Motley Fool Hidden Gems Investing - Waze Co-Founder on Entrepreneurship, Autonomous Vehicles, and ChatGPT

Episode Date: March 18, 2023

When venture capital investors walk into a pitch meeting, they usually know if they’re saying yes before anyone starts talking. 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 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. Company discussed: GOOG, GOOGL Host: Alex Friedman Guest: Uri Levine Producer: Ricky Mulvey Engineer: Tim Sparks Learn more about your ad choices. Visit megaphone.fm/adchoices

And I met one of the largest VCs in Israel, one of the leading partners, and that was after Waze was acquired. So we had a dialogue, an open dialogue, and I asked him, how long does it take you to decide if you like the entrepreneur or not? And we were sitting in a small meeting room, so the guy is looking at me, and then looking at the door and looking at me again, and says, before they sit down. i'm ricky malvi and that's yuri levine co-founder of the navigation app ways 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 ways the fundamentals of entrepreneurship a very common misconception about disruptive technology and if ChatGPT can solve the good enough problem. And 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? So you're right. At the end of the day, building a startup is a journey.

It's a complex journey and it's a long one. It's a rollercoaster journey. It's a journey of failures and we will touch base on all of those. But the first part of this journey is to figure out product market fit. And by figuring out product market fit, what I really mean is that you create value to your customers, to your users, to your customers, whoever they are. And 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 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, then I want you to think for a second on all the applications that you are using every day, right? So Waze, searching 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? And the answer is that there is no difference.

We are searching Google today the same way that we search Google for the first time in our life. We're using Waze or Uber or WhatsApp or Netflix or whatever it is, the same way that we did for the first time. So, 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 figure out product market fit, is a matter of years. It was five years for Microsoft. It was, you know, 10 years for Netflix. It was three and a half years for Waze. And even if you think of, you know, JetGPT, it was out there in the market two months ago, right?

So, for a second, I say, what's the big deal? just a month. 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. So 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 are not, you don't have enough traction. And when you don't have enough traction, And everything seems to be very hard. Once you figure out product market fee, which is the value that you create to your users, you're actually on a path of being successful.

I loved 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. So Waze has some magic in that. Waze crowdsource everything, right? And in particular, the traffic information. Now, when my Eureka moment was back in 2006, when we were on a family vacation on an expanded family vacation. So, we were like 10 different families there. And that was in the northern part of Israel. And Israel is a small place. You mentioned earlier Boston. So, Israel

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. And what happened is that everyone left before we did. And we were like the last car to leave. And I decided that I'm going to figure out what traffic like on the different route by calling the other drivers and ask them, how is traffic? And based on that, I realized that there is one route that is really crowded. And one of them, the other route was actually way less crowded. And I realized that really what I need is someone to be ahead of me on the road to tell

me what's going on. And that was the rhythm on back in 2006, but it was only in 2007 when I met the two other co-founders of Waze that we decided that this is what we're going to do. And 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? You know, at the end of the day, fall in love with the problem, not the solution, right? So when you speak with people and you would hear two things, right? And during this, from this moment until we launched the company, until we started the company, I spoke with so many people and I tried to qualify two things, right? So 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. And 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. And all the people tried to explain to me why it's not going to work. Well, obviously, it did. That's great. And 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? So I met the two other guys that actually, which ended up to be the CTO of Waze, was thinking similarly about crowdsourcing. And he was actually thinking of crowdsourcing the map data as well, which was a critical element in the ability to actually crowdsource traffic information.

Because when you think about it, you realize, so back then in 2007, map data was really expensive. And you cannot license map data and provide a free application. Now, you really need to have a free application in order to have critical mass of users to generate the traffic information. So that was the leapfrog in the ability to understand the solution needs not just to crowdsource traffic information, but to crowdsource the map itself. And this is where we started to share the same vision. And we had multiple meetings until we said, OK, now we're ready. We're going to make the leap of faith. And along that process, what did some of the roadblocks or hiccups look like on your end?

