Uri Levine is the co-founder of Waze and the author of Fall in Love with the Problem, Not the Solution: A Handbook for Entrepreneurs.
Alex Friedman, a member of The Motley Fool's member success team, caught up with Levine to talk about:
- The early days of Waze.
- One way to know if a company "will die."
- What happens, behind the scenes, when venture capital investors choose investments.
- ChatGPT, artificial intelligence, and autonomous driving.
To catch full episodes of all The Motley Fool's free podcasts, check out our podcast center. To get started investing, check out our quick-start guide to investing in stocks. A full transcript follows the video.
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Uri Levine: I met one of the largest VCs in Israel, one of the leading partners, and that was after Waze was acquired. We had an open dialogue, and I asked him, how long does it take you to decide if you like the entrepreneur or not? We were sitting in a small meeting room, so the guy was looking at me, and then looking at the door, and looking at me again, and says, before they sit down.
Ricky Mulvey: I'm Ricky Mulvey, and that's Uri Levine, co-founder of the navigation app, Waze. Levine is a serial entrepreneur and the author of Fall in Love with the Problem, Not the Solution. The Motley Fool's Alex Friedman caught up with Levine to talk about the inside story of founding Waze, the fundamentals of entrepreneurship, a very common misconception about disruptive technology, and if ChatGPT can solve the good enough problem.
Alex Friedman: I know in the book you talk a lot about product market fit. Why is this such an important idea for you, and how do you think entrepreneurs can measure it and focus on it?
Uri Levine: You're right. At the end of the day, building a start-up is a journey. It's a complex journey, and it's a long one. It's a roller coaster journey. It's a journey of failures. We will touch base in all of those. But the first part of this journey is to figure out product market fit. By figuring on product-market fit, what I really mean is that you create value to your customers, to your users, to your customers, whoever they are. To a certain extent, I would say if you don't figure out product market fit, you will die, as simple as that. In fact, you've never heard of a company that did not figure out product market fit. They simply died. That's it.
But when you think of companies that did figure out product-market fit, and I want you to think for a second on all the applications that you are using every day, so Waze, searching [Alphabet's] Google, using Uber, watching Netflix, Instagram, whatever it is, and ask yourself, what is the difference between any of those that you are using today and the first time that you have used that? The answer is that there is no difference. We are searching Google today the same way that we searched Google for the first time in our life or using Waze or Uber or WhatsApp or Netflix or whatever it is the same way that we did for the first time. Once you figure out product market fit, which is the value that you bring to your users, you don't change that anymore.
Now the journey that the two companies when they started until they actually figured out product market fit is a matter of years. It was five years for Microsoft. It was 10 years for Netflix. It was three-and-a-half years for Waze. Even if you think of ChatGPT, it was out there in the market two months ago. For a second, you'll say, what's the big deal? It's just two months? Wait a minute, ChatGPT is based on version 3.5 of GPT. It's about seven years that it took them to get to where it is today. It's always a long journey and a very hard journey to get to product market fit because, before you get there, you are actually still in the middle of the desert. You don't have enough traction, and when you don't have enough traction, everything seems to be very hard. Once you've figured out product-market fit, which is the value that you create to your users, you are actually on the path of being successful.
Alex Friedman: I love reading the story about how you came up with the idea for Waze in the book, and I was hoping you could share that with our members.
Uri Levine: Waze has a magic in that. Waze crowdsourced everything and, in particular, the traffic information. Now my eureka moment was back in 2006, when we were on an extended family vacation, so we were 10 different families there. That was in the northern part of Israel. Israel is a small place, you mentioned earlier Boston. Israel is exactly the same size as Massachusetts and actually the same population, so just imagine that you need to go back from the western side of Massachusetts back to Boston. End of the day in Israel, there are only two alternatives route, or back then there were only two alternative route.
What happened is that everyone left before we did, and we were the last car to leave. I decided that I'm going to figure out what traffic likely on the different route by calling the other drivers and ask them how is traffic. Based on that, I realized that there is one route that is really crowded, and the other route was actually way less crowded. I realized that really what I need is someone to be ahead of me on the road to tell me what's going on. That was the rhythm back in 2006. But it was only in 2007 when I met two other co-founders of Waze that we decided that this is what we're going to do.
Alex Friedman: Once you came up with that idea, how did you decide to take that leap to put all of your energy and all of your focus into creating the business?
Uri Levine: At the end of the day, fall in love with the problem, not the solution. So when you speak with people, you would hear two things. From this moment until we started the company, I spoke with so many people, and I tried to qualify two things. One is how big the problem or how big the problem is being perceived by those people, and obviously, traffic jam is perceived as a big problem. Two, when I shared the concept of crowdsourcing the traffic information with them, then what I really got is a consistent result, this will never work. All the people tried to explain to me why it's not going to work. Obviously, it did.
