Underlying Waze's journey is a little-known approach to product thinking, super-powerful data network effects, and a guiding north star metric. This is Waze's insider story, as told by their former CEO, Noam Bardin. NFX Partner Gigi Levy-Weiss recently sat down with Noam, where they discussed the step-by-step story of the company's growth, starting from their early days in 2008 with just 2,000 monthly active users, through being acquired by Google for $1B in 2013, and hitting 140M monthly active users at the time Noam stepped down in Feb 2021. Early-stage Founders are wise to study as many successful growth stories as they can. While there is no single playbook of best practices, each case contains deeply valuable learning that we at NFX aim to pass along from Founder to Founder. Read the full NFX Essay here - https://www.nfx.com/post/the-insider-story-of-waze
Gigi Levy-Weiss:
Hi everybody. We're here with Noam Bardin, the CEO of Waze that just left the company a while back. Noam, everybody knows you that work with you knows that you're an incredible leader. I think you led Waze for more than 11 years, one of the truly innovative and deeply beloved companies. I'm a user from day one more or less, which, we care about that as NFX also displays some of the best data network effect that we've ever seen.
We'd love to talk to you about your journey from the early days of Waze, all the way till now, 11 years later, and thinking a little bit on network effects. Let's jump in. First of all, thanks for coming over.
Noam Bardin:
My pleasure. Thank you for inviting me.
Gigi Levy-Weiss:
So I'm not sure that many people know how large Waze is and what a meaningful company it is. So when you joined the company, how many users did the company have and when you left, how many did it have in how many countries more or less?
Noam Bardin:
I joined Waze in March of 2009. Just briefly, the company began as sort of an open source project by one of the founders, in 2006. Ehud basically started this on his balcony, which is the Tel-Aviv equivalent of a garage, I guess, in America. And later on, things began taking off and they decided to turn it into a company. And they officially raised their A round in March of 2008. And I joined the company in March of 2009. So a year after the company was formally founded and three months after it launched as Waze, under the brand of Waze in Israel.
So the company had about 22 employees, it had launched a service only in Israel. In those days you talked about downloads, all kinds of things, but if you think about active users, there were probably about 2000 monthly active users at the time. Waze in February, we're at about 140 million in monthly actives, doing about 36 billion driven kilometers a month in every country you can imagine. So any country where people drive cars, there is a Waze map being built and a Waze service active from Iran and Saudi Arabia, to India and Malaysia and Philippines to Brazil, Mexico, Costa Rica, obviously the US, Europe.
So basically, anywhere you can imagine there are people, there's a Waze service and because it's a community driven product, it literally grows wherever people want it to grow. So if you go to Africa, you'll find different networks. If you go to tiny little islands off The Bahamas. So that's one of the things that's always fun at Waze is suddenly learning about new countries and new places where people have started building things themselves. And that's a lot of the power of a community and crowdsourcing.
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This transcript was exported on Jun 02, 2021 - view latest version here. Gigi Levy-Weiss:
We'll definitely get back to this, but one thing caught my attention. Did you state a KPI of driven miles or millions of driven miles? Was this one of the KPIs of the company?
Noam Bardin:
Yeah. So when you look at a startup progress, startups usually start with very, very simple KPIs, downloads, users, something. And the KPIs many times represent what investors are expecting to see. Because a lot of times, the KPIs, especially in early stage, startups are really focused at trying to raise money. But when you actually think about, as a companies mature and grow, the KPIs become more and more specific and deeper and more representative of the business and the user experience.
So for us, a few years after we founded, and we kind of realized that driven kilometers was really the most important metric of our service. That doesn't mean that it made sense to an investor or was comparative to other services. But when you think about what our network produces of users and the traffic, the more people drive with the service, which is what we call driven kilometers. How many kilometers did you actually drive that month? We collect more data off it. They spend more time with us. We can make more advertising revenue. We see that the engagement levels grow, the more people use us.
The more people use our product, the more features they discover driving more usage, et cetera, et cetera. And so all of these things really made driven kilometers as one of our most important metrics. In addition, we think about active users, we do have a use case at Waze where people open up the app, check directions, close it, but don't drive with us. And that's an important metric for many different things, but that's not representative of really the quality of the service. Driving with Waze open is really the quality of the service.
Gigi Levy-Weiss:
That's super interesting, and two follow on questions on that. So, when the company starts growing and now you have billions and billions of miles, do you start differentiating one mile to another? Like, the more desirable mile, the one where Waze can bring more value versus the other one. That's one question.
Second question, I was always wondering whether you guys have a KPI of reporting, how many reports per mile, or how many reports per active user per day in terms of users actually contributing more and more data? Was this something that you guys tracked?
Noam Bardin:
Yes, this is something that we tracked. There are obviously lots of KPIs. I always like to look at what's the Uber KPI? What's the KPI that drives your business? Now, if you look at reporting per driven kilometer or reporting per user, that's a very important KPI for the PM or the team working on reporting as a product. When you think about the company on the whole, if I have to choose one KPI, I would look at driven kilometers because I think that's the best explanation of how our business [inaudible 00:05:11] through KPIs. But yes, when you think about driven kilometers, not every kilometer is the same.
So for example, we would look at professional drivers. That's like Uber drivers, et cetera. We'd look at them different than we would look at consumer driver. We would look at people driving in their hometown or their home area, which is more commuting, which is the most important use case for us versus people driving one off on a road trip somewhere else. So there are all different ways that these kilometers were actually split up. And with that, you also get into how many drives produce these
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kilometers. So it's the average kilometer per drive. So if someone does few drives of very long distances, that's one thing, someone who drives very short distances, but many times a day or a week, now this is something else. So there's a lot different ways to slice this KPI.
Gigi Levy-Weiss:
Yeah. Definitely. Another thing that you said that immediately caught my attention. Many founders in small countries like Israel, often ask themselves whether they should launch their product locally before they go internationally. I seem to recall, and I think you mentioned this as well, that the initial founders of Waze started Waze actually as a project in Israel. How do you think about that? If you started the company like this today in Israel or in Germany, which is a larger country or in somewhere else, would you rather starting it as a local project or would you immediately try to go for your main markets?
Noam Bardin:
That's a very complicated, loaded and changing question in terms of where we are in the world. I'd say a few things that I think caught my eye. One is, not all countries are the same. So if you start with small countries like Israel or Sweden or Croatia, or Belarus, small countries like that, you have no choice but to be an export product because you have no market. And so you might start locally just to try out your service, but frankly, it's just like a technical experimentation. It doesn't really mean anything in terms of what's going to happen in the world.
If you come from a large country like the US or China or India, you don't need anywhere else. So your country is the market. So a Chinese company... And I know that you see that with entrepreneurs, you talk to an Israeli entrepreneur, they talk to you in thousands or tens of thousands. And you talk to an entrepreneur from China, a hundred million is the smallest unit of measurement. They just don't know a smaller number. And so there's like scaling that comes with your country. I think what gets really complicated is countries in [inaudible 00:07:19], Germany, the UK, countries that are large enough to have a market, but small enough that what happens in their market is not necessarily the reality for the rest of the world. And I think the dynamic you see, and it's not coincidence that we don't have many European, large consumer tech brands. We do. I'm not saying that. But from the large countries in Europe, we have more from the small countries, like Sweden.
