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We're here with Nom Bartin, the CEO of ways that just left the company a while back. And, Norm, everybody knows you and work with you knows that you're an incredible leader. I think you led ways for more than 11 years, you know, one of the truly innovative and deeply beloved companies. I mean, I'm a user from day 1 Morgan less, which, you know, we care about that as in effects. Also, play some of the best data network effect that we've ever seen.
We'd love to talk to them about your journey from the early days of ways all the way till now, 11 years later, and dig in a little bit on network effect Let's jump in. First of all, thanks for coming over. My pleasure. Thank you for inviting me. So I'm not sure that many people know how large ways is and, you know, what a meaningful company it is. So when you joined the company, how many users did the company have?
And, you know, when you left, how many did it have, and how many countries kinda more or less? So I joined ways in March of 2009. Just briefly, the company began as sort of an open source project by one of the founders in 2006 it would basically started this on his balcony, which is the television equivalent of a garage, I guess, in America. And later on, you know, they used to be on taking off, and they decided to turn 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 3 months after it launched as ways under the brand of ways in Israel. So the company had about 22 employees. It had launched a service only in Israel. There were, you know, in those days, you talked about downloads, all kinds of things, but if you think about active users, there Pete probably around 2000 monthly active users at the time. Yep. It's ways in February.
We're at about a 140,000,000 in monthly actives doing about 36,000,000,000 driven kilometers a month. In every country you can imagine. So any country where people drive cars, there is a ways map being built and the ways service active from Iran and Saudi Arabia to India and in Malaysia and in Philippines to Brazil, Cisco, Costa Rica, obviously, the US, Europe, you know, so basically anywhere you can imagine, there are Pete, there's a way it's 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 always fun at ways 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 in crowd 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? Yeah. So when you look at a startup progress, startups usually start with very, very simple KPIs, downloads, users, you know, something. Right? And the KPIs many times represent what investors are expecting to right, because a lot of times the KPIs, especially in early stage startups, are really focused on trying to raise money.
But when you actually think about, as a company is 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, few years after we founded, we kinda realized that driven kilometers was really the most important metric of our service.
That doesn't mean that it's 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 at the service, which is what we call driven kilometers, right? How many kilometers did you just 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 Currier, driving more usage and, you know, etcetera, etcetera. And so all these things really made driven kilometers as one of our most important metrics. In addition, we think about active users, you know, we do have a use case at ways where people open up the app, check kind of directions, close it, but don't drive with us.
And that's important metric for many different things, but that's not representative of really the quality of the service. Driving with ways open is really the quality of the That's super interesting. And, you know, 2 kind of follow on questions on that. So, you know, when the company starts growing and now you have, you know, 1,000,000,000 and 1,000,000,000 of miles, do you start differentiating one mile to another.
Like, you know, the more desirable mile, the one that we're ways can bring more value versus the other one. That's one question. 2nd question, I was always wondering with you guys have a KPI of reporting, you know, how many reports per mod or how many ports per active user per day in terms of users actually contributing more and more data. Was this something that you guys tracked? It's a sign that we track there. Obviously, lots of Pete. Right?
I always like to look at what's the Uber KPI, right? 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 Pete or the team working on reporting as a product. Right? When you think about the company on the hold. If I have to choose 1 KPI, I would look at driven kilometers because I think that's the best explanation of how our business translates into KPI.
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, etcetera. We'd look at them different than we would look at consumer drive. 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 is split up. And with that, you also get into how many drives produce these kilometers. So it's the average kilometer per drive. So if someone does few drives with very long distances, that's one thing. Someone who drives very short distances, but many times a day or a week. It's obviously something else. So there are a lot of different ways to slice this KPI. Yep. Definitely.
And another thing that you said that immediately caught my attention. So, you know, many founders in small countries like Israel often ask themselves whether they should launch their product locally before they go internationally. I sent a report, and I think you mentioned this as well that the initial founders of waste started waste. Actually, it's a project in Israel. How do you think about that?
Like, if you started the company like today in Israel, you know, or in Germany or in which is a larger country or in somewhere Beller, would you Beller starting it as a local project, or would you immediately try to go for your main markets? So 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 call my eye. One is not all countries are the same.