So we started, you know, we started in 2007, maybe May 2007, that this is what we're going to build. And 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 creation app, a navigation app that uses the traffic information, all of the same system. And so this is not as simple as just an app. It's actually the backend is way more complex than that. And therefore we need to raise capital. And we went on to fundraising that took us ages, a long period of time, nine months to raise capital. And so we officially started a company in March, 2008, once we get funded. And then And we started to hire engineers and build.

And this is something to remember. The first version that we have that was creating Mac was based on a PDA. Remember, long, long, long time ago, there were dinosaurs and then PDA and then Nokia phones. And today we all have iPhones and Android, right? This long time ago is 15 years. And then so we built the first version running on a Nokia phone, generating real-time traffic information and launched that in Israel at the beginning of 2009. And it was still not good enough. It was actually good enough in Israel, but not good enough in the rest of the world. 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. That was there from the beginning. It's at the end of the day, when you think about one of the best way to actually become successful is to find a common enemy. And all the drivers have two common enemies, right? Traffic jams and speed traps. In the book, there are two great chapters on fundraising and dealing with investors. So I'd love to hear from your opinion. What are some of the key takeaways to share with startup entrepreneurs about dealing with investors and the process of fundraising? So obviously, there is major... 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 rounds. And there is 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. And so I ended up with having two chapters. And 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 fundraise for a fundraising, they have no idea what they're going to face. And if start building a startup is a roller coaster journey, then let me define fundraising as a 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're doing that, right? And so many other things you have done before, you have built product before, you have like teams before, you hired, you fired, you did a lot of those stuff before in multiple places, but fundraising is the first time. And 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 would have that I had actually during my conversations with investors over the years. One is about how fast does it take them to the site?

And I met one of the largest VCs in Israel, one of the leading partners, and that was after Waze was acquired. So we had a dialogue, an open dialogue, and I asked him, how long does it take you to decide if you like the entrepreneur or not? And we were sitting in a small meeting room. So the guy is looking at me and then looking at the door and looking at me again and says, before they sit down, wait a minute. This is how fast it takes them to decide. It doesn't make sense, does it? Actually, it does, right? 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? Second. And then maybe there are a few more minutes that you either let that first impression to solidify or to change that. And what's really important is that you, as a founder 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're already made up their mind

and it's too late to change it. And therefore, I would say, start with the strongest point at the beginning. And to a certain extent, 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 there 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. And the second conclusion was with multiple dialogues with investors that invested the first funding round into a startup and asked him why. Why did you decide to invest in this startup or this startup or this startup?

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. And then you said, OK, wait a minute. If these are the only two criteria, then what we really need to make sure is that the

investor, like the CEO. And in order to do that, the CEO needs to go by herself to the first meeting. Because if there are other people in the room, they're going to drag attention and they prevent you from shining. And you need to shine in order to become likable. So this is the first part. You go by yourself. Second part is you need to learn how to tell a good story. And 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 2007, and I will tell you, I'm going to build an AI crowdsource-based navigation system. And you're 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. And 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. And 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're 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're 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 funded. Now, the biggest challenge is the following, right?

A venture capital partner is likely to meet 100 companies a year or a magnitude of 100 companies a year and invest in one or two. So one or 2% in 98% of the times they're going to say no. And what you really need to get used to is hear the no and not get discouraged. Everyone is talking about chat GPT right now. What's the disruptive technology that's making you the most excited? I was hoping that you're going to say disruptive technology, because at the end of the day, technology do not disrupt.

Technology does not disrupt. What disruption means is changing the behavior. And so there are a lot of technologies 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 their behavior, we have not seen change in the market equilibrium. And therefore, there was no disruption. So for a second, I would like to refer to, you know, let's think of Gmail, right? Nearly everyone that I know has 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, right? 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 chat GPT for a second, I would say, okay, this is really major disruption. It happened in no time, right? So this is two months ago and look where it is today. And for a second, I would say, whoa, whoa, whoa, wait a minute. Chat GPT is based on GPT 3.5, version 3.5. It is years to get to where it is today.