Gigi Levy-Weiss:
That have to export from day one.
Noam Bardin:
Because they have no choice. But if you start a company in Germany and you get all kinds of interesting German use cases and you solve them, you get sucked deeper and deeper to the German market. And you build a company that's great for Germany and could be a very valuable company, but it will never be a global brand because your focus is on solving German problems. Now again, if you're solving Chinese problems, that's fine. You don't need to be a global company. If you started solving American companies, that's fine. But if you're solving a company's in Germany, you're kind of capping the size.
And that's why I see small countries like Israel and Northern Europe, Eastern Europe, et cetera, as great places to launch globally because you have no choice.
Now, the question of, do you launch locally? I think as a few criteria to it. One is, what are you trying to achieve? So if you're trying to test out the technical aspects of your product, yes, definitely. If you're trying to check out the user experience, it gets more complicated. If you had asked me this
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question 10 years ago, I would have a very different answer. Today, I think what we're seeing is a more globalized view of startups. And so you can be a Latin American company that's focused on Spanish speaking countries with 800 million people speaking Spanish in these countries, you can build a phenomenal company without having to care about the United States. So obviously, you see that in China, you see it in other places.
So there are definitely types of companies that very local or regional, but for a real global brand, you have to be successful in the US. That's just the reality. And I say to a lot of people, "You can be super successful anywhere in the world. That doesn't mean you're going to be successful in the US. But if you are successful in the US, your odds of being successful everywhere in the world is much, much, much higher."
Gigi Levy-Weiss:
So to sum up, if you start a business like this today, you may do technical testing in Israel, but you'd never focus on that market to start with.
Noam Bardin:
Yeah, I think that that's an accurate way of putting it. I'll give you some examples. When I joined Waze and our product was for Israel, product itself was client based. You would download the whole map of Israel to your phone and then you would [inaudible 00:09:31] with it because it's a tiny country.
Gigi Levy-Weiss: I remember that.
Noam Bardin:
You can't download the map, or then, today you can of course. But then, you didn't have a storage to download the map of the US. It's 50 times bigger than Israel. And so we had to move from clients to the client server and to tiles and to communication issues and using up internet bandwidth, which then was very expensive. And all these other things that come into play when you begin building a client service solution. And I think that's a great example of why you have a problem launching locally. We launched a local product, client-based, great product, et cetera, but that product is not relevant for the US and obviously, we ran into a lot of problems when we went to the US that we had not seen in Israel.
Gigi Levy-Weiss:
You were a successful CEO before, what did you see in the product that got you convinced that you want to take this initial project that had some money and basically run it? What was so unique in it compared to the other solutions in the market or the direction of the market that got you convinced that this is something you want to take?
Noam Bardin:
So it's funny, I'll have to bring you up to speed to what my state of mind was at the time. I was running a company called Intercast, which was an HD delivery company, which was probably the worst mistake I ever did in my professional life, joining this company. I joined it for all the wrong reasons. I joined it because I wanted to join a company, not because this was the right company. And so I did due diligence from the position of, I want to join it, not from the position of, is this the right place? Long discussion, terrible mistake. I ended up shutting down the company, worst two years of my life. The person who ran
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engineering for me at Intercast was a very good friend of one of the founders. And so that kind of allowed me to follow their story and they followed our story. Although, we never actually met because they were fundraising and we were fundraising. We were like the whole thing.
Part of the A round investment, the agreement was that they're going to replace the CEO. So there was a CEO search going on for awhile. But I think what was unique, and a lot of times people come to me and ask, "Well, why didn't it work out?" Bringing on an external CEO so early. And my answer is, "Usually it doesn't work out and don't do it." The fact that it worked for us was really an anomaly. And I think that the reason it worked is because I met the founders, not the investors. I met the founders early on when they were looking for the CEO and we spent a lot of time together. We reached a point, before we went to the investors where basically, they said, "Look, we want you to feel like a founder. And we want you to act like a founder and not like a hired gun." And that's kind of who I am as well. And it worked that way.
We're very good friends today. Our families are friends. We've been through the trenches together, but I think we went to the investors after we had decided we want to work together. And I think usually what happens, you bring on an external CEO, they bring him on as, him or her, from the investor perspective. And then the odds of that working is very, very low. And so this was kind of a unique thing that happened to us, but you have to remember the time also. The first iPhones had just come out. This is 2008. So the first iPhones had come out. You have to jailbreak your iPhone to install navigation software on there. Nokia was a dominant player in cell phones and Blackberry was the dominant one in the US. And Microsoft was a major player in mobile phones.
So it was a very, very different world. And I had had smartphones, what they called then. It was basically a phone with email. I had them for a while, but I'd never installed an app on any of my phones. Waze was the first app I'd ever installed. Now, installing meant going and installing an executable and running it. There weren't app stores then. But that was the first app I installed. I had been driving to my previous place of work for two years every day. And it was a very long commute. It was like an hour and a half commute. And I thought I knew everything and I installed Waze. And the first time I asked it to take me to my office, it took me a very different route. And the route was completely not intuitive. And I was like, this can't be right.
But, I was testing out the app, thinking of joining the company. I tried it out and it shaved off 15 minutes off my commute. And that to me was kind out of the aha moment. Like, "Wow, this is something." The second aha thing was I was showing my wife the app, and we were talking about doing it or whatever. And this is the very first version of Waze that had come out. It actually had, you could see other Wazer. There were only blue. There were no moods. It was very, very, initial, it was on a Nokia phone. You could see them. And I remember my wife saying, "Wow, that's so cute. There are other people using this. I don't feel alone." And my wife is not very technical or into technologies or apps or whatever, but that feeling she got was something that was very, very important and stayed with me.
When you think about the technology, there's the functional side of what it does. And there's what it makes you feel. And a lot of times startups focus too much on what it does and the hard aspects of the feature, the functionality, the performance. And you forget that, if the user doesn't feel that it, doesn't really matter. What matters is what the user feels when using it. And so those two experiences were very transformational for me. Coming out of that bad experience I was in, I had decided I'm going to look for a small company that's doing a little piece of technology, not trying to change the world. I've had enough of these world changing companies, whatever. And I ended up going to Waze which was exactly that world changing all or nothing kind of approach. And we still laugh about that. I guess that's kind of what attracts me specifically.
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This transcript was exported on Jun 02, 2021 - view latest version here. Gigi Levy-Weiss:
That's a great story. And I think that your point on startups, not remembering that technology needs to be felt, that there needs to be a why behind it, I think this is something many people are missing. How do you give importance to this? When you think now about businesses, how do you weigh in the concept of feeling and what it makes the user feel when you think about ideas? Do you have any framework for that?
Noam Bardin:
So there are a few different frameworks that I apply when I talk to businesses. One is really trying to get them... I'm talking about the consumer space, but it's probably the same for, definitely for SaaS businesses and for some enterprise, I try to ask them when a user, five years from now describes your company, what are the words they're going to use? No, this seems silly. But actually that is what the output of strategy and mission and vision is. It's what will the actual user when they describe you think about it? So if you ask a user, a Google user, what's Google? They'll say, "It's a search company." They ask you what is Facebook? They'll say, "It's a social media company." Users have that clarity.
