Israeli content-delivery startup

XOsoft

hopes to secure up to $40 million via private placement at a company valuation of over $100 million.

XOsoft founder, chairman and CTO Leonid Shtilman says that the proceeds will be used to deploy its content delivery network and to fund R&D of similar networks for cellular applications.

XOsoft maintains one development center in Israel and another in California. Shtilman says the company wants to expand its staff from 70 workers to over 140 by year-end 2001, most of whom will man a new R&D center in New Jersey. The startup chose New Jersey to achieve proximity to leading networking players headquartered there, such as

Lucent Technologies

(NYSE:LU) and

AT&T Corporation

(NYSE:T), Shtilman explains. He added the company's new CEO and President Lance Boxer also prefers New Jersey for personal reasons.

Before joining XOsoft, Boxer served as president of Lucent's Communications Software group. For an executive of Boxer's standing, Shtilman says, he is willing to be flexible. The company also preferred to locate its new R&D center on the east coast because of the shorter time gap with Israel and Europe, Shtilman noted.

XOsoft's content CloneQuick delivery system accelerates content delivery over the Internet. Mirror sites distribute the content from the server of the original providers to servers elsewhere in the world, reducing distance and bottlenecks.

Shtilman: Infrastructure companies will win

Shtilman predicts that XOsoft will finish deploying its private network with websites in San Jose, Atlanta, New Jersey and London in January 2001. The company invested more than $1 million was invested in the network, which it views as experimental. The network is supposed to contain all the components required to manage content delivery and will serve some of the company's first customers.

When asked whether XOsoft directly competes with Cambridge, Massachusetts-based

Akamai

(Nasdaq:AKAM), Shtilman promptly explains the advantages of XOsoft's system. But in any case there is another difference between the established giant and the startup. They use different business models.

XOsoft plans to sell its Web-content accelerating product to communications companies. Akamai sells the right to use its content-distribution network.

Shtilman says that companies like Akamai take the business from networking companies. Until recently, there was no choice but to toe Akamai's line. But XOsoft believes that communications infrastructure companies will eventually win the war with services providers. When the battle is won, XOsoft will survive, Shtilman declares.

XOsoft's shareholders include the Comsor fund owned by

Comverse Technology

(Nasdaq:CMVT) and George Soros, American investment house

Janney Montgomery Scott

,

Goldman Sachs

,

Softbank

,

Draper Fisher Jurvetson

and the Israeli fund

Neurone Ventures

.