

What did you do in Israel?

"For two years, I accompanied 40 companies as a mentor in Colombia with funding from the local government. I would travel there once every month and a half, meet 20 companies, and give homework. The idea was to bring a company from concept to prototype within a year. After I finished there, in 2016, we founded ZutaCore."

How was the transition from a kibbutznik to a businessman?

"I'm a person who lives without constraints; everything is possible. Should I jump to mentor 20 companies in Colombia? Come on, no problem. I like challenges and flourish when there's uncertainty; that's where I'm happy. Order drives me crazy because it's not challenging. Let me live outside my comfort zone."

This can explain why you established a startup specifically in the Gaza border area.

"I did this because I am a member of Kibbutz Nahal Oz. Eight years ago, the situation in the Gaza border area was bad, and the kibbutzim were on the verge of dissolution. Nahal Oz, at that time, called on the members of the kibbutz, including those who left, to come up with a plan together on how to create economic resilience. From this initiative, I emerged with a decision to establish a company in the area. Not necessarily in Nahal Oz, which is a small place, but in Sderot, and since then, the company has been part of the growth that area has experienced."

The genius who left school after the 9th grade

ZutaCore was founded by Freibach and Nahshon Eadelson, who serves as the company's CTO. The two met in 2014 at the Mirage fund's entrepreneurship incubator. Freibach came as a mentor, while Eadelson participated as an inventor, after developing unique filters for irrigation, dealing with technologies for growing algae, and working on irrigation projects for Netafim. "From the first moment we met in the greenhouse, we have been working together," Freibach said.

Along with the differences, there are also quite a few similarities between the two. Eadelson (54) is also a kibbutznik by origin - from Beit Zera in the Jordan Valley (today he lives in Sdei Avraham), and he also did not finish his matriculation. But unlike Freibach, he never went back and completed his studies. "I finished ninth grade," Idelson says defiantly. "I don't have a degree. In kibbutzim, it's either work or study. When I left school, I was the 'gofer' of the person in charge of electronics, then the 'gofer' of the maintenance man for the injection machines, and then I worked in the fields. I don't have a degree, but the practical things, what I learned on the job, are priceless. Besides, I'm curious and study independently what interests me."

How can you be the technology officer in two companies without formal education?

"Nahshon is a multidisciplinary genius and an inventor," says Freibach. "For him, physics, chemistry, and thermodynamics are spoken languages ​​that he naturally masters. He does not need to memorize things that normal people have to memorize in university. Many inventors in the most important companies in the world, including in the high-tech world, didn’t complete formal education. Such people do not find their way within frameworks. And Nahshon is like that."

Why did you decide to develop a coolant for chips?

"Nahshon is well-versed in the intricacies of physics, and this is a very great strength of ZutaCore. Any electrical problem, a problem faced by chip developers - he quickly reaches the level of the experts in the field. When we were looking for technological ideas to develop, Nahshon came to me with 30 different ideas, and of these, I fell in love with the idea of a liquid that can get rid of heat. At first, I said 'let's develop a wearable cooling system,' for example. There were all kinds of ideas on the way - I come from computing, and cooling electronic parts is a real problem in the industry, and I knew it would only get worse in the world of AI. So Nahshon gave the technological answer, and I translated it into business. We have several patents that the best experts in the world have not been able to crack."

If the promise is so great, why aren't you public?

"The time will come when we sell at a high rate. For that, I am abroad 50% of the time. Just last week, for example, I flew from Israel to Houston, Dallas, and San Francisco. Now I'm going to Vegas for two days for an exhibition, and from there to San Francisco, then home to Sde Boker for four days and from there to a big exhibition in Taipei. My body can barely continue, but it's high-tech; you have to put yourself on the line, or you won't succeed."