Now, companies might not want to be that. So Google does a million things and like Facebook is doing VR, but no consumer will think of Facebook as a VR company. And that kind of clarity of what you want users to say about you. And obviously, you're starting out, you don't know what they will say about you. But if you have a strong vision of how you want them to describe you, then you can begin talking in consumer terms. So what are the emotions they're going to express? What do you do for them that changes their life or that makes their life better, or that helps them in something? Those kinds of questions, if you can answer them from the consumer perspective, it brings clarity to your whole business.
And this really goes back to the importance of having a clear mission and vision in terms of what you're trying to do. I think the biggest challenge we have, on every company, but specifically in startups is prioritization. When startups are not doing well, it's very easy because nobody cares about you and you're just, do whatever you want, nobody cares. But when you begin doing something that matters, you're going to get bombarded by opportunities. And assuming you've hired a great team of smart people, they're going to come up with great options to-
PART 1 OF 4 ENDS [00:16:04]
Noam Bardin:
Great team of smart people, they're going to come up with great options to do things, because if it's a smart idea and a stupid idea, it's easy to make a decision. But it's two smart ideas by brilliant people who understand your business and have great logic about why we should do these two things. How do you choose? And that's really where that strategy, that mission, that clarity about what's important for the user is so important as a tool for making that decision. So to give an example, we started out with Waze, one of the most important things we wanted to convey to users is that this is a network. There are other people out, there they're not alone, and that we're building towards something. At the same time, it was very important for us to manage their expectations. Because at the beginning, we couldn't find where you were going and we get you lost, and we'd ask you to jump off a bridge.
All this crazy stuff that was going on. So there were a few specific cases that we focused on and we engineered for. So one was there was that experience for the first time of seeing someone else using the Waze app. Now, today you open up Waze, you see 20,000 people around you, our challenge is to
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filter out people. When we started out, there was no one. So if you would be driving in the bay and in real time at that moment, there'd be three other people driving. That would be the [inaudible 00:17:04]. We engineered for you to see the other person. So we'd zoom out the zoom level and we added an arrow that would point you to where there's another person, because once you were driving and you saw another person, you felt so excited about this wow moment that people connected to, but the message was, you're not alone, other people are working on this together. And another example is when you come to a stop, we would show you reports around you.
So our initial algorithm was, show the closest 10 reports. And that meant that if you were in the bay, you would see a report from New York. Someone in New York reported a traffic jam, and you're in California. Like, "Why do I need this?" And users hated it. They would complain on the apple comments and everywhere about, "This is so stupid. Why are you showing me this stuff?" The reason we showed you this stuff is so you would know there's another person who happens to be New York who just reported something. And so we had to not listen to what users were saying because they were right, it was stupid. But the effect, the emotional effect it created of knowing there is someone else out there that's using the app at this time, that secondary effect was really what we were focused on.
And this is what I mean by when you have clarity about what's the emotional response you're trying to do, you can get to it. I run into a lot of companies that are trying to do all kinds of really fancy machine learning stuff. And I keep telling them that machine learning really is a call center in India. That's really what, [inaudible 00:18:17] is, "Yeah, we can [inaudible 00:18:19]." That's a good thing because if you start out manually with humans looking at it and build the right experience, later on you'll optimize the machine learning and the algorithms and all that stuff. But humans will do a much better job when you don't have much data in really doing that artificial intelligence, human intel, whatever you want to call it, but providing the service. And you can then begin experimenting with what works for users.
Another way of looking at this is that when you ask for a route from Waze and we tell you a route, you didn't go the other route. So you don't know if we were actually right or wrong in sending you that route. And so a lot of what we would do is to try to show you what a great experience we did for you and to make you feel empowered. And, in effect, it still exists. If you're standing in traffic with Waze and the road is painted dark purple, it's dark red or whatever that color is that's all traffic. And there are 50 different people that have reported traffic, people will still report again that they're in traffic. That makes no sense, there's no logical reason.
Gigi Levy-Weiss:
It's like clicking the close door, but I'm in the elevator.
Noam Bardin:
Exactly. But you feel that you're in control. You feel that you've done something you're helpless when you're sitting in traffic. But there was something you could do. And again, those emotional experiences are super, super, super important. And if you have clarity on them as a founder in terms what they are, what is that emotional experience that makes someone say, "Wow," and tell their friends about what they're doing, then you can engineer for it and you can build for it and you can plan for it. But if you don't have that clarity, then it's all just luck
Gigi Levy-Weiss:
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On this, what comes to mind immediately is that the language that you guys used was all geared to keep reminding people that it's not just a mapping service, but a network. Could you think of a few examples of how you used words, language in the product and around the product to make people remember always that it's not the same as the other product?
Noam Bardin:
Within Waze when we started out, there were two camps. There was, I like to call it the Blackberry camp and the iPhone camp. The Blackberry camp were a group of people who were very focused on core navigation, and they wanted basically to replicate an existing navigation system on a phone. then there was the iPhone part of Waze, we look at it much more as a social network. And even through around the idea of getting rid of the whole navigation part, just about people connecting. Ans I think the strength of Waze is that we managed to balance both, and I think that's really the biggest challenge is balancing that fun experience versus the functionality. When we were starting out, our nemesis was Foursquare. And they were our nemesis because I don't know if you remember at the time, they were the darling of the app world and of the location-based world. And they raised more money, and they were on the cover of Time man of the year, and they were everywhere. And we would look at it and we were so disappointed because obviously our engineers said, "I could build a Foursquare in a weekend."
That was the response of every engineer to every problem. But the point was, we had a lot of similar components. I think what changed though, and one of the challenges was they were for urban, young, cool, hip people, and we were for people that had a job and lived in the suburbs and drove, so obviously less cool. And so they got all the press, but what happened is they never managed to get out of the cool phase into the functional phase. And I think that's something that we did well. Yes, we weren't as cool, but we imagined to enough cool things to keep people engaged. But as a turning point, the functionality came in, and the functionality is what keeps people. Yeah, they'll start for the cool stuff. But if you can't provide real value, so all the emotions are nice, but if you're getting the person lost and they don't show up at work on time, the emotion is going to be very different. And so you have to balance those two thing. And that's something that we did very well, obviously looking back at the time, it was huge [inaudible 00:21:41].
Gigi Levy-Weiss:
But when you balanced them, I've had this in a bunch of companies that I led. And when you have two camps and one of them is the more conservative camp that looks at the functionality and says, "This has to do that, and we need to be just really good at that because that's table stakes." And then you have another camp that says, "Well, it's good that's table stakes, but if we're not going to shoot for the stars, if you're not going to bring the new experience, then we're not going to win anyhow." How do you basically balance these two? What I found along the way, and my company is the company that I found that is that I always had to kind of prioritize the shooting for the stars and then let the conservative camp fill in on the functionality that you need to actually provide the value. But if you took your eyes off aiming to innovate and indulge the customers, then just bringing the core functionality was never going to let me win in any of my companies. Does that resonate?
