Lenny's Podcast: Product | Career | Growth - A founder’s guide to crisis management | Uri Levine (Waze co-founder, serial entrepreneur)

Episode Date: February 16, 2025

Uri Levine is a co-founder of Waze (which was acquired by Google for $1.3 billion in 2013), along with nine other companies (including another company he sold for over $1 billion). He’s also been on 20 boards and has been an advisor to over 50 startups. He recently released a new chapter of his best-selling book Fall in Love with the Problem, Not the Solution, which provides a guide to surviving crises at your company. In this episode, we cover:• The two types of startup crisis and how to handle them• Why speed of action is the most important thing• How to keep your team motivated when things look dire• A framework for deciding whether or not to pivot• What to do when product-market fit disappears• How to approach raising money during a crisis• More—Brought to you by:• WorkOS—Modern identity platform for B2B SaaS, free up to 1 million MAUs• Rippling—Automate HR, IT, and finance so you can scale faster• OneSchema—Import CSV data 10x faster—Find the transcript at: https://www.lennysnewsletter.com/p/a-founders-guide-to-crisis-management-uri-levine—Where to find Uri Levine:• X: https://twitter.com/urilevine1• LinkedIn: https://www.linkedin.com/in/uri-levine• Website: https://urilevine.com• Book: https://www.amazon.com/Fall-Love-Problem-Solution-Entrepreneurs/dp/1637746601/ref=tmm_pap_swatch_0?_encoding=UTF8&qid=&sr=—Where to find Lenny:• Newsletter: https://www.lennysnewsletter.com• X: https://twitter.com/lennysan• LinkedIn: https://www.linkedin.com/in/lennyrachitsky/—In this episode, we cover:(00:00) Welcome back, Uri!(05:10) The new chapter: navigating crises(08:15) Types of crises founders face(29:10) Navigating cash crises(38:31) The importance of never giving up(46:26) How to keep people engaged through a crises(47:59) Transparency in crisis management(56:58) Navigating product-market-fit challenges(59:27) Deciding when to pivot or shut down(01:13:34) Real-life startup survival stories(01:17:06) Avoiding and preparing for crises(01:21:21) Final thoughts and book promotion—Referenced:• Waze: https://www.waze.com/• Moovit: https://en.wikipedia.org/wiki/Moovit• Order Chat: https://www.crunchbase.com/organization/order-chat• Fibo: https://finder.startupnationcentral.org/company_page/fibo• Behind the founder: Drew Houston (Dropbox): https://www.lennysnewsletter.com/p/behind-the-founder-drew-houston-dropbox• TomTom: https://www.tomtom.com/• Khosla Ventures: https://www.khoslaventures.com/• WeSki: https://www.weski.com/• Larry Silverstein: https://en.wikipedia.org/wiki/Larry_Silverstein• Oversee: https://oversee.biz/• Lessons from 1,000+ YC startups: Resilience, tar pit ideas, pivoting, more | Dalton Caldwell (Y Combinator, Managing Director): https://www.lennysnewsletter.com/p/lessons-from-1000-yc-startups• Tobi Lütke’s leadership playbook: Playing infinite games, operating from first principles, and maximizing human potential (founder and CEO of Shopify): https://www.lennysnewsletter.com/p/tobi-lutkes-leadership-playbook• Harley Finkelstein on LinkedIn: https://www.linkedin.com/in/harleyf/• Zip: https://zip.co/us• Qualcomm: https://www.qualcomm.com/• Einstein quote: https://www.brainyquote.com/quotes/albert_einstein_148788—Recommended book:• Fall in Love with the Problem, Not the Solution: A Handbook for Entrepreneurs (updated 2025 version): https://urilevine.com/book/#Pre-order—Production and marketing by https://penname.co/. For inquiries about sponsoring the podcast, email [e-mail].—Lenny may be an investor in the companies discussed. This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit www.lennysnewsletter.com/subscribe

Let's talk about crisis. I think it might be helpful to do a quick taxonomy of the types of crisis founders face. So to abstractly the two types of crisis, one is I would call that a cash crisis. All of a sudden, your cash program or plan is being jeopardized. You know, losing a customer, disappearing investor. The other one is lose of product market feed. When product market feed disappeared, you actually need to go back to square one. Then you basically say everything that I know so far.

far. It's irrelevant anymore. You also talk along these lines of never give up in a crisis and throughout your journey. Always keep on looking for ways to make it work. Never give up is the most important behavior of successful CEOs of startup. The second one, by the way, is making decisions with conviction. If you don't make them with conviction, then the team is not going to follow. If the team is not going to follow, then you're not going to be successful. The core part of your advice on crisis, it's always the founder's fault if things don't work out.

At the end of the day, you cannot relate to the case. You cannot rely on someone else. You have only one company. You need to make sure that this company is successful. When you assume responsibility, you're basically saying, you know what, I control my own destiny. Any advice for how to avoid falling into a crisis as a founder? Number one answer is no.

Don't worry, you will face crisis. Today, my guest is Uri Levine. Uri is the co-founder of Waze, along with nine other companies. He's sold two companies for over a billion dollars. he's been on 20 different startup boards, has been an advisor to over 50 different startups. And even more impressively, this is his second time on the podcast. In our first conversation, we walk through the biggest lessons that he's learned over the course of working with all of these different startups that he chronicled in his beloved book,

fall in love with the problem, not the solution. In this conversation, we go deep on one very specific topic, crisis. As Uri shares in his book, building a startup is a journey from one crisis to the next. And my goal with this conversation is to give you tools to handle the next crisis and the next crisis and the next crisis that you face as a founder. This topic is so important that Uri decided to update and re-release his book with a whole new chapter dedicated to managing crisis. And this new edition is actually going to launch right around the time this episode launches. If you enjoy this podcast, don't forget to subscribe and follow it in your favorite podcasting app or YouTube. It's the best way to avoid missing future episodes and it helps the podcast tremendously.

With that, I bring you Uri Levine. This episode is brought to you by WorkOS. If you're building a SaaS app, at some point your customers will start asking for enterprise features, like Samo authentication and skim provisioning. That's where WorkOS comes in, making it fast and painless to add enterprise features to your app. Their APIs are easy to understand so that you can ship quickly and get back to building other features. Today, hundreds of companies are already powered by WebExpresses. WorkOS, including ones you probably know, like Versel, Webflow, and Loom.

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For a limited time, Rippling is giving Lennie's listeners three months off. To redeem, visit rippling.com slash Lenny. That's rippling.com slash Lenny. Uri, thank you so much for being here, and welcome to the podcast. Thank you. I'm really happy to be here. I should have said it. Welcome back to the podcast.

This is your second time here, which is a pretty rare feat. And the reason that you're back is the first time we chatted in depth about your amazing book. I have it right here. Fall in love with the problem, not the solution. And you decided to re-release the book recently. with a new chapter about something that every single founder is going to go through. You actually have this quote I'll read that I think is a good summary of why this is so important,

that building a startup is a journey from one crisis to the next. Let me just start with this question of why did you decide to add this chapter? Why is this so important to update your book? You know, end of the day, recent years have demonstrated major significant crises throughout the world, right? from COVID to interest rate, to inflation, to wars, to, and then I realized that, wait a minute, this is something that I haven't spoke about it during my first book, and it's time to write to rewrite a new addition to that or a new chapter that will be added into the new release.