So if you start with small countries like Israel or Sweden or Croatia or, you know, Beller or 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 gonna happen in the war. 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 you've seen it with entrepreneurs. You talked to an Israeli entrepreneur. They talked to you in 1000 or tens of 1000. And you talk to an entrepreneur from China, 100,000,000 is the smallest unit of measurement. Like, they just don't have a smaller number. Right? And so there's, like, scaling that comes with your country. I think what gets really complicated is countries doing good.
Germany, the UK, you know, 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 a coincidence that we don't have many kind of European large consumer tech brands. We do. I mean, I'm not sure. But from the large countries in Europe, we have more from the small countries like Sweden and That have to export from day 1 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 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 Now again, if you're solving Chinese problems, that's fine. You don't need to be a global company. Right? If you started solving American companies, that's fine.
But if you're solving a company in Germany, you're kinda capping the sun. And that's why I see small countries like Israel and, you know, Northern Europe, Eastern Europe, etcetera, as great places to launch globally because you have no choice. Now The question of do you launch locally, I think has a few questions or sort of criterias 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're asking this question 10 years ago, it would have a very different 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 800,000,000 people speaking Spanish in these countries, you can build a phenomenal company without having to care about the United States. Right?
So Obviously, if you see it in China, you see it in other places. So there are definitely types of companies that are very local or regional, but for a real global brand, you have to be successful in the US. I mean, 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 your odds of being successful everywhere in the world is much, much, much higher.
So to sum up, if you start a business like this today, you may do kinda technical testing in Israel, but you'd never focus on that market to start with. Yeah. I think that that's an accurate way of putting it. I'll give you some examples. When I joined ways in in our product was for Israel, product itself is client you would download the whole map of Israel to your phone, and then you would have to pay with it because it's a tiny country. Right? So it's Yeah. I remember that.
You can't download the map or then today, you can, of course, but then you didn't have enough storage to download the map of the US. It's fifty times bigger than the Israel. And so we had to move from Flint to the client server and to tile and to communication issues and using up internet bandwidth, which then was very expensive, and all these other things that come to play when you begin building a client Currier solution.
And I think that's a great example of why you have a problem launching local. We launched a local product, client based, great product, etcetera, but that product is not relevant for the US and obviously ran to a lot problems when we went to the US, and we had not seen in Israel. You know, you were a successful CEO before. What did you Pete in the product that got you convinced that you wanna take the initial project that had some money and basically run it.
I mean, we're also 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 wanna take. So it's funny. I'll have to kind of 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. And 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 wanna join it, not from the position of is this the right As a long discussion, terrible mistake. I ended up shutting down the company worst 2 years of my life. The person who ran 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, and we were, like, the whole thing. And 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 a while, but I think what was unique, and a lot of James people come to me and ask, well, why did it work out, right, being 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 looked at the CEO, and we spent a lot of time together. And 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.
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 wanna work together. And I think usually what happens when you bring out 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 is kind of a unique thing that happened to us, but you have to remember the time also. This was the first iPhones that just come out. This is 2000 Right? So the first iPhones have come out. You have to jailbreak your iPhone to install navigation software on it. Nokia was a dominant player in cell phones, and Blackberry was a dominant one in the US, and Microsoft was a major player in mobile phones. Right? So it was a very, very different world.
And now I had had smartphones, what they called then, which was basically a phone with the email. I had them for a while, but I'd never installed an app on any of my phones. And Waze was the first app I had ever installed. Now installing meant going and installing executable and running it. I think there weren't app stores then. Right? But that was the first app I installed. And I had been driving to my previous place of work for 2 years every day. And it was a very long commute.
It was like an hour a half commute, and I thought I knew everything. And I installed ways. And the first time I asked it to take me to my office, it showed me a very different route. And I rather was completely not intuitive. I was like, this can't be right. But, you know, I was testing out the app that you joined the company. I tried it out, and it shaved off 15 minutes off my commute. And that took out of the moment. Like, wow. This is something.
The second thing was I was showing my wife the app when I was talking about doing it or whatever. And this is the very first version of of ways that come out that actually had you could see other wazers. They 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 kind of technologies or or acts 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.
Right? And what matters is what the user feels when using it. And so those two experiences were very kind of transformational for me. Coming out of that bad experience I was in, decided I'm gonna 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 ways, which was exactly that world changing, all or nothing kind of approach. And we still laugh about that.