Noam Bardin:
It resonates completely. And this is one of the many reasons why startups are hard. There isn't a silver bullet here. And looking back, everyone's a genius. "Oh, of course I knew this, I had this plan," whatever. The reality is, every moment, I would say, you sleep like a baby, you wake up every hour and you cry. It's like, "What's going on?" That's a founder of a company. You're constantly struggling with these
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decisions, you don't even know if he made the right or wrong decision because definitely then the analytics weren't there. And I think what helps is having clarity on what it is we're trying to do at this stage and how that leads to our vision on the one hand, but also how do all of these different things ladder up into that? So for example, if we wanted people to use us everyday for commuting, that was the core experience you wanted people to do. There are different reasons why they would use it for commuting. Part of it in commuting is you're bored. Nothing changing, most of what your instincts when you commute are correct because instincts are built in your experience.
Now we are there for that 10% or 50% of the time when everything is wrong, and then we're heroes. But we have to keep you engaged during that time when we don't have anything intelligent to say. And so I don't think you can come and say there's one or the other, there has to be a balance. All these things have to ladder up into your metrics. They have to drive engagement or to drive usage or to drive revenue, or drive whatever it is you're trying to do, but there are different ways of doing it. And I think for us having those two camps created a tremendous amount of yelling, screaming. And people that know Israelis, it gets very, very, very loud and very aggressive, and back and forth. But those yelling matches, I think helped clarify and crystallize what needed to happen. And there was always this balance. To the point where every version we'd release, we'd ask ourselves, "Okay, what are we doing this just for fun and what are we doing that's functional?" We wanted to make sure that we always had things coming into each version that led to each side.
Gigi Levy-Weiss:
And again, your business was a bit different than creating a new social app or something, because you couldn't really just move fast and break things. Because when you do that, say the Apple Maps, thing fiasco, then you end up losing your customers because you do have functionality that you need to provide.
Noam Bardin:
So yes and no. I think a lot has to do with the language and the relationship and the transparency you have with your users. I think a lot of startups make a mistake of trying to over promise to the user. Yeah, over-promise to the investors, that's fine. But over-promise to the users is a kiss of death. And for us, we were very [inaudible 00:24:45] ran our product was really good. She was really, really good at being able to say, "Okay, we're going to talk to our users about the features and where this is going. We're going to be very clear that right now we're not there." And so we wanted users to come with us on our mission, to join us. So they need to understand what the mission is, why this will be good in the future, and why it's not there yet today.
It's funny, after we raised our B round and we just raised a lot of money and everyone like, "Oh, invest, invest, invest." and we started seeing growth in usage. We actually, for the first time began looking at engagement, which seems funny, but it was a different world then. And what we saw was, and this is where the driven kilometers came in as the best proxy for engagement. We saw that our users kept growing, but our driven kilometers stayed flat. Meaning we were churning users. New users were coming in, we're getting churned, and a very small cohort kept using the same amount. And we actually decided to pause everything in the company and figure out what was going wrong with it. And that's a very hard thing to do because obviously everyone in their gut instinct knows what's wrong.
Just everyone thinks it's something else`. So we stopped everything, and we invested a lot in analytics and all kinds of stuff, and in surveys and talking to our users and focus groups, everything. And usually when you do this, you find inconsistencies between what people say and what the data shows. And here, what we saw was complete consistency with what the data showed and with the users show.
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Now we had all kinds of hypothesis about what went wrong. We thought users don't understand what we're trying to do. We thought they wanted it to be more of a navigation app, a traditional navigation app. We thought they wanted it to be more of a social app, we had all these theories. And basically we talked to our users, what was amazing is, users understood completely what we were doing and why we were doing it and how it would work.
And the difference, the main difference between a user who churned and a user who stayed was their patience level, not their understanding. The uses that churned, when you talked to them, they basically said, "Yes, I love what you're doing. I get it. With more users, they'll get better, blah, blah, blah. But I just got tired of waiting for it to happen and still wasn't good enough. So I said, 'I'll come back later.'" Well, the users that stayed said the same thing, but just had more patience. And that basically meant that we just weren't delivering a good enough product, but we delivered a good enough mission and a good enough experience, just the product itself didn't work well.
Gigi Levy-Weiss:
Or a good enough what we call product promise. When you describe to the customer what the product will do, they love it. The question is whether you can deliver on it or not.
Noam Bardin:
They understand it, and they understand the mechanics, that you need lots of people using it for it to get better. So once we understood that, we could focus all our energy on the core of the map, the navigation, text to speech, and basic functionality that wasn't working. And obviously that's much easier to improve than trying to improve an experience or trying to improve an emotional connection or things like that, which we've actually done a really good job on. As we improve the core functionality, you just saw the numbers go through the roof. It was literally, every release we did something and the usage grew and the churn went down, et cetera, et cetera.
Gigi Levy-Weiss:
That's super interesting. Let's jump for a second to the network, because I think one of the most important things for me is the network that you built around the product that wasn't a network before. And Waze for me is an iconic example of network effect. It's the clear, simple case where the value of the platform increases with each additional user, because each user is providing data that helps all the other users, as simple as that. But of course it requires a certain minimum number of users for it to start working, so let's talk about that. So how many users did you need to activate to make it even minimally useful? And how did you think about these KPIs, think about creating density? What hyper-local strategy you took in order to make sure that your data network effects were kicking in?
Noam Bardin:
So it's funny, we spent a tremendous amount of time at different periods of the company trying to build a formula. What explains how things work? And every time we failed miserably, okay? We had great theories and these tumors would work great in two countries and then completely not work in other countries. We could never reach a formula. But you take a step back and think about our network effect, there are a few different things we need. First thing we needed was a map. And for that, we did a small number of highly engaged users to spend hours working with us building the map.
Gigi Levy-Weiss:
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Could you explain that for a second? Because I'm not sure that people actually know what was the
source of the Waze maps. People thought that it all came from the same place and Waze was different.
Noam Bardin:
So let's take Israel as an example, just because that's where we started. When we started out in the mapping world, there was a duopoly in the world. There was Navtech and Tele Atlas, and Navtech was bought by Nokia and Tele Atlas was bought by TomTom. Those are the two maps of the world, there was no Google Maps, there was no Apple Map, that was it. And when you offered a navigation service, the most expensive component of your service was the license to the map, more than marketing and distribution and hardware and anything else, because it was a duopoly. Israel had its version of that, a company called [foreign language 00:29:12], which was the map of Israel. And so our thesis was that we could build maps instead of having thousands of trucks driving every road in the world every day and thousands of employees, et cetera, we could do this with a combination of volunteers and GPS chips on cell phones.
That was our bet, which was pretty radical at the time. And so to start out the service, what we need is a group of people that come in, and like Wikipedia when you go in and you build a new entry about a subject that you know about, we had the same thing we needed to be done with the maps. So if you were the first user in a country and you installed Waze, the map would be empty, it'd be a blank canvas. You'd start driving, your icon would turn into this road roller, like the way you see paving roads. And you'd start paving a road that you'd see being created behind you. And that was the first road in that country. And as you drove more and more and more of these roads began connecting. And we combined that with a really fun gamification experience, et cetera, and people really got into it,
Gigi Levy-Weiss:
But no utility for the users at that point, they're just contributing.