And so this is about crisis. And in addition, you know, my publisher told me that, oh, usually have a paperback. it's going to sell more and the more people are going to read it because it's easier to read. So I do have the new edition already. It will be published in about a month. And it does include the new chapter. And it's a paperback. I love that you're solving the drops to be done.

Make it easier to read. We'll make your paper back. I also, like, as you described it, it made me realize. So the, like, the reason your book is so great is it's basically a step-by-step guide of all the things you need to know about building a successful company. And what it feels like he's just realized, oh, I forgot this step that every founder goes through, which is crisis. Multiple crisis, right?

Multiple crisis. We'll get into that. Also, I love that you can actually update a book. That's like, you know, usually people are like, oh, books are done. You move on. I love that you have the opportunity actually to update a book. It's inspiring.

You know, I'm already thinking of the next one. The next book or the next update to the book? The next, not sure yet, not sure. And there is a reason for me to write the book, right? I wrote the book in order to make a bigger impact. I'm an entrepreneur and everyone knows that, right? So I built ways and moved it and dozens of other stars. But I'm also a teacher.

So I feel equally rewarded when I build something myself or I guide someone to build it. And the book is fulfilling my destiny as a teacher, sharing my know-how with entrepreneurs, with business people, with pretty much everyone to help them to become more successful. So the realization that what I really want is people to take out of the book is something that will increase their likelihood of being successful. And the next book is going to be pretty much the same,

with the same philosophy of, wait a minute. If I can make a bigger impact, I would like to make a bigger impact. It's a beautiful mission. I think we're going to do that. Let's talk about crisis, maybe to make this very real and visceral for people to get a sense of like, you know, you heard the word crisis. You're like, oh, yeah, sure. Can you maybe share a story of a crisis that you experienced that might be illustrative of the types of crisis the founders face across the many companies you've started and advised what comes to mind? You know, COVID was an excellent example.

And one of my startups back then called the Water Chat. And actually, it was the first AI chat back in 2020, right? And that was meant to help people to make reservations to restaurant. As simple as, oh, I would like to make reservations for six people for tomorrow night at XYZ restaurant. And that chat was actually very, very successful in Israel. And the reason is that we actually built an engine that had a figure. facing the user with a chat, but also facing the restaurant with a chat. So we did not require any integration.

We could go online anywhere and actually cover all the restaurants in no time. And that turned out to be pretty successful and then COVID hit. And guess what? All the restaurants were shut down for hosting guests. And there were no more reservations for restaurants. right. Now, we were really good at that, but we did not have enough funding to actually pivot into something completely different. And the result is that we had to shut it down. And still, you know, people still ask me, what happened to that, right? What happened to that

was COVID. I feel like COVID happened to a lot of companies. And it feels like that's kind of an impetus to this chapter. I think he even said that, like, it created so many crisis across so many companies you were involved with helped you realize a lot of companies and founders are just not prepared. So by and large, I would say, end of the day, we look at global crises and we say, this is going to impact an industry, right? But as an entrepreneur, you don't care about the industry. You care about your own startup.

That's it, right? And if the rest of the world is suffering from the same problem, it doesn't help you not even a single bit, right? So your problem is your problem. That's it. And then you need to abstract that and basically realize, okay, wait a minute, I will define a crisis as something that you already had that is significant, disappears. So let's say that you already have, you know, millions of dollars in revenues, right? And all of a sudden, your biggest customer, you know, decide not to continue and you lose half of your revenues, right?

All of a sudden, you basically say, wait a minute, I have to adapt, right? Something significant happened. And that's something significant is that your revenues disappeared, right? Or maybe your funding disappeared. Or maybe. So in general, the first type of crisis will be around cash. All of a sudden, your cash is not the same as you expected. Something happened.

Maybe funding, maybe revenues, maybe projection, maybe you lost a big customers, a cash crisis. And then you need to adopt. The second one, which is even more significant, is that you lost product market feed. And that might happen, right? It might happen because of regulations, because of competition, because of, you know, something dramatic happened that there is no more value into your product. And we are going back to basic.

Product market feed is very simple. That means that you create value to your customers. This is what it is, right? And you never heard of a company that did not figure out product market feed. They simply died. That's it. And by the way, product market feed in general have only one metric. Only one metric.

Retention. Look, it's really simple. If you create value, they will come back. That's it. If they are not coming back, that means that you are not creating value. And so in your startup journey, this is going to be the first phase, and it's going to require a lot of iterations and the hum. And, you know, it's a journey of failures, right?

So we're going to try something and it doesn't work. We can try something else. And we keep on crying until we find one thing that does work. But once you figure that out, you're ready to move to the next part of your journey. But what if it's all disappeared, right? What if all of a sudden someone changed their regulation? Someone, you rely on a very unique data that you were able to build, and all of a sudden someone create a way to access this data for everyone.

What if there is a competitor that makes you irrelevant? You know, I'm using iPhone. Obviously, a lot of people using iPhone, and I'm using that for a long while. iPhone is born in 2007. Before that, we used to have different phones with keypads. And when iPhone was introduced, Microsoft basically say, this one never worked. They were in a position of a market leader.

They own Windows mobile operating system that was running on pretty much all the phones in the work, right? So all the smartphones in the work, from Nokia to Motorola to Samsung to pretty much with. And they look at it and say, this will never work. They haven't realized how impactful it is, right? So this is a competition coming out to the market with something that is completely different and not only disrupt the market, but actually create crisis for pretty much everyone else. And the result is that, you know, today Microsoft is not a player in the mobile operating

system, and Nokia disappeared or pretty much disappeared. And in Motorola, all disappeared and pretty much everyone that was really significant in this industry, they were not adopted fast enough to the change. And the change was that their product market feed disappeared. Now, it's not that their product all of a sudden become irrelevant. People simply wanted something else. So when product market feed disappeared, you actually need to go back to square one. And the faster that you realize and you basically say, everything that I'm,

know so far. Everything that I knew so far is irrelevant anymore. Can I restart? Can I go back to square one and restart? Because if you cannot, you will die. You're following your own solution and you believe that this solution is going to be marketed better than what the market wants. And what the market wants is different. It can be also a matter of regulation change. One of my startups called FIvo died because of change in regulation. So FIvo was doing tax returns, right? Something that everyone hates, but we have to do that. And when we started, we basically say, wait a minute, when I speak with people and ask them,

how is tax returns being done in your country? What I heard was pretty consistent, right? It's either complex or expensive or both. That's hit-right. And I said, wait a minute. What if I can simplify that? What if we can make it really, really simple? And we defined simplification by filing in less than five minutes.

Whatever you do, if you can do that in less than five minutes, it's simple enough. And we ended up with building a platform in Israel that people were able to file in less than three minutes. And that was actually pretty amazing. Now the result was that in about, in Israel, filing is not mandatory. So we actually enable people that we're not filing up until now to file because it's simple. And we increase the size of the market by 25% over one year.