You know, I guess that's kind of what attracts me specifically. 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. And, you know, how do you give importance to this? How do you 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? So there are a few different frameworks that I kind of apply when I talk 2 businesses. One is really trying to get them. And I'm talking about the consumer space, but it's probably the same for definitely for SAS businesses and for some enterprise I try to ask them when a user 5 years from now describes your company, what are the words they're going to use? Now this seems silly but actually that is what output of strategy and mission and vision is.
It's what will the actual user when they describe you think about Right? 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. Right? Users have that clarity. Now companies might not wanna be that, right? So Google does a million things. And, like, Facebook is doing VR, but no consumer will think of Facebook as a VR company. Right?
And that kind of clarity of what you want users to say about you. 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 gonna express? What do you do for them to change their life?
That makes your life Beller, or that helps them in something like 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, first of all, in every company, but specifically in startup, is prioritization, right?
Yep. And when startups are not doing well, it's very easy because nobody cares about you and you're just, you know, do whatever you want. Nobody 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 gonna come up with great options to do things. Cause if it's a smart idea and a stupid idea, it's easy to make a decision, right?
But it's 2 smart ideas by brilliant people who understand your business and have great logic about why we should do these 2 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, you know, an example, we started out with ways. 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.
Right? And that we're building towards something. At the same time, it was very important for us to manage their expectations because in the beginning, we couldn't find where you were going. And we get you and we'd ask you to jump off a bridge, you know, all these crazy things going on. So there Morgan 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 James.
You see, you know, 20,000 people around you. Right? Our challenge is to filter out we started out, there was no one. So you would be driving in the bay. And in real time, at that moment, there'd be 3 other people driving. Right? Like, that would be the Yeah. But we are engineered for you to see the other person. So we'd zoom out the Zoom level.
And we added an arrow that would kind of point you to where there's another because once you were driving and you saw another person, you felt so excited with this wow moments 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. Right? Someone in New York reported, traffic James. And you're into California. Like, what do I need this? And users hated it. They would complain in the Apple comments and everywhere, but this is so stupid. Why are you showing me this stuff?
The reason we showed you this stuff is so you would know there is another person who happens to be in New 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. Right? That secondary effect was really what we were focused on.
And this is what I mean by when you 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 you that that machine learning really is a call center new That's really what we do in those cases. Right? Yeah. We can the end of the day. 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, but you don't have much data in really doing that kind of artificial intelligence, human intel, whatever I'm gonna 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 ways and we tell you a route, you didn't go the other route.
So you don't know if you were actually right or wrong in sending me 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, you know, in effect, it still exists. Well, if you're standing in traffic with ways and the road is painted dark purple, right? I mean, it's dark red or whatever that color is. That's like all traffic. And there are 50 different people that have reported traffic. Right?
People will still report again that they're in That makes no sense. Right? There's no logical It's like clicking the closed door button in the elevator. 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 something that was something you could do. And again, those emotional experiences are super super super important.
And if you clarity on them as a founder if there's what they are, what is that emotional experience that makes someone say wow and tell their friends about what they're doing, you can engineer it for it, 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. On this, I mean, what comes to mind immediately is that the language that you guys used was all geared just to keep reminding people that it's not just a mapping service but network.
I mean, could you think a few examples of how you use words, language, and the product, and around the product to make people remember always that it's not the same as the other product? So within ways when we started out, there Pete 2 caps. 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 ways that we're looking at it much more as a social network. And even threw around the idea of getting rid of the whole navigation part, just about people connecting. Now I think the strength of ways that we manage to balance both And I think that's really the biggest challenge is balancing that kind of fun experience versus the functionality.
When we Pete starting out, our nemesis was force And they were a nemesis because they got all the, I mean, I don't know if Pete 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 and of the year, and they were like, everywhere. And we would look at it, and we were so disappointed because obviously, our engineers said I could build a 4 square in in a weekend.
There was no response of every engineer to every problem. Right? 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 hit Pete, and we were for people that had a job and lived in the suburbs and drove. So obviously less school. And so they got all the press, but what happened is they never managed to get out of the pool phase into the functional phase. And I think that's something that we did.