Noam Bardin:
[inaudible 00:30:08] nothing. Okay? But if you were the first one to create a road, you got a lot of points for that. But that was creating this geometric road. You then needed to go online to our editor, which is a web-based application, from your desktop or laptop, not from your phone. And you need to begin giving a name to the road. And you'd need to play with the geometries a bit because the GPS reading wasn't accurate enough. And you needed to connect two roads together as an intersection, about do you have a right turn or not? Is it a one way? Is it a two way? What city is this road part of? Et cetera. So there's a lot of metadata you'd have to add in. To do this, we needed a relatively small number of highly engaged users that would do it with us. And then they'd build out this grid of the network.
Now the second stage, once you have a grid, and some countries in the US there's a map that the census bureau puts out, which is okay. Maxwell Tiger, every company uses it to start. But it's not a navigable map, it's missing data, et cetera. So if we could, we used third party as a base. But for us owning the data was always critical. So we would not touch data that we didn't have full ownership of. So now you have this grid, now you need a lot of people, more people to basically drive on this grid. Because as they drive, we're learning directions, we're learning speeds, we'll begin building an historical database of speeds. How long does it take to drive each segment? So for that, you need more users who are driving around, still getting no value. And so for that, we built a gamification platform using points and virtual goods and all kinds of stuff to allow a larger percent of users to come and play. So if you can imagine the traditional social media statistics of 1% create-
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990.
Noam Bardin:
199 day, 11089, depending on who you ask. So for us, the 1% where the users who created the map, and these were our editors. The 10% were the users who report it, because they are the ones who were more engaged. Not engaged enough to actually go and edit things on their computer. But while they were driving, they were engaged, they'd report traffic, they'd report policemen, they would drive around. And as they're driving, we're collecting the GPS data automatically from their phone. So that GPS data is raw material that our algorithms and people can then analyze to understand speed-
PART 2 OF 4 ENDS [00:32:04]
Noam Bardin:
... algorithms and people can then analyze to understand speeds, directions, et cetera. So, that was the second stage. Then the third stage, and that stage also built up a historical database of speeds.
Gigi Levy-Weiss:
How many users are we talking about for the second stage for a place like Israel, which is like a small State in the United States?
Noam Bardin:
So it's hard to say because it's a combination of a variety of factors. One is how much do they drive?
Gigi Levy-Weiss: Yep.
Noam Bardin:
How active they are, but also it's, what are the alternatives? So, for example, we have a huge community in Iran, which is funny because we're not allowed to support them or talk to them. There's the embargo against Iran. Obviously, Israel and Iran have questionable relationships, and the Iranian government has tried to block Waze there multiple times, but because there aren't any good navigation apps there, the Iranian people got together and they built the map themselves and they've done everything from scratch. We did nothing there. We're not allowed to. So we did nothing. They've done everything themselves, and so because there's nothing else there that even what we would call a poor map in the West, for them was a really big upgrade. And so they started using it more and more and they got better and better, and today it's by far the best map to use there.
Same thing happened here. So in the question of what's good enough is a function of, what's the competition? There's a famous joke that you're being chased by a bear in the forest, you don't need to run faster than the bear, you need to run faster than your friend. Same thing here, as long as you're doing better than what they have, then it's good enough that people will use it. So for Germany, you would need to have an extremely high quality 3D embedded in the car map, and for Brazil, as long as you could tell people how to get there, it would be a huge improvement. So it's really varied. But if you thought about how the app grew, it started out with building the network, then building the speeds and
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the data on it and then, as more people came in, the real-time traffic component began reaching that
point where people who joined didn't even know there was a community behind it.
And so we had to manage different countries in different maturity states, but it also meant a question of where do we invest our resources in terms of marketing, et cetera, and partnerships? It doesn't make sense to do that when you're not ready for the consumers, when you're building, because there's the early adopters and it's a different conversation. When you're ready to go mainstream, it's a completely different discussion and a different set of criteria that you're looking at, but that's obviously later on in the maturity of the country.
Gigi Levy-Weiss:
So what I want to state that really resonates with me is the fact that you've been basically thinking about your 19-90 or 110-89, and not just in terms of understanding your users, but actually in terms of what you're asking of them and the product that you're actually building for them, which I think many companies are missing. Many companies are trying to look at this just as a way to understand their user behaviors rather than harness this and understand that there's going to be 1% of the users that are going to be willing to make a lot more than others. They're going to be willing to contribute a lot more. All you need to do is give them the tools and the incentives to do that.
There's going to be the 9% or 10% that are going to be willing to be more involved and you need to just give them the way to be more involved and contribute more. Not as much as the first group, but still. And then there's going to be the rest of it, and you need basically a different product for each one of them if you want to get the most out of each one of them. And that really resonates with me.
Noam Bardin:
Yeah. I'll give you some examples. Our first versions of our app were much closer to call it more traditional GPS applications. And not in the way it looked but in terms of it would tell you if you're disconnected from the network or not, and the strength of the GPS signal, and the direction that you're driving and all kinds of things that for early adopters is very important. Now, early adopters like to find things that are broken. They want to find things that are broken. They want to complain and then see that it's fixed. They want to be the first one to find the bug. That's a very different relationship than when you're ready to go to mass market, where we basically smoothed the app, made it much more fun and clean, and took out a lot of that functionality, which pissed off our core users. But, again, for our new consumer, it didn't matter. They didn't care what the strength of the GPS signal was, but for an early adopter, it did.
So that clarity at every stage of your company, to know exactly who you're targeting, when you're targeting early adopters, you don't need your product to be super smooth and clean. You're creating the wrong impression. If you have a super smooth, clean, beautiful product that just doesn't work, you're going to disappoint a lot of people. If you have a product that's broken and jenky but it has a lot of functionality and you're targeting early adopters who are going to help you make it better, they're going to see how they're impacting the product. That's very important for them. So, again, that clarity of who the user is that you're looking at, what's the problem you're solving for that user, what's the emotional experience you're creating for that user? What's that wow moment that the user is going to be so excited?
For us, seeing another Wazer was a wow moment. People would go crazy when it happened. Today, that's not a relevant experience, because obviously there are too many users. All those things, knowing at every stage of your company who you are, what's the most important thing at this stage,
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having that vision in terms of that helps you prioritize and having that KPI that's relevant for the stage that you're in. Retention KPIs didn't make sense in the beginning because we had very, very high retention from a fraction of the users and no retention for most of the users, because the product just didn't work. But that didn't matter in that sense, because we were targeting those early adopters that are helping us build the map.
Gigi Levy-Weiss:
Yeah. And I love both the concept of having different product thinking about each type of user. And also one more thing that you said really, really resonated with me, which is, trying to indulge the users and get them to these wow moments. But I want to touch for a second on the data network effect, because as NFX and the fund focusing on network effected businesses, we've always looked with admiration at what we think is one of the best if not the best of the data network [inaudible 00:37:08] out there. And when we try to explain to people what makes the data network effect strong, because some people say, "Hey, I'm going to put out the product. I'm going to collect some data and that's going to be defensible." And when you look at the quantity of data or how difficult it is to get it, it just doesn't change anything.