People filing taxes. Yep. Because it was simple, right? So you go into the platform. You realize that, wait a minute, I actually entitled to get a return. So let me file. If I'm not entitled to get a return, then I'm not going to file because it's not mandatory. And the result is that we increase the load of the taxation system.

None of a sudden the Israeli tax authority didn't like us anymore, and they basically shut us down. So changing the regulation, and we lost product market feed overnight. They basically say, oh, we're going to shut you down. And that's tomorrow. And that's it. Now, we did not have enough, you know, run rate to actually. actually because the company was about break-even, right? So we did not have enough funding to go and try to find something else.

And we tried to fight the regulator, but fighting regulator requires a long period of time and a lot of funding, and we did not have that. So regulation might be a reason why you lose product market fit. And if you need to go back to square run. And what we decided is that, okay, what I decided on a personal level is that I'm not going to deal with the regulation anymore. I don't want to rely on a regulator to allow me or not allow me to do what I want to do. By the way, with ways, you know, in the early days, we thought that the business model is going to be selling data. to authorities, to municipalities, to maybe have public transportation systems and so forth. And we basically say, wait a minute, we have the best traffic information in the world.

I can go to a municipality and tell them how long does it take to make a left turn in each and every traffic light in the city every day of the week, every hour of the day. And therefore, they can recalibrate the traffic control system and enable better utilization of the city. of the entire road system. And it turns out that this is really, really, really slow business development process. They didn't really care. And that was frustrating, right? Even if you offer that for free, they still don't care. And the result is that we changed the business model.

We ended up with advertisement. But the reality is that I don't like to work with regulators. They're too slow. Okay, there's so much here I want to dig into. one is this example of this story about losing product market fit it reminds me of at drew Houston on the podcast founder dropbox and he described a moment where uh when apple launched uh apple photos or iCloud i think it was i cloud he's like it's as if there's like this mushroom cloud exploding far in the distance that you don't hear for a long time and we didn't necessarily see

exactly how much this would have been this will have impacted our business and i think that's what happens a lot of cases you see something happen And you're like, no, we're going to, this is no problem. We're going to win anyway. Like BlackBerry, I think, did the same thing with iPhone. You know, we had the same thing with Ways, right? Because when we started, Waze was free. And it was the only one that was offering turn-by-turn navigation free.

And the reason is that we created our own maps. And then one day, in 2010, Google announced their free turn-by-term navigation. Turns out that they were working for the last two years in building the maps of the US. And they enabled that on Google Maps, right, turn-by-turn navigation with audio guidance to turn, right, turn, left, and so forth. And two companies were actually shocked, right?

The entire industry, but two companies were impacted. The first one is actually TomTom. TomTom was the provider of the maps for Google to do navigation. And they basically say, no, we have our own maps. We are going to terminate the contract. And Tom Tom said, wait a minute, you're paying us $18 million a year and we have five years contract. And Google say, yeah, we will keep on paying you that amount of money that we are committed, but we are not going to use your project anymore. And that one was waste, right? Because basically everyone in the industry told us that we are doomed. Our own investors told us that, look,

If you can sell the company for $20 or $30 million today, do it because you are not going to be successful. Now, obviously, we turned the corner and turns out to be very successful. And to that level that eventually Google acquired us, right? And the reason is that the use case was different. Waze was focusing on the daily commuters. So we wanted people to use our application twice. a day when you go to the office and when you come back home. And Google Maps is something that you're being used not that frequent, right?

In general, I would say if I ask 100 people how often they use ways, they will tell me every day. If I ask them how often they use Google Maps, they will tell me when I need it. So a different use case in obviously different product that is built for the specificity of the use case, right? So ways is way simpler and the map looks. almost obstructive. They are not, but they looks like obstructive and way less details. And the result is that the ability to create something that is simpler and people are using

everything. But when Google announced turn-by-term navigation, all the investors in the world turn out, turn our back on us. And that was 2010. We were looking for new funding. We actually, I remember that night, because we were just about to go and meet with all partners meeting at Kostla Ventures. And we had multiple meetings beforehand, and that was like kind of, okay, this is the final seal. And the evening before, we had dinner with the partners that was promoting us at Kostla Ventures. And he told us, look, I have a lot of relationship in the industry. and I spoke with my friends at Google, and they told me that they are at least two years away

from building their own maps. And the next morning, they simply announced that this is a turn-by-term navigation. Going to that meeting was waste of time already. And we had very, very hard time to raise capital because of that. But eventually, we were lucky in the sense that once Google announced their turn-by-turn navigation, turns out that the rest of the industry were took by surprise, right?

And Microsoft decided that, wait a minute, we don't have our own map, so let's invest in ways. So we ended up getting investment from someone that we did not expect. Okay, so first of all, you've shared all these types of crisis. I think it might be helpful to do a quick taxonomy of the types of crisis founders face. You shared regulation changes, competitors coming at you, investors, not wanting to invest. So two types of, abstracting the two types of crisis. One is that I would call that a cash crisis, right? So all of a sudden, your cash program or plan is being jeopardized, right?

For, you know, losing a customer, disappearing investor, not meeting your expectation, dramatic price change in the market and so forth. And the other one is lose of product market feed. So all of a sudden, whatever you have is irrelevant anymore. And you actually need to go back to square one. For the first type of crisis, if this is a cash crisis, then what you really need to ask yourself, and in any type of crisis, is the first of all is what is actually being impacted?

Is that my run rate? Is that my product? Is that my revenue stream? is that my, you know, if I'm still relevant, with water chat, we were irrelevant, that's it. And so the first thing that you need to do is what is really being impacted. And then the second thing is how long is going to last? Is that a temporary thing?

Is that forever? Is that the new future? And then you ask yourself, okay, Okay, so how much run rate do I have? And you'll replaying accordingly. And I'll give you some examples, and this is really important. Because let's say that you're a company that you have $5 million of revenues a year, say, $400,000 a month. And your burn rate, your net burn rate is 200,000.

So you actually, at the end of the year, in order to run for a year, you need about $2.5 million to run. If you lose half of the revenues and you only had $2.5 million in the bank, you now have six months to run. So obviously, you need to read up. Now, one of the things that you might say to yourself, I'm going to remain on the same course and are going to deal with the crisis in five months from now. Or you can basically say, no, I'm going to change my expense to adjust to the current revenue strain that I have and still have 12 months of run rate.

Whatever you are going to decide, you're going to decide. You need to decide today right now. And the reason is very simple, right? If you want to reduce the burn, the expenses in order to extend the run rate, if you wait two more months, then it's going to become nearly impossible to do. If you wait six months, then obviously this is impossible to do. So the longer that you wait, you actually lose options. The only ability to choose is today.

This is one of the most challenging part of a crisis, right? You actually need to make a decision rapidly, like today. There are few reasons to that one. Number one is that if you don't, then you might, might lose options. Number two, and this is about communicating within the organization that decision. Look, if there is a crisis, everyone knows. Everyone knows and you don't do anything about it. This is not a good practice. Now, you might want to decide, no, we're going to keep on running full steam ahead until we hit the wall. Because by that, we increase the likelihood that we will

have enough velocity to bypass the world. But you need to communicate that with your team. Because the one that is really suffer is not just you. It's the entire team. They know that there is a crisis and they want to know that someone that holds the steering wheel is making the decisions. And if you don't, then guess what? You are then a sinking ship.

