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Most people don't know it, but online genealogy is big business on the Internet. One of the leaders, Ancestry.com, has a market cap approaching $2 billion. But the company in the space everyone is scared of is Israel-based MyHeritage.

MyHeritage now has 57 million registered users, 18 million family trees, 800 million profiles, hundreds of millions of photos and adds almost a million new profiles each day, Founder/CEO Gilad Japhet told us in an interview.

The company, which has close to a hundred employees, is profitable and backed by blue-chip investors like Facebook-backer Accel Partners and original Skype investor Index Ventures. For MyHeritage, the sky seems to be the limit.

It wasn't always that way, however. For the first three years when MyHeritage got started, no one would touch it. Here's that story. 

MyHeritage's founder Gilad Japhet has been passionate about genealogy since forever, he tells us. He was mapping his family's origins when he was 13. He got his start in an unrelated field, however: computer security. While studying computer science at Technion, the hardcore Israeli engineering school, he worked nights at antivirus company BRM. After Symantec bought that company's technology, he joined another computer security startup and worked in Silicon Valley for a couple years.

After getting married, Japhet cashed in his stock options and took six months off, in part to study his family's history. In a classic entrepreneurial move, he started coding his own genealogy software because he was frustrated with the existing services, and then decided to build a company around it. He named the company Inbaltech after his daughter Inbal.

There was only one problem: this was 2002, the worst ever time to raise money for a consumer internet company. Particularly in Israel, no slouch when it comes to startup funding, but where investors ran away from consumer internet after the dotcom bust. Particularly for a genealogy company, which most people didn't think is a big market. Particularly for a first-time entrepreneur who'd never worked in genealogy or consumer Internet. 

"There were no social networks, not even blogs, and the world did not recognize the power of genealogy and family history as the bond that connects all people worldwide. Family is the most natural social unit, but people did not realize yet how the Internet will transform the social world and the importance that families play in that," Japhet told us.

Japhet nevertheless soldiered on. He built a team of ten people and bootstrapped the company. MyHeritage, which at first was download software, grew very popular. One of the reasons it was so popular was because it was free, which didn't exactly warm potential investors to the company. When money began to run out, Japhet stopped taking a paycheck. And then mortgaged his house. And then his wife freaked out. 

MyHeritage's headquarters on the outskirts of Tel Aviv MyHeritage In 2005, Japhet was able to scrape by angel funding and keep the lights on. 

MyHeritage, now a website on top of a piece of software, was roaring. The service went from free to freemium, with a basic free version and premium subscriptions.

Japhet tells us the free version of MyHeritage was better than all the other (paid) services on the market at that time. But beyond a great product, being global from day one helped as well, he says: "The first version of the product in 2003 was already available in 6 languages, then quickly up to 16, and support for multiple languages and cultures was built into the DNA of the company from day one. That allowed the company to have a strong penetration globally and in many countries we were (and in some cases still are) the only properly localized product available."

On the way, MyHeritage had to fend off a company whose birth story is the antithesis of his own: Geni. Geni was founded in 2007 by David Sacks, the former COO of PayPal. Sacks is part of the PayPal mafia of entrepreneurs who led the payments company to a $1.5 sale to eBay and now build and invest in some of the biggest companies in Silicon Valley. LinkedIn founder Reid Hoffman is part of the PayPal mafia. Facebook's first investor Peter Thiel is the "Godfather" of the PayPal mafia. While Japhet had to scrape by for nearly three years without funding, Geni launched right out of the gate with big VC funding and a $100 million valuation. 

Geni failed to make a dent in MyHeritage's growth. Now Sacks has moved on to Yammer, a very successful enterprise social network. Japhet calls Sacks "excellent" and Geni "very high quality", but says it didn't get very far because its founder didn't have his consuming interest in genealogy. In particular, Geni doesn't support existing family trees—you have to build or type in your family tree from scratch instead of just being able to upload your work like on MyHeritage. "People who've already built their tree were not amused," Japhet says with understatement. What's more, Geni wasn't global. 