Well, yes, we weren't as cool, but we managed to do enough cool things to keep people engaged, but at turn Flint, 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 Pete the person lost and they don't show up at work on time, you know, the emotions are gonna be very different. Right? And so you have to balance those 2 things.
I think that's something that we did very Beller. Obviously, looking back at the time, it was huge. Pete you balance them, you know, I've had this bunch of companies that I led. And, when you have 2 James, 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 really good at that because that's stable stakes.
And then you have another camp that says, well, it's good that that's stable stakes, but if we're not gonna shoot for the stars, if you're not gonna bring the new appearance, then we're not doing win anyhow. How do you basically balance these to what I found along the way in my company?
The companies that I found it is that I always had to kind of prioritize the shooting for the stores and then let the conservative camp, you know, kind of fill in on the functionality that you need to actually provide the value. But if you took your eyes off aiming to innovate and then dodge the customers, then just bringing the core functionality was never gonna let me win in any of my companies. Does that resonate?
It resonates completely, and this is one of the many reasons why startups are right? There isn't a silver bullet here. And looking back, everyone's a genius, right? Oh, of course. I know this. I had this plan. I would The reality is every moment you're, I would say, you sleep like a baby, you wake up every hour and you cry. Right? It's like, that's what's going on as a founder of a company. Right? You're constantly struggling with these decisions.
You don't even know if you made the right or wrong decision because, you know, 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 these different things ladder up into that? So for example, if we wanted people to use us every day for commuting, Right? That was the core kind of experience you wanted people to do.
There are different reasons why they would use it for commuting. Part of it in commuting is your board. Right? Nothing changed. And most of all your instincts, when you commuted are correct because insects are built on 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 could come and say there's one or the other.
There has to be a balance. Beller 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 2 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 that's just for fun, and what are we doing that's functional?
I wanna make sure that we always had things coming into each version that led to each side of it. Yeah. And I guess your business was a bit different than creating a new social app or something because, you know, you couldn't really just, you know, 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 section of the that you need to provide.
So yes and no. I think a lot has to do with the language and the relationship and the transparency you have to your users. I think a lot of startups make a mistake of trying to overpromise to the user. Yeah. Overpromise to the investors. That's fine. But overpromise to the users is the kiss of death. And for us, we were very, and, lately, she ran our product. It was really good.
Yep. She was really, really good at being able to say, okay, we're gonna 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 future and why it's not there yet today. That was funny.
After we raised our B round, and we just raised a lot of money and everyone was like, oh, it's an investment investment. 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 Morgan kilometers came in as the best prop for engagement. We saw that our users kept growing, but our driven kilometers stayed Flint.
Meaning, we were churning users, right? We're 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 then. That's a very hard thing to do because obviously everyone their gut instinct knows it's wrong. Right? Just everyone thinks something else. Right? So we stopped everything, and we invested a lot in analytics and all kinds of stuff.
Surveys and talking to our users and focus group, everything. And, you know, 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 the data showed and with the user show. Now we had all kinds of hypotheses about what went wrong. We thought users don't understand what we're trying 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, 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 users that churned when you talk to them, they basically said, yes, I love what you're doing. I get it.
With more users, it'll get better, blah blah blah. But I just got tired of waiting for it to happen, and it still wasn't good enough. So I said I'll come back later. Well, the unit 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. Very good enough, what we call, product promise. Right?
It's a good enough, you know, when you describe to the customer what the product will do, they love it. Question is whether you can deliver on it or not. They understand it, and they understand the mechanics that you need lots of people using it for it to get better. Right? So once we understood that, we could focus all our energy on the core of, like, 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'd actually done a really good job on. As we improved the core functionality, you just saw the numbers go through the roof. It was, like, literally every release we did something and the usage grew and the churn went down, etcetera, etcetera. That's super interesting.
Let's jump for a second to the network because I think, you know, one of the most important thing for me is the kind of network that you built around a product that wasn't networked before. And, you know, ways for me is an iconic example of network effect. Yeah. 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 like, 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 kinda need to activate, to make it even minimally useful. And, you know, how did you think about these KPIs? Think about creating density? You know, what kind of hyper local you to in order to make sure that your data network effects are kicking in. So it's funny.
We spent a tremendous amount of time at different periods in the company trying to build a formula, right? What explains how things work. And every time we failed miserably, okay, we had great theories, and these distributors would work great in two countries. And then completely not work in other countries. Like, we could never reach a formula. But if you take a step back and think about our network effect, right, there are a few different things we needed.