And what's going to happen is that the top. performing people that would leave. Let me do a quick summary of what you've shared to give people a landscape and then let's keep going down this route. So there's basically two types of crisis. And these are, you know, there's like small crisis. I imagine someone's pissed off at something. These are how you describe major crisis, like existential crisis for your startup, right?

Is that the way to think about it? Right. Because if an A player leaves, I hate it, but it's not a crisis. Yeah. Okay, cool. So there's kind of two. cash crisis, which is either a bunch of revenue disappears or investors bail or don't want to keep supporting you. Those are kind of the two major buckets. And then there's product market

fit crisis, could be a competitor launches, could be the market changes, things like that. And within the cash crisis, so say you realize we are not, we don't have as much cash as we planned or need. The three steps you just described, what is really being impacted, just be really real with what is the impact to our business. with this change, how long do we think this cash crisis will last? And how long do we have before we run out of cash, essentially? Yep. And then you need to decide. And then you need to decide on your action, right?

And your new plan, right? And maybe it's a new strategy. If all of a sudden, I would say, if this is about product market fee disappeared, then this is a new strategy. And maybe it's about deciding on extending the run rate or keep on trying or whatever. And this is something that is really interesting.

And we go back to COVID and I look at two of my startups that were in the travel space, right? One of them is we ski. And it's essentially, you know, the booking.com of ski vacations. And guess what? COVID started and there was no more ski trips to Europe, right? Europe were shut down completely. You know, all the ski areas were shut down. And you know that I'm an avid skier, right?

For me, that was a disaster on a personal level, right? And eventually, by the way, what happened is that I was back in Tel Aviv and I was unable to travel to Europe and it was only somewhere in 2022 that I was able to travel to the U.S. after vaccination and so forth. And in March 2000, 2022, I actually moved myself to Utah, to Salt Lake City, and I basically say, no, I'm going to ski every day that I'm not busy. And I skied until the end of the season. So what happened is that, you know, COVID started. We realized that we have a major problem.

And the problem was actually the first thing that you face is cancellation. because all of a sudden, out of, you know, very few cancellations per day, you ended up with hundreds of cancellations per day because this is it, right? And after you dealt with that, then the next question that we ask ourselves, okay, so how bad is it, how long it's going to last? Now, that was supposed to be the first year that we were profitable, right? So we did not have a lot of cash in the bank because we expected to become profitable this year. And we basically told ourselves, okay, this season is over.

Next season is not going to happen. We don't know, but we need to plan for something that is going to last longer than that. And then we basically say, okay, how can we deal with it now? Because of whiskey had a lot of strategic investors from the travel industry, right? In the travel industry, they didn't really care about whiskey. they care about their own products, right? If you're a hotel chain, then guess what? You have no travelers.

If you're an airline, guess what? You have no flyers. So anyone in the travel industry has suffered from the same problem. And the last thing on earth that they care about is a startup that they invested at. And we realized that, okay, wait a minute, we don't have enough cash to survive for two seasons without revenues. We need to raise additional capital. Now, no one, no new investor is going to speak with us, right? Because there's no ski, so what are you talking about?

And we approach the existing investor, by the way, I'm one of them, right? And we basically say, okay, you know what, we need your help. And everyone told us, oh, we are busy, right? We have other problems to deal with. We have our own problems. I don't see how is that going to become a good investment and then we basically decided that, okay, wait a minute, we're going to do a pay-to-play.

A pay-to-play is actually sort of forcing new investors at the expense of the existing one, right? So, for example, doing a major down-round is sort of pay-to-play, right? Because if you're not participating, your position in the company is going to be diluted severely. And this is what we decided to do. And that was way more complex. I described that in the book, way more complex than that,

because we also had, you know, safe instruments that we need to convert before we can actually do something like that. And that was really complex. But we ended up doing that. And today, the company is actually very successful. After COVID, we used the time of COVID to actually improve the product. and as soon as COVID was over, then we started to grow rapidly, and the company is profitable, is growing rapidly,

is actually providing very, very good service to its customers. So to a certain extent, I would say we ended up getting out of this crisis successfully. But if you are in the middle of it, and you ask yourself, so what are the chances that we will end up being successful? it looks way smaller, way smaller. So what happened here is that you realize that, okay, this is not forever, right? So ski is going to come back, but we don't know how long.

And therefore, we assume that it's going to be for two seasons until it's a day is coming back until 2020. And for that, we need to adopt, right? And so we resize the company to be very, very lean and small. And we raised just enough capital to survive those two years. And it ended up to be working very well. But in that sense, now, if you would ask me how much luck was in there, luck is always good. I think that I heard maybe the most significant real estate developers in New York is Silverstein. And he built the World Trade Center and pretty much everything.

I think on the Hudson. And he was asked how he becomes such a successful developer. And he said, you know, tell you the truth, this is 85% luck and 15% skills and know-how and so forth. And then he was asked, if he can change one thing, what exactly is going to be? And I say, you know what, I'm going to replace the 15% skills with additional 15% luck. So luck is good. for me lack I will define lack as opportunity meets readiness

readiness. Readiness is up to you. Opportunity not always. Beautifully said. I also agree with luck being so core to most people's success, most company success. But you probably don't give me, I feel like you're not giving people enough credit for the hard work that's also involved

in the skills and timing and stuff. On the readiness. That's the readiness. Of being ready. to take advantage of opportunity. That makes sense. Okay, there's a bunch of stuff I want to dig into here. So one is, and this is something, it's kind of a tangent, but I think it's a core part

of your advice on crisis, which is that it's always the founder's fault if things don't work out. Even if there's completely at air control, even if the whole world is changing, it's still your responsibility in your fault if things don't work out. I wouldn't say fault. I would say responsibility. Responsibility. You know, it might not end up beautiful.

In some cases, you will die. But at the end of the day, you cannot rely on someone else. The fact that this is, you know, the interest rate is going up and the result is that it's becoming very, very hard to raise in their capital. the fact that this is industry-wide, so what? You have only one company. You need to make sure that this company is successful. And later on, you know, if you fail, then you can rely to then basically say, this is my excuse. It was not just me, right?

Not just me is not going to help you to become successful. Just me is going to help you to become successful. When you assume responsibility, then you are able to, you basically, basically basically saying, you know what, I control my own destiny. I'm going to make the decisions and I control my own destiny. When this happens, you increase the likelihood of being successful. Regardless what happened to the rest of the market, and you don't really care. You also talk along these lines of you have this in your chapter, this section of never give up in a crisis and throughout your journey.