Alex Friedman: That's great. When it came to choosing your co-founders, what did that process look like? Did you consider lots of different people, or did you build a team together based on previous relationships and friendships that you had?
Uri Levine: I met the two other guys that actually would listen, which ended up to be the CTO of Waze, was thinking similarly about crowdsourcing. He was actually thinking of crowdsourcing the map data as well, which was critical element in the ability to actually crowdsource traffic information. Because when you think about it, you realize back then in 2007, map data was really expensive, and you cannot license map data and provide free application. Now you really need to have a free application in order to have a critical mass of users to generate the traffic information. That was the leap frog in the ability to understand the solution. It needs not just the crowdsourced traffic information but to crowdsource the map itself. This is where we started to share the same vision, and we had multiple meetings until we said, OK, now we're ready. Are you going to make the leap of faith?
Alex Friedman: Along that process, what did some of the roadblocks or hiccups look like on your end?
Uri Levine: We started in 2007, maybe May 2007, that this is what we're going to build. We realized that we will need a lot of engineering here because we are trying to create a map creation app, a navigation app, a traffic app, a navigation app that uses the traffic information in all of the same system. So this is not as simple as just an app. It's actually the backend. It's way more complex than that, and therefore we need to raise capital. We went to fundraising that took us ages, a long period of time, nine months to raise capital.
So we officially started the company in March 2008 once we get funded, and then we started to hire engineers and build. This is something to remember, the first version that we have that was creating map was based on a PDA. Remember, a long time ago there were dinosaurs, and then PDA, and then Nokia phone, and today we all have iPhones and Android. This long time ago is 15 years. We built the first version running on a Nokia phone, generating real-time traffic information and launched out in Israel at the beginning of 2009. It was still not good enough. It was actually good enough in Israel but not good enough in the rest of the world.
Alex Friedman: I will say I am personally a user of Waze and Google Maps, and I've always wondered, how did you decide to come up with the idea of the speed traps? I know, initially, the idea to launch Waze was about traffic jams, but who had the light bulb above their head that said, hey, we should really monitor where cops are and sheriffs are so people know how to slow down?
Uri Levine: That was there from the beginning. At the end of the day, when you think about one of the best way to actually become successful is to find the common enemy, and all the drivers have two common enemies: traffic jams and speed traps.
Alex Friedman: In the book, there are two great chapters on fundraising and dealing with investors. I'd love to hear your opinion, what are some of the key takeaways to share with start-up entrepreneurs about dealing with investors and the process of fundraising?
Uri Levine: The reason that I ended up with actually having two chapters is that I first wrote the first chapter that is about fundraising at the beginning, but then later on, we realized that, wait a minute, fundraising is an ongoing process, it might never end, or it will have multiple phases and multiple funding. There is a major difference between the first round, where you don't really have any traction or anything to demonstrate and potentially just the team and the slide deck or the story, versus the rest of the time that you need to actually show progress and traction. So I ended up with having two chapters. Let me start by saying the first one is actually more interesting because, most of the entrepreneurs, the first time that they are going to fund-raise for a fund raising, they have no idea what they're going to face, and they start building a start-up business on a roller coaster journey.
They let me define fundraising as roller coaster journey in the dark. You don't even know what's coming, and part of it because it's the first time that you are doing that. So many other things you have done before, you've built product before, you have led teams before, you hired, you fired, you did a lot of those stuff before in multiple places, but fundraising is the first time. The most important part is to stop thinking about you and start thinking about the investors and what is it that they would like to hear, what is it that they care about so your story makes sense to them because, otherwise, they are not going to invest. Two critical takeaways that I had actually during my conversations with investors over the years, one is about how fast does it take them to decide.
I met one of the largest VCs in Israel, one of the leading partners and that was after Waze was acquired. We had an open dialogue, and I asked him, how long does it take you to decide if you like the entrepreneur or not? We were sitting in a small meeting room, so the guy was looking at me, and then looking at the door, and looking at me again, and says, before they sit down. I said, wait a minute, this is how fast it takes them to decide. It doesn't make sense, does it? Actually it does. How long does it take you to decide if you like a candidate for a position? How long does it take you to decide if you like your date? Seconds, then maybe there are a few more minutes that you either let that first impression to solidify or to change that.
What's really important is that you, as a founder or CEO that is raising capital, you need to start with the strongest point that you have in your story because, if you don't, by the time you'll get there, it might be that they've already made up their mind, and it's too late to change it. Therefore, I would say start with the strongest point at the beginning. if I would need to define what does your story needs to look like for the first two minutes or five minutes or whatever it is, you start with the strongest point at the beginning. You remember that they are users too, you explain why you are going to be successful, and that's about it, and then you finish up with the strongest point at the end as well.