"It took them 2-3 years from launch to add support for any language other than English," Japhet says. That matters a lot when your family tree may be spread over several countries and the site with the most family tree data can build a network effect.

All in all, MyHeritage's story is that impressive entrepreneurial story: someone with a passion who just won't give up, and who beat bigger and badder incumbents. 

Exclusive Interview with
MyHeritage Investor Saul Klein â†’

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Terms and Conditions:

MyHeritage is an online service that allows members to create family sites and profiles in order to build and print their family trees, share family photos, keep in touch with family members, perform DNA testing, receive genetic genealogy and genetic health analysis, participate in scientific research and research their family history with advanced research tools (the "Service"). The Service is owned and operated by MyHeritage Ltd. (hereafter "MyHeritage", 'we', 'our' or 'us'). 'You' or 'your' means an adult user, over the age of 13, of the Service (in some countries the minimum age is 14, see Section "Underage Users" below). Any use of the Service and/or the MyHeritage Website (the "Website") is subject to compliance with the Terms and Conditions listed herein. Please read them carefully, because by using the Website you agree to be bound by them and to enter into an agreement with us based on such Terms and Conditions (this "Agreement"), whether or not you register as a member in MyHeritage ("Member"). The MyHeritage website (the "Website") is part of a group of websites that we own and operate (the "MyHeritage Website Group") which also includes MyHeritage.* websites on other top-level domains and Geni.com.

This Agreement applies to any use of the Service, including but not limited to: a) submitting samples for DNA extraction and processing, b) uploading a digital version of your genetic information exported from other DNA services, c) receiving and interacting with genetic genealogy analysis provided by the Website (the "DNA Genealogy Services"); d) receiving, viewing and interacting with genetic health analysis (the “DNA Health Services”); and e) downloading your raw DNA data (collectively, the "DNA Services"). Unless explicitly indicated otherwise, the Service includes the DNA Services for all purposes of this Agreement. If you do not agree with any provision in this Agreement, do not use the Service and the Website. We reserve the right to modify any provision hereof from time to time, in our sole discretion, and such modification shall be effective immediately upon its posting on the Website. You agree to be bound to any changes to this Agreement if you continue to use the Service after any such modification is posted.

DNA
By submitting DNA samples to MyHeritage, you give permission to MyHeritage to directly or indirectly extract the DNA from the samples, perform genetic analysis on the DNA using methods available now and developed in the future, to disclose the results of the tests performed by way of providing the respective DNA Reports to you and, solely with respect to the DNA Genealogy Reports, also to others that you authorize, and to store the samples for additional genetic testing (i.e., we may be able to provide more detailed and accurate DNA Results, DNA Reports and other outputs by additional genetic testing in the future, subject to your explicit approval) and to allow you to download the DNA Results, in each and every case subject to and in accordance with this Agreement and with the Privacy Policy. You acknowledge that in the event that you download your DNA Results: 1) such download will create a copy that is not protected by MyHeritage’s security and privacy settings; 2) such download and the storage of your DNA Results after you have downloaded it, shall all be made at your own risk; and 3) MyHeritage will not have any control over the downloaded DNA Results and shall not be liable to you or to any third party in connection with such download and/or storage.

By using the DNA Services, you acknowledge that you may learn information you do not anticipate from the DNA Results and from the DNA Reports, which may evoke strong emotions and has the potential to alter your life and worldview. You may discover things about yourself that trouble you and that you may not have the ability to control or change (e.g., your father is not genetically your father, or your ethnicity is not what you thought it is, or surprising facts related to your ancestry), or that you have a higher than average risk of developing an incurable condition like Alzheimer’s disease). Once you obtain this information, the knowledge is irrevocable. You should not assume that any information we may be able to provide to you, whether now or as genetic research advances, will be welcome or positive. These outcomes could have social, legal, or economic implications.

You further acknowledge that your use of the DNA Services and receipt of the resulting DNA Reports may have serious implications not only for you, but also for your immediate or other family members, since they share some of your DNA. If you are in any way concerned about any such potential implications, DO NOT USE the DNA Services.