This is by far the most important behavior of a startup CEO. You just talk about that because a lot of times it's like maybe just stop, maybe just give up. one example where it's like, I don't want to deal with regulation other companies. I'm just going to stop. Any advice there just like, okay, maybe it does make sense just to stop and try to give the investors money back versus, yeah, it's just part of your job not to give up. You know, I heard of cases that you basically say our underlining assumptions didn't work out and in our thesis is wrong and therefore we would like to return the investors

their money. But entrepreneurs never give up. And this is the most successful behavior of startup CEO, right? Never give up. Always keep on looking for ways to make it work, right? And so it is going to be a journey of failures, right? And in particular during crisis, but you still need to keep on trying to make it work, even though it's way harder.

So never give up is the most important behavior of successful CEOs of startup. The second one, by the way, is making decisions with conviction. This is true for all CEOs, so for all companies, not just startups. Now, startups, those decisions are probably more frequent, and there are a lot of them. But you're in crisis. All CEOs in the world needs to make hard decisions. And you need to make them with conviction. Because if you don't make them with conviction, then what will happen is that the team is not going to follow.

If the team is not going to follow, then you're not going to be successful. But they never give up. You know, you ask entrepreneurs what will happen. And they will basically tell you, no, we keep on fighting. One of my other startups in the travel industry called Oversea back then, they called Fairfly. And they, you know, the CEO told me that a cat might have nine souls, right? We are a cat in that sense. we have nine souls and the reason that I know that is that we already died night times

or almost died night times, right? And so the reality is that you don't keep up. You keep on as long as, and for a second, I would say, look, there are only two reasons that you would like to give up. One is that your mission is wrong, right? So the problem disappears. And if the problem disappears, your mission is no longer relevant or no longer valid and you might want to consider it to give up. The other one is that if the team is not right and you are unable to change it. So you brought toxic investors into the board and they start to control the company and obviously in many cases they create more damage than help and you are unable to change that anymore. Then this is a good reason to give up. Other than that, never can.

given. Crisis, not crisis, hard cheap, no money to pay, no, you know, anything that might happen, anything that you might want to think that might happen will happen. I'm excited to chat with Christina Gilbert, the founder of One Schema, one of our longtime podcast sponsors. Hi, Christina. Yes, thank you for having me on, Lenny. What is the latest with One Schema? I know you now work with some of my favorite companies like Ramp, Vantas, Scale, and Watershed. I heard that you just launched a new product

to help product teams import CSVs from especially tricky systems like ERPs. Yes, so we just launched one scheme of file feeds, which allows you to build an integration with any system in 15 minutes as long as you can export a CSV to an SFTP folder. We see our customers all the time getting stuck with hacks and workarounds, and the product teams that we work with don't have to turn down prospects

because their systems are too hard to integrate with. We allow our customers to offer thousands of integrations without involving their engineering team at all. I can tell you that if my team had to build integrations like this, how nice would it be to be able to take this off my roadmap and instead use something like one schema and not just to build it, but also to maintain it forever? Absolutely, Lenny.

We've heard so many horror stories of multi-day outages from even just a handful of bad records. We are laser-focused on integration reliability to help teams end all of those distractions that come up with integrations. We have a built-in validation layer that stops any bad data from entering your system, and One Schema will notify your team immediately of any data that looks incorrect. I know that importing incorrect data can cause all kinds of pain for your customers and quickly lose their trust. Christina, thank you for joining us.

And if you want to learn more, head on over to OneSchema.co. That's Oneschema.com. This idea of never give up, it's very similar to Dalton Caldwell was on the podcast. He's a partner at YC and his whole. He has a famous talk, I guess, at YC and this was the title of his podcast episode, was Just Don't Die. That's this main advice to a startup. Just don't die. Never give up.

You might die. You'll never give up. Then we be reborn. And to be clear, the way a startup dies is they run out of money. Is that the simplest way to think about that? That's the only way that they die. By the way, all the companies in the world, right, they are unable to pay their bills and therefore they die. Yeah.

And many of the tactics you share is just ways to not run out of money. oftentimes it involves down rounds, creating strange cap structures just to keep it alive, losing, you know, equity percentage just to keep it going. That's part of the job, basically, and that's what you have to deal with. You know, in many cases, we had to engage the employees, right? Now, we don't have cash. So what we did is that we diluted all shareholders in order to give employees way more equity, right? So five times more equity than they had before. and we told them we need you to trust us

and believe in the cause and believe in our ability to recover. And if we don't, then everyone loses. But if we do, then everyone wins big time. And so this will be a way to actually re-engage employees if you're unable to pay them the regular pay. And that was the case in most of the startups that almost run out of cash.

occasionally you can do you know if you will tell me that you're going to run out of cash next month and therefore you need to shut down I would like to imagine that you have at least six more month of run rate you don't know that

but this is through leadership right so you you basically tell your people stay with me you know you believed in the cause you believed in my leadership you, I still believe in the cause and I still believe in you. And maybe we're going to have some hard time.

Maybe we're going to have some months that unable to pay. But eventually we will get out of that. And in many cases, most people will stay. Now, leadership, you don't build leadership during crisis. You might, but in particular, you build leadership through, you know, transparency through recognitions of your team through actually

putting your team as the top priority. At the end of the day, you're going to be successful if your team delivers. And in order for the team to deliver, then they need you to trust them to deliver. This is really powerful advice, and I want to spend a little more time here, which is

keeping people on board and engaged and motivated through a crisis. So this kind of almost script you just shared is really great. Is there anything else that you found useful or any advice you could share for helping a founder keep the team on board, keep people excited, driven? There's, you know, these words you shared, I think, is a really good example. Is there anything else? So during crisis, people will appreciate more than anything else, transparency. And if you hide information from them, then they would leave.

They don't trust you anymore. But if there is a crisis, and look, if there is a crisis, then everyone knows that there is a crisis, right? It's not surprising for anyone. And this is where they expect your leadership the most. This is where they expect you to be there for them and tell them that this is what we're going to do. And if A, B, C happens, then we will be successful. And if it's not, then we will die. and I want you to believe that we can deliver A, B, and C, and I want you to stay here for that part of the journey.

And this is really, really dramatic. This is perhaps the most important part. Look, during crisis, the team is the one that is going to take you out of the crisis. And you need them more than ever. And guess what? They need you. when you talk about being transparent and open about everything, like how,

what's an example of just like how far you recommend people go? Because, you know, you could just be like, here's all of our data and metrics and numbers, here's what our investors are emailing me. Like how real do you recommend people get? I know it's hard to just summarize in a couple sentences, but what's a good way to illustrate that? So number one, don't sugarcoat.

Right. So you basically, you don't need to share all the feedbacks from all the investors. You can tell them, look, I met dozens of investors in the last couple of weeks and they're all saying no. Or, you know, we had a signed term sheet and the investor disappeared, right? Okay. That's fine. It is what it is.

Look, the fact that it's ugly, if you don't tell that it's ugly, it's still ugly. And so I would share the essence. And if we have metrics, then what I would like to do is believe that everyone is a of the metrics, of the key metrics of the company. This is something that in general, I would say, oh, in the lobby of the office, we should have the key metrics displayed for everyone to understand.

This is what we stand for. This is how well we are executing anyhow, right? And so when they will see the numbers drop, they know that the numbers drop, right? And this is something that I will, in general, I would say, look, key metrics, they should be shared anyhow. And so in particular, during the crisis, we should keep on sharing them.