First thing we needed was a Morgan for that, we needed small number of highly engaged users to spend hours working with us building the map. Could you explain that for a second? Because I'm not sure people actually know what was the source of the wage maps. People kind of thought that it all came from the same place and wage was different. So, you know, let's take Israel as an example. Just because that's where we started. Right?
When we started out, the mapping world, there was a duopoly in the world. There was Naftech and Beller Atlas, and Naftech was bought by Nokia, and Beller Atlas was bought by TomTom, those are the 2 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 Maha, which was the map of Israel. Yep. And so Our thesis was that we could build maps instead of having thousands of trucks driving every road in the world Beller day and thousands of employees, etcetera, we could do with a combination of volunteers and GPS chips and 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 coming.
And like with Wikipedia, when you go in and you build a new entry about a subject that you know about, we had the same thing we need to be done with the maps. So If you are the 1st user in a country and you installed ways, the map will be empty be a blank canvas. You'd start driving, your icon would turn into this road Beller. Like what you see paving roads and start paving a road that you'd see being created behind you. And that was the 1st road in that country.
And as you drove more and more and more of these roads Morgan connecting, right, and we combined that with a really fun gamification experience, etcetera, and people really got into but no utility for the users at that point. They're just contributing. Oh, nothing. Okay? But if you were the first one to create a road, you got a lot of points for but that was creating this geometric road.
You then need to go online to our editor, which is a web based application from your desktop or laptop, not from your phone, and you'd 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'd need to connect 2 roads together as an intersection. About do you have a right turn or not? And so one way is a two way, what city is this road part of, etcetera? 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. Right? And then they Beller out this grid of the network. Now, the 2nd stage, once you have a grid, and some countries in the US, there's a map that the Census Bureau puts out, which is a okay math with Tiger, it's Beller company uses its start, but it's not navigable map. It's missing data, etcetera. So if we could, we use 3rd party data 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 on. So now you have this grid. Now you need a lot of people, more people, basically drive on this grid because as they drive, we're learning directions. We're learning speeds. We 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, right?
And so for that, we Beller 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 990. Yep. The 199011089, depending if you ask. So for us, the 1% were the users who created the map, and these were the our editors.
10% were the users who reported because they're 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 and report traffic police men, they would drive around. And as they're driving, we're collecting their GPS data automatically from their phone. So that GPS data is our raw material. That our algorithms and people can then analyze to understand speeds, directions, etcetera.
So that's kind of the 2nd stage. Then the 3rd stage, and that stage also built up a historical database of Pete. How many users are we talking about? For the 2nd stage, for a place like Israel, which is like a small state in the United States So it's hard to say because it's a combination of a variety of factors. 1 is how much do they drive. Right? Yep. How how active they are, but also it's what are the alternatives?
So for now, we have a huge community in Iran, which is funny because we're not allowed to support them Omri talk to them. Right? There's a embargo that you ran. Obviously, Israel and Iran have questionable relation ships, and the Iranian government has tried to block ways 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 there. Right? So we did nothing there. They've done everything themselves. And so because there's nothing else there that even a 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. 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.
You know, 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. James thing here. As long as you're doing better than what they have, and it's good enough that people will use it. So for Germany, you would need to have an extremely high quality three d 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. Right?
So really varied. But if you thought about how the app grew, it started out with building the network, then building the speeds and 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, etcetera, on 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 to completely different and a different set of criterias that you're looking at, but that obviously later on in the maturity of the country.
So what I wanna state that really resonates with the fact that you've been basically thinking about your 11990 Morgan 11089, and not just in terms of understanding your 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 gonna be 1% of the users that are gonna be willing to make a lot more than others gonna 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 gonna be the 9 or 10% that are gonna be willing to be more involved, and you need to just give them the way to be more involved and contribute Morgan, not as much as the first group, but still, and then there's gonna be the rest of it. And you need that basically a different each one of them if you wanna get the most out of each one of them, and that really resonates with me. Yeah. I'll give you some examples.