And so we created basically a list of things to help founders understand what makes a valuable data network effect business. And we said, first and foremost, the data capture is preferably automatic, because otherwise, it's just not scalable. The product value increases automatically as you get more data. So it's not just for the sake of having data. It's more than this. Then the minimum threshold for the amount of data needed before the product starts providing value is high, which means that you can't just collect a bit or license a bit of data and get to the same place. And then the value created by the data is central to the product value, meaning it's not just a side thing, but it's the core thing. How did you guys think about the data network effect? How did you think about how defensible it makes you and how did you basically create this culture where this became critical for everybody in the company?
Noam Bardin:
So there are a few things. I think data is one of the most misused terms today in the startup world and people have this idea that data is valuable. And data is only worth what you sold it for. That's it. I see so many companies telling me, "Oh, we're collecting all this data and so still valuable, whatever," and as someone who's been at Google, et cetera, you have no idea what you're talking about. Data is not valuable. What you do with the data is valuable. So if you can sell the data, package it in a way that someone will pay for it, that's valuable. If you can take that data and create a product that provides value to the consumers, then it's value. And I think that clarity is super important. Just to say that because you have a lot of data that it's valuable, no, you can have a lot of data, but who cares?
So for us, we talk about different types of data. One thing that was very important for us from day one is that we own all our data. And that was a risky approach we took. It created a lot more value for the company, but it meant that we moved much slower in the beginning because our data was pretty terrible. And this really goes back to where you see the value. The good thing about maps at the time, and still today, people think that maps are free or whatever, if you want to go out and buy a map today for navigation, you can't. There's open street map, which is an open source map, which has several advantages and disadvantages. Google has its map. It's not selling it. Nokia and [Telealis 00:39:10] have their maps and they're very expensive if you want to buy them. And Apple doesn't sell its map. So you can't really get raw data.
So, for us, owning the raw data was crucial, and that went into the data that we had that users built, but also whenever we could acquire data, we did as long as it was rights free and we could own the rights forward.
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Mm-hmm (affirmative).
Noam Bardin:
So that was one level of data. The second though is all that real-time traffic and things you get from GPS traces. So those are things that you could also buy today from fleet management companies, and you can buy that data from different sources. But when it comes from consumers, you're getting the data where it matters. If you're buying your data off trucks, they'll show you traffic when they go up a hill, because they're driving slowly. And obviously, consumers are not. So, that's a second level. Third level of data though is the reporting and all the interactions with the users, which only a human can do. I can see a policeman there and report them. No amount of algorithm can detect that from the GPS. And so, for us, it was always this combination of things. We believe it as a matter of philosophy that you need to combine humans and algorithms. Neither of them is a slam dunk, but working together, they can do crazy things.
And these are the kinds of philosophies we had. And I think what you see, I think people usually underestimate how powerful manual human work can be versus how complicated automated, scalable things are. So when you start out as a company, you don't really have data. All that machine learning you're building and all that doesn't really matter because there's no raw data in there, so garbage in, garbage out. While at the same time, a human can do what might take you hundreds of man years to develop algorithmically, a human can do that instinctively by just looking at it. So there are pros and cons for each one. At the same time, when you're dealing with masses of data, you can't have humans dealing with that. So you've got to find those combinations, and what we did, which I recommend to many companies is to start out super manual as a first step. Second step, you want to optimize the manual processes so each person can do more with less time.
Gigi Levy-Weiss: Yep.
Noam Bardin:
Third step, you want to begin adding in algorithms that help enhance the humans and take off tasks that humans are not good at, and at the end, you want to reach a point where you've automated as much as you can. And so it's super important to understand that flow. And I see today, because machine learning is so easy to deploy today and to develop, and it's a great buzzword for raising money and things like that that people love building all kinds of complex machine learning algorithms, but they don't really have enough data for that to matter, and at the same time, they could've done that with a human at a 10th of the time. And so I think when it comes to data effects, I would say the most important thing is to understand, why are you collecting the data? When you say it's valuable, what is the value? Are you selling it? Is it producing a product, whatever?
And then ask yourself, can I achieve that value different? Is the data the only way to achieve that value or can I do that with humans, manual work, hard coded things? That's why I like to say, "Most AI today is a call center in India," because basically, yes, the AI solves the core or the easy, the 80/20 side, but the last 20% is going to be human somewhere else and it's going to be very complicated and it's much cheaper and simpler to do it with humans than to try and actually build an algorithmic solution for every edge case.
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Yeah, definitely. In many of our companies, we still see that using humans at the edge cases makes the company much faster and much better for its users. And the thing that you hit the nail right on its head, that data is valuable if you know what's the value in it and if you know how to use it in your product and if you know how to move fast around it, which many startups are missing.
Speaker 1:
You're listening to the NFX Podcast. If you're enjoying this episode, feel free to rate and review our channel and share this conversation with someone you think would benefit from these insights. Follow us on social @nfx and visit nfx.com for more content. And now back to the show.
Gigi Levy-Weiss:
I want to jump for a second top of a growth, because I think that one more thing that Waze did phenomenally well was that once you got that initial network density and product market fit, you knew that you had the right product for the right market. What did you really do to basically pour the gasoline and get the company to grow much faster? I mean, there's very little companies in the world that end up with so many users and with so many keen users that are using the product almost every day. How did you get there? What did you do? What growth tactics did you use once you knew that you had product market fit?
Noam Bardin:
It's interesting. When we think about our world, they are basically three apps or competitors in this space. There's Google Maps, there's Apple maps, and there's Waze. Now, Google maps has an operating system. It's called Android, which is a great way to distribute your app. If you're going to distribute an app, it's really good to have an operating system. I highly recommend it for every entrepreneur. And Apple has iOS. And we had ourselves and we've still, if you look for the driving, because maps do a lot more than just driving, we'll only do driving, but if you look at driven kilometers, our estimates are that the market breaks out to about 40% Google, 35% Waze, 25% Apple, roughly, and I can honestly say I don't know all the data. So it's amazing that we've managed without an operating system to stay there.
And I think the way we did that was very much by staying focused on our core and really understanding what we're trying to solve and not getting distracted. So, for example, one of the decisions we made is that we're only going to be a driving app. Because, of course, we could do walking, we could do bicycles, and we could do discovery and we could have a million other things. And some of them, we tried and failed that. But fundamentally, I think there's a huge value for companies that stay focused. And if you look at Spotify as an example, every major company today has a music service, none of them are as good as Spotify. And Spotify does this without an operating system and without shoving it, bundling their music like Amazon or shoving it down your throat like Apple. They're not. They just have a better product, and I would guess they have more engineers and more people on their music product than Apple and Google combined, because it's focus.
Netflix focused on one thing, video. They could have gotten into music. They could have gotten into podcasts. No, they're staying. They know who they are, they know what matters, and they're getting better and better at it. And they know their users. Knowing their users and their context, which is what matters. I think one thing that you have to be careful of is not to go to someone else's backyard because it looks better and to really keep going deeper and deeper into your own. That's one thing that we did that I think worked. When it comes to growth, I think we were not very good at building a
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traditional growth experimentation team, and for many internal reasons I think that's probably one of the biggest mistakes I take on myself, is that we just never managed to actually get there. But we did do really innovative things around partnerships, and one of the advantages that we had is that when we look at it, we had this data. Our original plan was to sell this data. That was our original business model.