Definitely not hiding information. So if you have a major customer leave or investor disappear, right, or we are unable to sign a term sheet, right? And so this is the highlight. This is the major issue. And the details themselves, it's less critical. Now, if people ask, then answer. If someone ask, okay, so how many investors have you met that say no? Then start counting 37, be specific.

That's a great answer. I want to come back to something you said that I think is so important but so hard, which is to act fast. If I was a founder, something changes in the market. It's easy to say, okay, you need to cut burn, you need to go raise money, down rounds. It's so hard to do to lay people off to do all these challenging things for your company. Can you again just help people understand why it's so important to act fast? You talked about optionality goes away just like what actually happens there if you don't?

So I'll give you an example, right? So let's say that you have you're almost run out of cash, right? And you have, you believe that you're going to raise capital in the next two months. and if it's not, then you run out of cash, right? So one of the things that you might want to do is extend the run rate. One other thing that you might want to do is actually tell the people that we will be running out of cash in two months. And number one, I want you to help me, even if we run out of cash, because there are good chances that we eventually will be able to raise capital and recover that. In number two, in order to

you know, in order to get your support and believe in the company, I am going to offer you more equity. So the more equity is of something that I will do twice, right? Once today, once you realize that this is going to be challenging. And then again, if we need to ask people to reduce their salary or do something

dramatic around that. And the first one is actually preventive, preventive action, right? So you have shared a know-how, you shared the challenges that we are going to face, and you demonstrate generosity not out of, you have to, but you demonstrate that. And then you essentially dramatically increase their loyalty and their commitment. And when you will need them, they will be there. So this is one example. The other example is about calculating end of cash.

And this is really, really important, right? So let's say that you have run rate of X month, right? Six months, right? If you reduce burn by 50% today, then you simply increase your run rate to a year. If you don't do it today and you wait three more months, then you only can do that for the, so the first three months,

you burn the same way that you did up until now, and now you reduce that to half. So you have six more months, right? Total of nine months. If you decided today that you need 12 months and you don't act today, you will never have 12 months. Now, is that the only way, to do that? No, it's not the only way, but it's one of the ways that, by the way, most companies

will do, so they will reduce burn rate today in order to extend the run rate. Is that going to be more helpful? Don't know. Really, depending on the case, if you would ask me, if you reduce the run, reduce the burn rate, increase the run rate. So now you have 12-month to raise new capital. Is that going to have higher likelihood of remaining with the current plan and growth and raise capital within six months? I don't know that, but this is exactly the decision that you need to make. That's a really great way of putting it. Just the math means the leverage you have now to extend run rate runway is so much higher the sooner you make the decision. And the key, just going back to your kind of algorithm of deciding if we need to act in this way,

quickly is first think about what's being impacted, then how long is this impact going to last, and then how long do I have before you run out of money? And those questions is your advice for deciding, do we let people go now? Do we raise money now? There is always, by the way, there is always alternative for let people go. In general, I would say letting people go is is probably better than reducing salary for everyone, right? But let's say that you need, you know, cost reduction of 30%, right? One of the options is let 30% of the people go. Another option is actually reduced salary by 30% for everyone,

and it's going to have the same impact, right? Not exactly the same impact on the balance sheet and on the P&L, but not necessarily on the organization. Now, if the organization feels that they are committed to each other, they will prefer the second way. If this is more of individuals, then obviously they will prefer the first way. Is there a different way? What about if management gives up on their salary?

That might make the same impact, right? And definitely the demonstrations of leadership, right? And by the way, increasing the commitment of the rest of the organization. So in that sense, I would say there are multiple ways of reducing the cost. But in general, this is always about impacting people. If you look at the startup and you look at the budget, 70% of the budget is people, maybe 75% of the budget is people. Everything else is nickels and dines.

If you're going to tell me, oh, no, we're going to, you know, we are going to stop the supply of coffee to do that. office and this is how we're going to reduce cost. No, this is how you create dissatisfaction with the team and you would reduce costs because some people would leave because of that, not because of lack of coffee, but because of inability to determine and to make hard decisions. So end of the day, if you need to reduce cost, that means people. That was really good advice and really good set of options to consider wrestling people off. So most of what we've been talking about right now has been the cash crisis route.

We've spent a little time on the product market fit crisis route, but I want to spend a little more time there. So for the cash crisis route, you have these kind of three questions and then it's like, cool, this will tell you how quickly to act and how severely to make cuts. In the product market fit route, is it essentially, if you've lost product market fit, it's to pivot? Is that basically the question? And then it's a question of where to pivot and what to do. So the first question is, am I still relevant? And probably the answer is no. And then the next question that you basically say, okay, do I want to pivot, right?

And for that, I would say, if I would start today, this is what I'm going to do. And if the answer is yes, then do it. Now, in many cases, you say, oh, wait a minute, I already have the organization and I already have money in the bank and this is what I'm going to do instead. I wouldn't necessarily do that. The way that I would look at it is different, right? Because the other alternative is basically say, wait a minute, all of my underlining assumptions have gone, right?

They are wrong. I lost product market feed. The value proposition that I had is wrong or is no longer valid or no longer relevant, and therefore I need to start from scratch. do I really have the assets to become successful on the new path? And the assets could be, you know, technology that you already developed, could be the team that you already built, could be the know-how that you have in that specific market

that gives you a significant advantage. And if any of those is really, really significant, then it's possible that you want to pivot. Pivot basically says, a major fuck-up. All of our underlining assumptions are doing. And because everything else, if it's not, then that's part of the journey of failures, right?

If you'll tell me, oh, we try this product, or we try this featuring didn't work, then this is going to be your journey. But once you figure out product market feed, if it disappears, then pivot is one option. Shutting down is another option. And for shutting down,

there are two things that you need to ask yourself, do I have the energy to keep on going? Maybe you basically say, I spent the last seven years trying to do that, and now it's gone, and you know what, I need some time off. And the other one is that do I really have the assets to become dramatically successful? Pontera is one of my startups that I started back in 2012. and back then we called that FIX. And we were dealing with financial fees in Israel. And we were actually pretty successful. And then we decided, okay, wait a minute, Israel is a small market.

Let's move to the U.S. And we moved to the U.S. And one day the CEO came to me and say, look, we need to focus. I cannot do both. So we need to pivot. And we start the Israeli operation completely in order to focus all of our efforts. on the U.S. operation.

And then we realized that the nature of the beast is different, and therefore we need to re-look for product market feed. And eventually we found that with the regulations of the Obama administration. And that was our product back in 2016 or 17. And then the administration have changed, and now it's going to change again. And they changed the regulation. And overnight, we figure out that, and we were actually on being a successful path. And we had to reinvent ourselves.

Now, what we basically say is, look, we have the energy to keep on going. We have something a thesis that we believe might be relevant for us. We have the technology that can serve the thesis, and we have enough cash to try it out. And we went back to the board, and we offered them to, two options. Number one, we give you your money back. And number two, this is what we're going to try. And the interesting part is that investors don't want their money back. They did not invest in order to have their money back. They invest in order to make a significant impact. And obviously, they don't want to go back to their investors and tell them, guess what?