Our first versions of our app, we're much closer to call it more traditional GPS applications. None of 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 wanna be the first one to find the buck. That's a very different relationship than when you're ready to go to mass market where we basically smooth the app, made it much more fun and clean and took out a lot of that functionality, which pissed off our core users, right, But again, for a new consumer, it didn't matter. Right? He didn't care what the strength of the GPS signal was, but for an early adopter did. So that clarity 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, right? You're gonna disappoint a lot of if you have a product that's kind of broken and gen key, but has a lot of functionality and you're targeting early adopters, they're gonna help you make it Beller. You know, they're gonna 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 laser. It was a wow moment. People would go crazy when it happened. Today, that's not a relevant experience because obviously they're 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? Having that vision in terms of that helps you prioritize and having that KPI that's relevant for the stage that you're in Right? Like, 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 project didn't work. Right?
But that didn't matter in that sense because we were targeting those early adopters that are helping us build the map. Yep. And I love both the concept of having kind of different product thinking about each type of user. And also one more thing that you said really, really resonate with me, which is trying to indulge the users and get them to these wow moments.
But I wanna touch for a second data network effect because the, you know, is a ZenFX and, you know, the fund focusing on network effect businesses. We've always looked at with admiration at what we think is one of the best if not the best of them, data network effect that this is out there. And when we try to explain to people what makes the data network effect strong, because some people say, hey. I'm gonna put out a collect some data and that's gonna be defensible.
And, you know, and you look at the quantity of data or how difficult it is to get 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, you know, we said 1st and foremost, the data capture is preferably automatic because otherwise, it's just not cable. 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 inviting 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. 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. Like, that's it. I so many companies telling me, oh, we're collecting all this data and it's so valuable, whatever.
And, you know, someone who's been at Google and that are, like, 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 value. And I think that clarity is super important, but 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 1 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 still today, like, people think the maps are free, 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 advantages. Google has its map. It's not selling it. Nokia and teleallis 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.
And so for owning the raw data was crucial, and that's went into the data that we had, the users built, but also whenever we could acquire data, we did as long as it was rights free, and we could own the rights full. Mhmm. So that was one level of data. The second though is all that kind of real time traffic and things you get from GPS So those are things that you could also buy today from Flint management companies.
Now 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 that your data off trucks, they'll show you traffic when they go up a hill. Because they're dropping slowly. Right? And obviously, consumers are not. Right? So that's kind of a second level. 3rd level of data though is the porting and all the interactions with the users, which only a human can do. I can see a police in there and report them.
No amount of algorithm can detect that from the GPS. And so for us, it's always this combination of things. We believe it is a matter of philosophy that you need to combine humans and algorithms, neither of them as a slam dunk. But working together, they can do crazy things. And these are the kinds of, like, philosophies we have. 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. So all that machine learning you're building and all that doesn't really matter because there's no raw data in there. So, you know, garbage in, garbage out, right? But at the same time a human can do what, you know, might take you 100 of man years to develop algorithmically.
A human can do that instinctively by just looking 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. Right? So you've gotta find those combinations. And what we did, which I recommend many companies, to start out super manual as a first step. 2nd step, you want to optimize the manual processes, right? So each person can do more with less time.
Yep. Third step, you wanna 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 kind of automate it 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 have done that with a human at a tenth of the time. And so I think when it comes to data effects, would say the most important Morgan 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, you know, hard coding things like to say, the most AI today is a call center in India because basically, yes, the AI solves the core or the easy, the eightytwenty side, but the last 20% is going to be human somewhere else?
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. Yeah. Definitely. In many of our companies, we still see that using humans at DH cases is, you know, makes the company much faster and much better for its users.
And I think that you hit the nail right on its head that data is valuable, you know, if you know what's already been it and if you know how to use it in your product and if you know how to move fast around it, which thing many starters are missing. 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 at nfx and visit nfx.com for more content. And now, back to the show. Oh, I wanna jump for a second into the top of a growth because I think that one more thing that we did phenomenally well was that once you got to that initial network density and product market fit, you know, you knew that you had the right product for the right market. What did you really do to basically kinda 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 kinda key users that are using the almost every day. How did you get there? What did you do? What kind of growth tactics did you use once you knew that you had product market fit? So, you know, it's interesting. When we think about our world, they're basically 3 apps or competitors in the space. There's Google Maps, there's Apple Maps and there's Waze.