The second conclusion is with multiple dialogues with investors that invested the first funding round into a start-up, I asked him, why did you decide to invest in this start-up or this start-up or this start-up, and what I heard was very consistent. I like the CEO, I like the story. That's it. I like the CEO, I like the story. Then you say, wait a minute. If these are the only two criteria, then what we are going to need to make sure is that the investor likes the CEO. In order to do that, the CEO needs to go by herself to the first meeting because if there are people in the room, they are going to grab attention, and they prevent you from shining. You need to shine in order to become likable. This is the first part. You go by yourself. Second part is you need to learn how to tell a good story. A good story is not about facts.
A good story is about creating emotional engagement. Now it's way easier to create emotional engagement if you tell a story about the problem and not about the solution. Just imagine that we will be here in 2027, and I will tell you, I'm going to build an AI crowdsource-based navigation system, and you are going to say, oh, very interesting, but you don't really care. If I will tell you I'm going to help you to avoid traffic jams, then you do care. So this is a story that is associated with the problem that is easier to engage with because what you really want is the listener to think that they are part of the story, that they want to be part of the story. If this is the case, then very likely, they're going to say yes. In many cases, you will need to realize that investors are not going to invest in something that they don't understand or that they don't think that they are going to use.
Now if, in general, you are approaching someone that you know for sure that they're not going to use because you are building a product for teenagers and that particular investors don't even have kids, then you need to create the linkage between someone that they care and your value proposition. If you don't create that linkage, they don't think of someone that they know that is going to use that or someone that they care that is going to use that, and the result is that they are way less likely to invest. Now it doesn't say that you're not going to be successful. I'm just speaking about increasing the likelihood of getting fund. Now the biggest challenge is the following. A venture capital partner is likely to meet a hundred companies a year, or a magnitude of 100 companies a year, and invest in one or two, so one or two percent, and 98% of the times they're going to say no. What you really need to get used to is hear the no and not get discouraged.
Alex Friedman: Everyone is talking about ChatGPT right now. What's the disruptive technology that's making you the most excited?
Uri Levine: I was hoping that you're going to say disruptive technology. Because at the end of the day, technology does not disrupt. What disruption means is changing the behavior. There are a lot of technology that did not have a use case, and therefore, even though everyone said at the beginning, oh, this is going to be a disruptive technology, as we have not seen a change in the behavior, we have not seen change in the market equilibrium, and therefore there was no disruption. For a second, I would like to refer to a of Gmail. Nearly everyone that I know have Gmail. Gmail is about 17 years old. Before that, we actually used to pay money to the ISP in order to have a mailbox. Then Google introduced Gmail that at the beginning it was not good enough, but through multiple iterations, it became good enough and free, and no one can compete with free.
So this is not about a new technology because there were email servers before and email clients before, and they're still out there, but Google Gmail was free. Waze was free. That was the major disruption in the market. Now when you look at ChatGPT for a second, and we say this is really major disruption that happened in no time. This is two months ago and look where it is today. For a second, I would say, wait a minute. ChatGPT is based on GPT version 3.5. It is years to get to where it is today. This is about how long does it take to get to a product market fit. And yet the use cases, the verdict is still out. I can think of multiple use cases, but what we need to figure out is that each one of them will get to the level of good enough.
Because if all of our audience is now going to go into ChatGPT and tell ChatGPT the following, write my resume, and give them two working place that you had before. I'm a software engineer, I was a software developer at this company from this time until this time and then team leader at this time for this time and so forth, and then you look at the results. In the first glance, you're actually go to like it. Wow, that really saved me a lot of time to write my resume. Then I would ask you, read it again and ask yourself the following questions. If I need to go and defend that resume in an interview, can I do that? You will look at it and say, you know what, yes, I can do that.
Then I would ask you the third question, is that you? Yeah, and the answer is no. The answer is anyone. Right now it's still too generic, but with additional training in the specific areas, it will become absolutely amazing. Now ChatGPT is not the whole AI. It's just a spoken language. So when we think about it, then you say, OK, wait a minute, this is actually good enough for anything that is about language generation. Definitely, kids at elementary school can make their homework using ChatGPT big time. It's probably general enough and good enough to serve their purpose. But it's not good enough if you are trying to make something that looks professional and detailed and specific.
Alex Friedman: How about AV, what's the future hold there? When I say AV, autonomous vehicles, I mean.
Uri Levine: There, there is huge demand because then you think, OK, what is the problem? The problem is very simple. They are actually two flavors of the problem. Number one is that I actually need to spend time driving a car, and I don't need to drive a car if the car can drive itself, right? So this is going to free up a lot of time. Time that an average person in the US is spending behind the wheel? An hour a day, four percent of the day, actually, nearly seven percent of the awaken time that they have, and if I can actually free that time for you, you would thank me every day. This is one thing. The other part is casualties, car crashes. There are more than one million people being killed every year on the roads. If you'll tell me this is only in China and India, no, US is actually pretty bad in that.