And so this is about how long does it take to get to a product market feed. And yet the use cases, the verdict is still out. So I can think of multiple use cases, but what we need to figure out is that each one of them, we 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, right? Write my resume and give them two working place that you had before. And I'm a software engineer. I was a software developer. this company from this time until this time, and then team leader this time for this time,

and so forth. And then you look at the results. In the first glance, you're actually going to like it. Wow, that's really saved me a lot of time to write my resume. And then I would ask you, okay, 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? And you will look at it and say, you know what? Yes, I can do that. And then I would ask you the third question. Is that you? And the answer is no. The answer is anyone. So 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. And so when we think about it, then you say, okay, wait a minute, this is actually good enough for anything that is about language generation. And 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 how about av what is the future hold there and when i say av autonomous vehicles i mean there there is huge there is huge demand right because then you think okay what is the problem the problem is very simple there are actually two flavors of the problem number one is that i actually need to spend time driving a car and and i don't need to drive a car if 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 u.s spending on behind the wheel an hour a day four percent of the day actually nearly nearly seven

percent of the awakened time that they have and if i can actually add that free that time for you you will thank me every day so this is one thing the other part is um is casualties right so so car crashes, there are more than 1 million people being killed every year on the roads. And look, if you'll tell me this is only in China and India, no, no, no. U.S. is actually pretty bad in that. And with autonomous vehicles, we will have way less casualties, you know, to the level that if we will do fast forward, and we all realize that this is going to happen, it's going to happen because of the need. And 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 that this is two years

down the road and turns out to be not or not there yet. But we all realized that this is going to happen. And when this happens, people, the next generation, they will not drive. The generation after that, if you will tell them that you used to drive car to yourself, they will not believe you. This is how the world will change. And when you think about it, you say, okay, 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. So I know this story is still unfolding and to timestamp our conversation, it's Tuesday, March 14th. But as someone who works with a number of startups and with different venture capital organizations, I'm curious, what was your reaction when you heard the news about Silicon Valley Bank? So, you know, we heard the rumors before.

And the first thing that we did is this could be very catastrophic for some of the startups. And the recommendation was for the startups is to make sure that they have available funding, available cash in other 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, right? And for a second, I would say, look, if you think that 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. So as the situation has evolved, what have those conversations looked like with entrepreneurs and startups? So 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, right? At the end of the day, you look at the amount of deposits that they had, and you ask yourself, okay, where are all those? Where is this money? This money is actually probably in CDs or in other monetary tools, and it's still there. What happened is that the bank, And, you know, there were a lot of withdrawn that created a ripple effect.

And 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 of it or 95% of it or 97% 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. To wrap things up, I was hoping you could share some final words of wisdom for entrepreneurs. So I would start with maybe two things, right? So 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 it's worth solving. And then ask yourself, so who has this problem? Now, if you happen to be the only person on the planet with this problem, then you know what? Go to a shrink. It's way cheaper than building a startup. And if a lot of people actually have this problem, then 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 works, 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 are trying to build something new that no one did before. And the reality is that we think that we know exactly what we are doing, but we don't. So we try multiple things until we find one thing that does work. Now, if this is the case, you realize that this is a journey of failures, then there

are two immediate conclusions, right? The first one is that if you're afraid to fail, then in reality, you already failed because you're not going to try. Albert Einstein used to say that if you haven't failed, but 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, okay, 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. That the more attempt that you have, you eventually increase the likelihood of being successful. And the last part is, you know, has to do with decision making. I spoke with many entrepreneurs that their startup failed and asked them why. And about half said the team was not right. And I kept on asking, okay, what do you mean the team was not right? And I heard, you know, 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 is not right? Now, all of them told me within the first month. And he said, wait a minute. If you knew within the first month that the team is not right and it didn't do anything, the problem was not that the team was not right. The problem was that the CEO did not make hard decisions. 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 small organization like startup, the hard decisions, they will 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. Jure, thank you so much for joining today. It's been a pleasure speaking with you. Thank you. My pleasure.

As always, people on the program may have interests 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. Thank you.