Now Google Maps has an operating system, called Android, which is a great way to distribute your app. If you're gonna distribute an app, it's really good to have an operating system. I highly recommend it for every entrepreneur. And Apple has iOS. Right? So and we had ourselves. And we've still if you look at at for the driving, because maths do a lot more than just driving, we all need your driving.
But if you look at driven kilometers, our estimates are that the market breaks out to about 40%, Google, 35% ways, 25% apple. Okay, roughly. And I gotta ask if I don't know all the data, but so it's kind of amazing that we managed it 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 of course, we could do walking, and we could do bicycles, and we could do discovery, and we could do a million other things, and someone we tried and failed that. But fundamentally, I think there's a huge value for companies that are 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, right?
And Spotify does this without an operating system. And without shoving it, bundling it, their music, and then like Amazon or shutting it down your throat, like Apple, it's like, they're not. They're just have a better product because 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 gone into music. They could have gone into podcasts.
They could have 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. Now knowing their users in their context, which is what matters. So 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 work.
When it comes to growth, I think we were not very good at building a 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're 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 looked 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 we'd sell maps. And maps, there was duopoly. They're very expensive, right? What we learned the hard way is that the companies we were disrupting were the ones that used to buy the maps. So we're basically disrupting our customers. And so I think the only real pivot we made at Waze was deciding we're not gonna sell data, but we're gonna 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 or broadcast program Morgan, there's several 1000, primarily TV, but also radio stations that use us to report traffic. Now I know we all like to say the TV is dead, etcetera. There is something very special in America things you've seen on TV. And 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 the training they could report about traffic in their area with ways, but we were not a vendor. We did not replace our existing system, although they asked for it. We did not charge them because we wanted to say no. We didn't wanna be their vendor, but that gave us tremendous amount of visibility and distribution.
2nd program we put in place was a program working with cities. And partnering with cities, essay cities, it's also a department of transportation, you know, ministries of transportation, etcetera. 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 Beller these 2 way APIs. 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 they were, you know, whatever their KPIs were. They're all different use cases. But the point was that's another kind of network effect that happens when you begin taking what you have and building 2 way directionality to receive and send data, where 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 3rd was really partnering with companies that also care about driving. So one of the best companion 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 gonna recognize you're in the car and ask you, do you wanna run ways? Or if you're running ways and Pete into the car, it's gonna recognize that you have Spotify.
Ask you wanna listen to Spotify and control your Spotify from 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 Interesting. And so nobody paid anybody. It was just a mutual recommendation. Mutual recommendation. We'd recommend each other. Obviously, there's all kinds of things that talked about of advertising. We know what they're listening to. We know where they are.
There are really not things you can do, but Both companies had common enemies, so that was easy. In In a way, This idea of enemies is that nothing I learned the hard way is that, you know, 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. Yeah. There was more complicated than that.
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 you know, 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 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. It was even after we Pete 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 if the corporations, they care about their own KPIs and how, you know, is it helping or not?
One thing I've said, I've, 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 gonna move your business. While once you have traction, It's very easy and can accelerate things already happen.
1 of the or kind of thesis was you wanna 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 Morgan specific country and invest in it, whatever, and it never worked. While at the same time, a place to had started organically, you can pour the gasoline on the fire and it'll light. And so that was kind of one of the things that happened.
Again, we couldn't understand exactly why is French 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 none of them work But it doesn't matter. When we saw things going well in France, you invest there. You saw things going well in the UK, you invested there. But in Germany where it didn't, we didn't invest there. No. I love that.
I also think that the concept of, you know, we always tell companies not to focus too much in business development early on because then, you know, even if succeed, you're trying to put your destiny in somebody else's hand, which is not great. But I think that your way of putting it, which is, you know, don't try to get this business development thing going until you have the organic trend happening so that you can basically, you know, accelerate the organic trend.
I think that's a great way putting it. That's a new way for me to think about it in that 3 d grade. So, you know, one question that I have that I always ask founders is, like, 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 there are phenomenal results would have been even much better.
Do you have, like, things like that in your mind? Oh, yeah. Yeah. 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 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, or it was so expensive. So our plan was we're gonna give it for free. Because our data, we're building the community.
And so even though in the Christensen model, right, even if our product isn't as good as the others, it'll be free. That's gonna be our marketing. As more people use it, it'll get better and better, so it'll probably 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 was free. And that caused a terrible panic on our side.