And so we had all the support to keep trying something else. And since 2018, we are actually being pretty successful on this path. And all of a sudden, you know, companies 12 years old. And we pivoted twice. And now we are, you know, end of the day, helping Americans to retire richer, helping financial advisors to support you on your 401K plans, on retirement saving plans. And the result is pretty significant.

So this company is on a path of being successful. successful, but we almost died twice. And look, all the CEOs in the ward, if you would ask them, have you nearly died already? And they will tell you yes. And then the next question would be how many times, and they will tell you multiple times. And if they are not, that means that they're simply too early on their journey. That's such an important point. It came up.

I just had Toby from Shopify in the podcast. and he said exactly the same thing. The number of times Shopify almost died, people have no idea. It's important to know. That's very common. It's, yeah, and I'm a good friend with Harley Finkelstein,

the president of Shopify, and he told, you know, we exchanged horror stories about nearly dying, right? And we're still here. Just never give up. To double down on this pivot point real quick, so the things you should look at to help you decide if a pivot is a good idea.

You shared, you have some tech that might be helpful in this new direction. You have a team that's really well suited to this new idea or you have some knowledge. Is there anything else just like, what's that list of things you should look at to see to come up with ideas slash decide this is a good idea for us to pursue? So, you know, going back to basic, right? But now you're already running. So you probably have already validated the problem or the value proposition, right? So you, when you're about pivoting, right? So when you start, you think that, okay, I have this brilliant idea.

And what I really encourage people is, first of all, go and validate the problem, right? Speak with people and understand their perception of the problem. And only then start to think about the solution. Now, this is still not the case in most startups. But this is fall in love with the problem, not the solution. And for a few reasons, right? and maybe number one reason is, well, entrepreneurship journey is about creating value.

Simplest way to create value, solve a problem. That's it, simplest way. And I like simple. But then in addition, when you focus on the problem, then the problem is going to serve as the north star of your journey. And when you have a north star, you're going to make less deviation from the course and increase the likelihood of being successful.

But by and large, your story is going to be way more compelling. If we will be here in 2007 and I will tell you that I'm going to build an AI crowdsource-based navigation system, you're going to say, oh, yeah, very interesting. But you don't care. If I will tell you, I'm going to help you to avoid traffic jams, then you do care. When your customer care, they want you to be successful. And when they want you to be successful, they are going to help you to become successful. And so this is going back into pivoting the same way, right?

First of all, validate what's your value proposition? What's the problem you're going to solve? Now, in most cases, you already validated that because you, you know, in the market for some years and you had dialogues with customers and you already realize that. And maybe you already told yourself, you know what? In my next startup, this is what I'm going to do. And so it's possible that you already validated. And if you haven't, then this is exactly the time to revalidate the value proposition. So this is the first thing that you need to do.

And then the second thing that you want to do is ask yourself, do I really have a significant advantage here? Do I really have the team, the technology, the know-how to make a leapfrog here and really lead the market? And then the other part of it is, okay, do I have the energy and the passion to go and do it all over again? Because this is going back to square one, right, trying to figure out product market fit and then figuring out business model and then figuring out

growth and so forth. So the entire journey from scratch. And if you answer yes to all of those, so you have a very significant value proposition and you think that you have something that is going to accelerate you dramatically because of the know-how, the technology, the team, then the next thing that you're going to do is validated with the team. In your underlying assumptions the team is going to continue? Maybe. Maybe not. This is exactly the time that you would like to validate that.

And the way that you're going to validate that is you basically say, then guess what? We are fucked. Our underlying assumptions are no longer valid. And this is our new opportunity. And we can go this path or we can die. And let's see what people, if they believe in the new path, then this is a good idea.

In many cases, by the way, it's possible that the new path will come from them. They are the one that are closer to the customers. They are the one that are closer to the technology. They are the one that are probably no better than you. If this new path is actually valid or not. And if this is the case, then you go and do it. The last one that you want to, look, even if you don't have the money for it, let's say that you don't have plenty of cash in the bank.

go back to the investors and go back to raise capital, because now you actually have a very significant advantage, right? You already have a technology, you already have a team, you already have the know-how, you're already second-time entrepreneur because pivot is like restarting from scratch, or you're already multiple times entrepreneur. So you are way more attractive today than when you were a few years back. And so go back to existing.

investors and new investors and raise more capital for this new journey. I like this algorithm. I was writing it down as you're talking. So basically, when you're deciding to pivot, looking for opportunities to pivot, step one is find a problem, validate there's a problem that exists. Step two is figure out if you have the tech team or know-how. That gives you an advantage to win at solving this problem. Then ask yourself, do you have the passion and energy to be spending your life in the many number of years attacking this problem? and then make validate your team wants to also go after this problem and then check with your investors

and try to get money to fund you going after this problem. Yep. Awesome. And I like this order right now. Some people will tell you, oh, my order is different and I'm not saying if this is the right thing or the wrong thing, but I think that one of the reason that I say this is the order is, look, when you validate the problem and the value proposition,

even if you don't have the passion, if it's being validated, your passion will be built up. Because then you feel, you know, you speak with, you know, with potential customers, and you tell them, this is what I'm thinking of doing,

and this is how it's going to help you. They will say, yes, I need that. Can you do it tomorrow, right? Then all of a sudden you get excited about it. And usually when I speak about consumers, then I tell people when you go and speak about the problem, if the answer that you are going to get is, oh, I know someone that had this problem, don't follow this back. If they will tell you, no, no, no, no, no, this is not the problem.

The problem is, and they will give you their version of the problem, this is where you want to follow that. To a certain point, if you speak with enough people, you would have the sense that you are being sent on a mission. And this is where your passion is going to go through the roof. And so don't start with the passion. Let the passion be built. I totally feel that I have friends who started this company Zip, which is a procurement, a really good procurement platform.

And I don't know if they were growing up wanting to be building in business that helps procurement experiences be better. But in there, and they pivoted six times before they pick this idea. but they through that, I think, found how big of a deal this was and how much happier people can be in their day-to-day with a better product and got excited about it. And now that's what they're building. The best thing happened when you try to validate a problem

is that you speak with someone and they will tell you in a very strong emotional world. I hate that, right? Or something like that. Yeah, this is exactly what you're looking for. You're looking for something that people will engage emotionally. and with strong emotions. Someone once described it is you want to look for their pupils to dilate

when you talk about this problem. Yep. There's a quota road down as you were talking earlier that I think is really great. It's kind of a framework for the way you used it is to help you pick which direction to go. But I think it's a useful framework in general for companies and founders is ask yourself, if I were to start today, what would I have done and what would I do if I ever to start this company again today? I think that's such a powerful thing to always think about, even when everything's

going great. I agree. Today is the first day of the rest of your life. And this is pretty much everything in your life, right? So ask yourself, knowing what I know today, would I do something different? Now, if the answer is yes, then do something different today. Don't wait until next life, right? Or next company, or next relationship, or next something. If you're basically know today that you should be doing something different, then change. I think that's extra important because somebody will do that probably and compete with you and put you out of business. And it's better that you do that first. But this is true for everything in your life.