We would create this data with our users and then we'd sell maps and maps, there was [inaudible 00:45:37]. They were very expensive. What we learned the hard way is that the companies we were disrupting were the ones that used to buy the maps. So we were basically disrupting our customers. And so I think the only real pivot we made at Waze was deciding we're not going to sell data, but we're going to sell advertising. And as soon as we made that decision, it meant that we could use our data as bartering for partnerships. We didn't need to keep it hoarded for sales. And so we started several programs, the first being our broadcast program, where today there's several thousand, primarily TV, but also radio stations that use us to report traffic. Now, I know we all like to say that TV is dead, et cetera. There is something very special in America for things you've seen on TV. That's just the reality.
So because we weren't selling the data, we could go to TV stations. We gave them their own interface and their own app that they could plug into their things in training so they could report about traffic in their area with Waze. But we were not a vendor. We did not replace their existing system, although they asked for it. We did not charge them because we wanted to say, "No," we didn't want to be their vendor. But that gave us a tremendous amount of visibility and distribution. Second program we put in place as a program working with cities and partnering with cities. And it's also a departments of transportation, ministries of transportation, et cetera. We had something they wanted. We had that data they could only get for very high cost. But we also had a direct relationship to their consumers. So suddenly we built the AAPIs. They would send us data on closures and things like that, so that our app got better.
And we sent them data on what we were doing so they could improve the way whatever their KPIs were. They were all different use cases. But the point was that's another network effect that happens when you begin taking what you have and building two way directionality to receive and send data. Again, you can't do that early on because you don't have data, you have nothing to offer. But as you grow, it becomes easier and easier. And so the city program was another thing. And the third was really partnering with companies that also care about driving. One of the best companions to driving is music, and so we partnered first with Spotify, but today with every music platform on there. So if you get into your car and you turn on Spotify, it's going to recognize you're in the car and ask you, "Do you want to run Waze?"
Or if you're running Waze and you get into the car, it's going to recognize that you have Spotify and ask if you want to listen to Spotify and control your Spotify from Waze. And so these kinds of partnerships made a tremendous amount of sense, because, again, we both cared about the car experience and being in the car.
Gigi Levy-Weiss:
Interesting. And so nobody paid anybody, it was just a mutual recommendation?
Noam Bardin:
Mutual recommendation. We recommend each other. Obviously, there's all kinds of things talked about in terms of advertising. We know what they're listening to. We know where they are. There are a million other things you can do.
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Both companies have common enemies, so that was easy.
PART 3 OF 4 ENDS [00:48:04]
Noam Bardin:
There are million other things you can do, but-
Gigi Levy-Weiss:
Both companies had common enemies. So that was easy.
Noam Bardin: In-
Gigi Levy-Weiss: In a way.
Noam Bardin:
This idea of enemies is another thing I learned the hard way is that when you're in a startup you think that you're the center of the world and everyone is measured by, are they a friend or foe of you. And that's how you view the world.
Gigi Levy-Weiss:
Now, there was more complicated than that.
Noam Bardin:
But it's even more. When you look at other companies, you're constantly thinking about how their strategy is going to affect you, but you forget that nobody cares about you. Nobody knows you. You're a startup. No one's ever heard of it about you. And you also have no way of understanding why other companies are doing what they're doing. And again, this goes back to you thinking about your product and you're thinking about distribution and strategy. They're thinking about getting promoted or this VP not liking the other VP, or Amazon did this so we need to do this. And the criteria is so different. And that's I think the one thing I tried to tell founders is stop negotiating with yourself. You have no idea. Do what's right for your users and for your business. Don't assume you understand what's going on in the other companies.
And so I've seen that always. Even after we were acquired by Google, we did deals with Amazon, and we did deals with Apple, we did deals with other companies. Because again, the actual teams that you're dealing with don't really care about the strategy of the corporation and of the corporations, they care about their own KPIs and is it helping or not. One thing I've said, I think I've written about this, about partnerships is that a mistake startups have is trying to do business development early on. It's very, very hard, and it's not really going to move your business. While once you have traction, it's very easy and can accelerate things already happen.
One of our core thesis was you want to do marketing and partnerships and inorganic activities only when you see an organic trend. But we tried many times to open up a specific city or a specific
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country and invest in it, whatever, and it never worked. While at the same time, a place that had started organically, you can pour the gasoline on the fire and it'll light. And so that was one of the things that happened. I couldn't understand exactly why is France, we're one of the strongest app brands in France, but in Germany, nobody uses us. We still don't understand that. Okay. We have all kinds of theories, but none of them work with it. But it doesn't matter. When we saw things going well in France, you invest there. You saw things going well in the UK, we invested there. But in Germany where it didn't, we didn't invest there.
Gigi Levy-Weiss:
No, I love that. I also think that the concept of... we always tell companies not to focus too much on business development early on, because then even if you succeed, you're trying to put your destiny in somebody else's hands, which is not great. But I think that your way of putting it, which is don't try to get this business development thing going until you have the organic trend happening so that you can basically accelerate the organic trend. I think that's a great way of putting it. That's a new way for me to think about it and that's really great.
So one question that I have that I always ask founders is if there's one thing that you think that was the greatest decision that you made, that you surely would have make again, because it helps you succeed. And what was the one thing that you think had you done differently in ways that phenomenal result would have been even much better? Do you things like that in your mind?
Noam Bardin:
Oh yeah, unfortunately. I think the worst mistake we did was... So our plan was, again, going back to 2009 navigation on your mobile phone was a $10 a month investment. You couldn't get it free, there was no Google maps or anything like that in that terms. And that's because of the cost of the data, they were so expensive. So our plan was, we're going to give it for free because our data we're building the community. And so even though in the Christianson model, even if our product isn't as good as the others, there'll be free, that's going to be our marketing. And as more people use it, it'll get better and better. So it'll be better than the traditional system, which is what happened. But what happened at the end of 2009 is that Google maps came out with their navigation product, which was a hundred times better than ours and worked and it was free. And that caused a terrible panic on our side.
Obviously we had this traditional term sheet from a big VCU who yanked it the minute Google announced it and we couldn't raise money. Everyone likes to talk about the good stuff. We could not raise our B round because Google came out with their product. Literally I spoke to every VC in Israel and most of them in the Bay and we got basically the door slammed in our face everywhere. And that's another story about what we did around that round. But the point is that we panicked at that point and we made the classic mistake I was talking about, trying to think that we understand what's going on within Google. So we said, "Okay, Google is probably going to follow their playbook," meaning they'll open up APIs for navigation, like they do with everything. And they'll go from the US to the UK, to Germany, to France, which is how they roll out their products usually. And what we need to do is quickly go to a different part of the world where we can build up assets.
And so we started focusing on Latin America and that meant that for about a year we took our eyes off the US market. And that was a huge cost. We lost time, we lost focus, we lost a lot of things. And looking back, it was just a terrible decision based on emotions. It was based on the fact that we think we know what's going on at Google. We have no idea what's going on in Google. What do we know? The message for me here and I say that to founders and they never believe me and then many
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years later, they come back and say, "Now I understand what you're talking about," is that don't try and
understand what the behemoths are doing and why, what your competitors are doing and why.