Obviously, we had this kind of traditional term sheet from a big VC who yanked it the minute we will announce it, and we couldn't raise money. Everyone likes to talk about the good stuff. We could not raise our 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 not the story about what we did around that round, but the point is that we panicked at that Flint, 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's probably gonna follow their playbook, meaning they'll open up APIs for navigation. Right? Like they do with everything. Yep. And they'll go from the US to the UK to Germany to France, you know, to how to kinda 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 Morgan that meant that for about a year, we took our eyes off the US Morgan, 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 at I'm like, what do we know?
The message for me Pete, and I I say that to founders, and they never believe me. And then, you know, many years later, usually 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, where your competitors are doing it. Why? Yes. When you own 20% of the market, you can start thinking about 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. We had we done that and stayed focused only on our users and not think strategically on this, I think we would have in a much better position. That's very interesting. 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 you know, things were growing and our downloads are growing and everything.
We're suddenly peeling and hearing about us, whatever, but our core metric of driven kilometers was Flint. 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 the level of clarity that we would never have gotten to and a level of prioritization of what we were doing that we Beller have gotten to.
And once we had that clarity, literally, we could see how every one of our activities drove that Pete, and things worked 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, right? If things aren't going 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 on going into the analytics and talking to our users in take up to build the analytics because it was kind of before a lot of the tools for mobile that we have today existed. And doing all of those things Pete super, super, super important for us. 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. Yep. So you don't have many that have gone through it.
And 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, the very few that gone through that phase, And I definitely didn't. It 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 kind of the lean startup methodology, just doing have to and throw away code and all this kind of stuff to get things done. And that was the right thing at the time, but we didn't make that Flint 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 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 gonna be you can't state Flint and big, which is what happened to us. And so I think that understanding what to scale and when to scale it is just as important as kind of the lean startup methodology of ignoring the scaling side, right?
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 into that problem to understand. I think one of the hardest problems there is the human capital 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 100,000,000 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 skillsets needed. And how do you handle that in a way that, a, is good for them because they've been with you. You wanna 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 a lot.
That'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 is scaling many James. And it's so hard because, emotionally, you're connected to them, but there may not be the right people for the company. And so one last question for me.
Yeah. You've recently wrote a little bit about, your experience in Google, and, you know, I don't wanna speak about that because everybody read that, at least once, if not twice. But what I do wanna ask you out of it is that if I'm a young fan, they're starting a company now. And if you think about, you know, the perspective of what makes young companies succeed against these giants that you literally can't win, and yet you win.
What's like the one thing that you wanna 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. First of all, my host 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 James. And Beller expected it to Pete, I would have edited it very differently.
I understood this was gonna 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 and need to build a culture that fits into that on the one hand. But on the other hand, they need to have a clear vision mission strategy about where they wanna go and how they're gonna get 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 Beller 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, you know, Verizon just sold off its internet properties, Yahoo, and AOL, etcetera. And AT and T just sold off all its media properties, not Warner Brothers. What a medium.
Yep. But these are exactly to me the same problems that you see everywhere, right, where people forget who they are and what they're good at. Apple has built a phenomenal business basically on consumer hardware product, right? They don't have a 1,000,000 product. They have not gone into very different spaces. Right? 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 an interesting story, but Amazon is a consumer e 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. Right? 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. Right? 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, every pro that 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 any, 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 it is that 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 a place in the organization. And that's just a 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 star But what you do have is your ability to say no. To say no to everything except a 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 be 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 starting to compete with the biggest companies in the world. It's never gonna happen.
But if you're doing one thing and you're doing it hundred times better than anyone and you're stand 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. No. This has been amazing. Such a well through information, and you've been so generous with your time. I wanna thank you on behalf of the end effect community.
I think that there's so much here for fans 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. Hey, I can't wait either to figure that out. I will I think that I think is an amazing content you guys put out in FX is one of the few venture driven content sources that I actually read. You guys have done a phenomenal job, and I think you're 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. That's perfect advice. No, I'm thank you very much. At NFX, we believe creating something of true significance starts with seeing what others do not. Send this episode to any friends that may need these insights and frameworks, and feel free to rate and review us on your favorite podcast platform. Thanks for listening to FX Podcast.