If you are working in a place and you are not happy and you suffer there, then I would say, you know, the guidance that I give to my children is very simple. If you're not happy at your working place, then ask yourself, is there something that I can do to change that? Then try to change that for the next three months. If you're unable to change that, then leave. You don't deserve to be unhappy. And you need to control your own destiny.

For me, quitting your job, do you know what it means? You fire your own job, boss. That's what it means. you fire your boss by quitting. That's it. That's empowering. I like that. Okay.

Just, okay, two more questions. One is I want to close the loop on the way story. So you talked about how Google launched a competitor, basically free turn-by-turn directions. That was the business you were building, and you essentially had to change direction. What did you actually do? How did you decide and realize this?

So we didn't change. We, we, back in 2013, and 10, we were simply not good enough. We were still in the product market feed iterations and iterations and iterations. And we were not good enough. And we kept on building and we kept on iterating and iterating. But we almost ran out of cash, right? And then we had this lucky day that Microsoft decided to invest.

And so we used Qualcomm. And, you know, the funny part is that I had this dialogue with Qualcomm ventures. and they told me that they're not sure why is that important for them. And I read someplace that they did not invest at Twitter at $55 million. And this is exactly what I told. May I remind you that you did not invest in Twitter at $55 million valuation? This is where ways is today. And obviously a different story, but that was the fear of missing out, the fomo.

Yeah, I was going to say, good fomo. But the result was that we had enough cash to keep on trying and keep on iterating and iterating and iterating. And eventually we ended up to be very successful. So that was not about pivoting or changing directions or doing anything dramatic. We basically say, okay, we will need to reduce costs dramatically. We decided that we are not going to, by the way, what we did is we reduced the salary of the management only. And to a certain extent, I would say people didn't even know. We decided in a management meeting that this is what we're going to do.

And if push come to shovel, then we will do the next step and the next step and the next step and the next step. And but we were eventually able to raise capital. So in that sense, the nearly die was a matter of state of mind. But we did not run out of cash. We raised capital just before that. The story is actually really illustrative of a point I was thinking as you were talking, which is that product market fit crisis often also leads to a cash crisis from investors not wanting to invest.

In many cases, yes. In many cases. You get a double whammy. But to a certain extent, I would say, no, product market fit basically means that you go back to square one. So the other alternative that you have, and by the way, it's also valid. is if you are unable to convince your existing investors to reinvest in the company in order to build the new part of the journey, the new journey, then you know what?

Shut down the company and restart a new company that is doing exactly that. And that's a bigger threat for investors, right, because they are not part of the new journey. Now, they might want to say, oh, we, you know, the company owns their IP, the know-how is the people owned by the people, not the company. How do you avoid the crisis? A lot of this advice is here is you have a crisis,

here's how to deal with it. Any advice for how to avoid falling into a crisis as a founder? Number one answer is no. Don't worry, you will face crisis. And if you worry, you're still going to face crisis. Number two is that, look, it's way easier to deal with a crisis if you have plenty of cash in the bank. So if you can raise capital and maintain higher level of cash in the bank, it will help you to go through the next crisis. But it's not going to avoid it.

So always be funded. It's a good advice. But in general, look, you do not prepare for the next crisis because you don't know what kind of crisis is going to be next. and you can assume that there will be the next crisis, right? Trust me, they will be the next crisis. And then the most important part is that you analyze that fast, and then you act fast. But you cannot prepare for it because you don't know where it's going to come from. And this is really, really important.

The best preparation is that if you have plenty of time, cash. In general, I would say if you have plenty of cash, then this is going to help you for many things. When you say plenty of cash, do you have any advice? It's kind of common advice of have 18 months of runway. Is there anything there you'd recommend for founders?

And this is really depending on the CEOs, right? And their risk attitude. Some of my CEOs prefer to have two to three years of runway. I basically say, this is my comfort zone. I know that I can restart. If I need to, I know

that I can suffer major crisis. I know that I can go into new direction if I want to. I know that I can expand and try something completely different if I want to. This is not necessarily as a result of a crisis, right? So maybe you basically say, here is an opportunity, and I have the cash to do that. My general rule will be around 18 months. Are you okay with 12 months? Yeah, If you risk taker, bigger risk taker, then you can survive with 12 months. But the challenge is that, look, if you have shorter period of time, then you don't have enough time to execute. You need to focus on fundraising all the time.

And you want to focus on creating value and not just bringing cash into the company. Yeah. Obviously, the downside of raising more runway is you're giving away more your company. but it's always this trade-off, how much to sell, how much money to get. Being a founder, what a tough gig. And I'm going to come back to this quote you had that I shared at the beginning of the podcast, which is building a startup as a journey from one crisis to the next. Yeah, you know, it goes back into the other three dimensions of a startup, right?

It's a roller coaster journey with ups and downs and ups and downs. And it's a journey of failures because we are trying to build something new that no one did before. So we tried multiple things for that. Albert Einstein used to say that if you haven't failed, that because you haven't tried new things before. And it's a long journey. It's a very long journey. In particular, the longest part is until you figure out product market fit.

And now I add the fourth dimension of that, that this is a journey from one crisis to the next one. Yeah. And you've done, how many companies have you started at 10 last time I saw? Yeah, about a little bit more than that. A little bit more than that. It's, you know, not all of them are going to be successful, but most of them are. In some form.

And you just keep doing it. You're a glutton for a crisis is what I'm hearing here. You know, I'm not there for the crisis. I'm there for the value creation. Yeah. Or is there anything else that you wanted to share that you think might be helpful to get into before we wrap up? I really like this podcast.

I really like. And hopefully, in my mind, this is my mindset of a teacher. My destiny is about value creation. And if this podcast or this book, this one, can help people to become more successful,

then I fulfill my destiny. I'm so delighted to be helping you fulfill your destiny. Two final questions. Where can folks find the book? When is it for sale? And then just how can listeners be useful to you? The book is going to be published in about a month

from now. And it is already available for pre-orders on Amazon. But later on it will be on bookstores throughout the US and Canada and so forth. What's the date it'll be published? Because we're recording this. Maybe it's coming out around the time we published this. So what's the date?

I think it's February 15th. Okay, great. I think this is coming out right around there. So perfect timing. So perfect time. And you can follow me on LinkedIn, or you can go to my website, orilevin.com. And I want you to read the book. At the end of the day, you know, you ask me at the beginning, what do I want to accomplish?

Do I want people to buy the book or read the book? And I told you, look, everything that I'm trying to do in my life is about doing good and doing well. So buying the book is the doing well part of it and reading the book is the doing good part of it. And I want you to read the book. That's so good. Lori, thank you so much for being here. Thank you. Appreciate it.

Bye, everyone. Thank you so much for listening. If you found this valuable, you can subscribe to the show on Apple Podcasts. Spotify or your favorite podcast app. Also, please consider giving us a rating or leaving a review, as that really helps other listeners find the podcast. You can find all past episodes or learn more about the show at lenniespodcast.com. See you in the next episode.