Yes, when you own 20% of the market, you can start thinking about it. But in the beginning, you're nothing. You don't exist and just focus on your users. And don't assume that the other party is looking at you. They don't even see you. You don't exist. Had we done that and stay focused only on our users and not think strategically on this, I think we would have been in a much better position.
Gigi Levy-Weiss: That's very interesting.
Noam Bardin:
The second thing that I think was transformational for us was, and I touched on it, was that moment after our B round, when we had this money and things were growing and our downloads are growing and everything was... Suddenly people began hearing about us, whatever, but our core metric of driven kilometers was flat and we could have easily just continued to incrementally go forward. But we announced it as a crisis internally and we stopped everything we were doing and focused only on understanding why that happened. And we reached a level of clarity that we would never have gotten to, and a level of prioritization of what we were doing that we would never have gotten to. And once we had that clarity, literally we could see how every one of our activities drove that KPI and things work well.
But it's extremely difficult to do because when you're trying to stop what you're doing, when you have a lot of good things going on. If things aren't going well, it's easy. But when things are going well, to be able to say, "They're going well, but they're not really going where we think they need to go," and to stop and to spend the time and going into the analytics and talking to our users. In our case with the [bilby 00:54:23] analytics, because it was before a lot of the tools for mobile that we have today existed. And doing all of those things were super, super, super important for us. And I think that was a very pivotal moment.
I'll give one other mistake that I think we made. Today things have changed a little bit, but overall there's a lot written and discussed about early stage startups and there's very little discussed about scaling a startup. And this is the reality of the numbers, right? Most startups fail. So you don't have many that have gone through it. So you've got lots of people who've worked at successful companies that are large and lots of people that work the very early stage companies that have failed. There are very few that have gone through that phase.
And I definitely didn't. This was the first time I've gone to that phase. And I think I completely underestimated the importance of infrastructure. And I think in the beginning, in the early stage, we were very focused on the lean startup methodology of just doing what we have to and throw away code and all this stuff to get things done and that was the right thing at the time. But we didn't make that flip in our heads fast enough that, "Okay, now things are growing. Now we have to invest in testing, in analytics, in extensibility, in org structure, in the type of leaders that we had." We were a very flat organization and we saw that as a value. And being a flat organization is great when you're very small, but there's a point where you're not going to be. You can't stay flat and big, which is what happened to us.
And so I think that understanding what the scale and when to scale it is just as important as the lean startup methodology of ignoring the scaling side. How do you go from lean methodology to scaling? I think that's an area where people have not thought enough about and not enough people have run
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into that problem to understand it. I think one of the hardest problems there is the human capital side. The type of people that are going to get you to your first million users are not necessarily the people that are going to get you to your first hundred million users.
And it's terrible because these people have done the right thing. They've been with you the whole way. They are the most committed employees you have. But at a certain point, they might not have the skill sets needed. And how do you handle that in a way that A, is good for them because they've been with you, you want to take good care of them. But at the same time, not sacrifice scaling of the company because of your emotional connections to the early stage people who were there. And that's definitely a place where I made lots.
Gigi Levy-Weiss:
There's a place, I think, where all of us make mistakes. You look at the people that work with you along the way, and they're just not the right people for when the company's scaling many times. And it's so hard because emotionally you're connected to them, but they may not be the right people for the company. And so one last question for me, you've recently wrote a little bit about your experience in Google, and I don't want to speak about that because I think everybody read that at least once, if not twice. But what I do want to ask you out of it is that if I'm a young founders starting a company now, and if you think about the perspectives of what makes young companies succeed against these giants that you literally can't win, and yet you win. What's the one thing that you want to stress on culture that you think that is so critical for the young company that you feel is what all founders need to maintain in order to be able to fight these huge companies?
Noam Bardin:
First of all, my post was about my experience. Obviously, everyone read. It was broad enough that everybody could read into it whatever they wanted to. And so it created obviously a lot of waves and I never expected it to get, I would have edited it very differently, understood this is going to happen and definitely went out of control. I think that early stage startups and every stage, every company need to understand what their core strengths are and what matters. They need to build a culture that fits into that on the one hand. But on the other end, they need to have a clear vision mission strategy about where they want to go and how they're going to get there. And it seems obvious, but it's not.
Most companies are too caught up with the everyday details to ask themselves, are we doing the right things. We're doing things well, but are we doing the right things? And I think that's a huge advantage that startups have. I mean, just this week is an interesting week because our last 10 days, Verizon just sold off all its internet properties, Yahoo, and AOL, et cetera. And AT and T just sold off all its media properties, not Warner brothers.
Gigi Levy-Weiss: Warner Media, yep.
Noam Bardin:
But these are exactly to me the same problems that you see everywhere. People forget who they are and what they're good at. Apple has built a phenomenal business, basically on consumer hardware products. They don't have a million product. They have not gotten into very different spaces. But what they do, they continue to do better and better and deeper and deeper. If you look at Amazon, fundamentally, Amazon, put aside AWS which is interesting story, but Amazon is a consumer e-
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commerce company and they do it better and better and better. Yes. They tried to build a phone. They realized that was wrong. They shut that down immediately. But having that clarity of who you are and why you're doing things is really the strength of a founder. And it goes away with the founder as well.
And you see that when Steve Jobs was pushed out of Apple, Apple lost its focus. And when he came back, it gained it again. That's the magic the founders have. The ability to look at everything around the company because they understand everything, every little detail, every line of code, every system, every customer, every user. There's something so special about that that can't be replaced with a hired gun. And so that founder ability to see where you're going and make quick decisions on it is something that large companies usually don't have and they lose it. But you need to lean into that as a startup. You need to be pushing yourself all the time to be narrow, not to be wide. Narrower, and narrower and narrower, understanding your customer, understanding your product. What is it you're trying to do and how every action that you're doing, or every initiative ladders up into that.
When you grow to a certain size, suddenly individuals don't care about the mission anymore. They care about their own place in the organization. And that's just the reality of scale, of size. And then it's a complete set of things. And you're not going to be able to win there. I mean, if you're a startup. But what you do have is your ability to say no. To say no to everything, except very small number of things that matter. And knowing that they matter. Okay. And if you can do that and be very, very focused on that, you can beat anyone because again, but if you don't have that, then you're nothing. You're a very small group. People that have a little bit of money, that's trying to compete with the biggest companies in the world. It's never going to happen. But if you're doing one thing and you're doing it a hundred times better than anyone, and you understand it deeper and every action you do ladders up into that one thing, getting better and better and better, you can take over the world.
Gigi Levy-Weiss:
Noam, this has been amazing, such a wealth of information, and you've been so generous with your time. I want to thank you on behalf of the NFX community. I think that there's so much here for founders to learn from, and I can't wait to hear more about where you're heading and what you're doing, the various things. So thanks so much.
Noam Bardin:
Gigi, I can't wait either to figure that out. I will say that I think it's been amazing. The content you guys put out at NFX is one of the few venture-driven content sources that I actually read. You guys have done a phenomenal job. I just read your stuff all the time and I think it's great. So I'm glad I can help here. And again, as a startup, figure out what you're good at, not what the others are good at and triple down on that.
Gigi Levy-Weiss:
That's perfect advice. Noam, thank you very much.