With autonomous vehicles, we will have way less casualties. To the level that if we will do fast-forward, we all realize that this is going to happen. It's going to happen because of the need. Whether or not this is going to be five years down the road or 10 years down the road, no one knows. Five years ago, we were all thinking but this is two years down the road, and it turns out to be not or not there yet. But we all realize that this is going to happen. When this happens, the next generation they will not drive. The generation after that, if you will tell them that you used to drive car yourself, they will not believe you. This is how the world will change, and when you think about it, you say, wait a minute, the changes that we are seeing are so dramatic and so fast. We cannot imagine what the future is going to bring us.
Alex Friedman: I know this story is still unfolding, and the timestamp, our conversation, it's Tuesday, March 14th. But as someone who works with a number of start-ups and with different venture capital organizations, I'm curious, what was your reaction when you heard the news about Silicon Valley Bank?
Uri Levine: We heard the rumors before, and the first thing that we did is this could be very catastrophic for some of the start-ups, and the recommendation for the start-ups is to make sure that they have available funding, available cashing out of banks, so transfer the cash from Silicon Valley to other banks. But in general, I would say this is one of the areas that it's really easy to protect yourself. Have multiple accounts in different banks. For a second, I would say, look, if you believe that there might be a ripple effect that will cause damages to other banks, and maybe we have seen some of that already starting to happen, then I would say then make sure that you have two or three bank accounts in different countries, so not just American, maybe also European bank or Chinese bank or Hong Kong Bank.
Alex Friedman: As the situation has evolved, what have those conversations look like with entrepreneurs and start-ups?
Uri Levine: It's a matter of making a swift decision and executing them. It's not a big deal. But the part that is really interesting is the challenge that the money is not gone. At the end of the day, you look at the amount of deposits that they had, and you ask yourself, where is this money? This money is probably in CDEs or in other monetary tools, and it's still there. What happened is that there were a lot of withdrawn that created a ripple effect. These a lot of withdrawn, the money is still there, and so at the end of the day, people will get their money back, or most it, or 95 percent of it, or 97 percent of it. But the key question is when, and if you need that in order to pay payroll, and payroll is tomorrow, then you might have a problem.
Alex Friedman: To wrap things up, I was hoping you could share some final words of wisdom for entrepreneurs.
Uri Levine: I would start with maybe three things. Fall in love with the problem. Always start your journey with a problem. Think of a problem, a big problem, something that is worth solving. Then ask yourself, so who has this problem? Now if you happen to be the only person on the planet with this problem, then go to a shrink. It's way cheaper than building a start-up. If a lot of people actually have this problem, only then, go and speak with those people and understand their perception of the problem and then build a solution. Now if you follow this path and your solution worked, it's guaranteed that you're creating value, and you actually accelerate your success big time. The second one is, we mentioned earlier, this is a journey of failures. So we're trying to build something new that no one did before.
The reality is that we think that we know exactly what we're doing, but we don't, so we try multiple things until we find one thing that does work. Now if this is the case, and you realize that this is a journey of failures, then there are two immediate conclusion. The first one is that if you are afraid to fail, then in reality, you already failed because you are not going to try. Albert Einstein used to say that if you haven't failed, that's because you haven't tried anything new before. If you are going to try new things, you will fail.
The second part is that, wait a minute, if this is going to be a journey of failures, then fail fast because the faster that you fail, you actually have still plenty of time and plenty of resources to try another version, another approach another go-to-market strategy, another something else. The more attempt that you have, you eventually increase the likelihood of being successful. The last part has to do with decision-making. I spoke with many entrepreneurs that their start-up failed and asked them why. About half say the team was not right. I kept on asking, what do you mean the team was not right? Then I heard, we had this guy not good enough and this guy not good enough. So not good enough was the main reason, and then I asked them the most interesting question.
When did you know that the team was not right? Now all of them told me within the first month. I said, wait a minute, if you knew within the first month that the team is not right, and he didn't do anything, the problem was not that the team was not right, the problem was that the CEO did not make hard decision. Making hard decisions is hard. Making easy decisions is easy. This is why most people don't like to make hard decisions, and the result is that in a smaller organization like start-up, the hard decisions, they would go all the way to the top. Now if the CEO is unable to make those hard decisions, the result is going to be catastrophic. The top-performing people would leave.
Alex Friedman: Uri, thank you so much for joining today. It's been a pleasure speaking with you.
Uri Levine: Thank you. My pleasure.
Ricky Mulvey: As always, people on the program may have interest in the stocks they talk about and the Motley Fool may have formal recommendations for or against, so don't buy or sell stocks based solely on what you hear. I'm Ricky Mulvey. Thanks for listening. We'll see you tomorrow.