Problems, it has been said, are nothing more than awakening creativity.
Just look around you. There is plenty of evidence to support this view if you consider some of today’s biggest companies that were start-ups not so long ago: Tesla, WhatsApp, Facebook, Uber, Netflix. The list goes on.
Uri Levine knows a lot about start-ups. He is the co-founder of Waze, the world’s largest community-based traffic and navigation app. In 2013 it was acquired by Google for $1.1 billion. He was also a key investor and the first board member of Moovit, sometimes called “the Waze of public transportation,” which was acquired by Intel for $1 billion.
Levine has built more than a dozen startups and seen everything from failure to mid-level success to financial and market success. He has the skills and persistence to launch successful businesses, combined with the self-knowledge to know how he did it.
Levine’s book is Fall in love with the problem, not the solution: a handbook for entrepreneurs. Their focus on connecting with the end consumer should be a key guideline for every entrepreneur at every stage of the business creation journey.
Rodger Dean Duncan: The title of your book seems to be a good formula for evaluating business opportunities. What questions should entrepreneurs ask when making these assessments?
Uri Levine: Creating a lot of value for a large number of people is definitely a formula that works. Although this seems obvious, it is not that simple. Let me try to explain.
Value means solving a problem. When you solve a problem for someone, you create value for that person.
Then you have to qualify how much value you create and how many “someones” there are. As a general rule, long before you start your journey you should think of a problem, a big problem, something worth solving, that the world will become a better place if you solve it. Then you should determine who has this problem and try to define them by groups (eg “working parents”) and try to define multiple groups.
Then go and talk to these people to understand theirs perception of the problem.
Only then does he start thinking about the solution. Talk to as many potential users as you can. The result will be:
1. It will qualify and help you fall in love with the problem, or better yet, it will disqualify the problem.
2. It will provide you with the correct perception of the problem
3. It will provide anecdotal stories for you to use on your journey
Duncan: You say that an entrepreneur’s passion for making a change must be greater than their fear of failure and opportunity cost. How can people be self-aware enough to know if they really have the mindset for business success?
levine: Entrepreneurship is all about taking a leap of faith, even when people around you tell you “this will never work” in so many ways and shapes. But you also have to be in love to make that leap.
If you’ve never taken a leap of faith like this, ask yourself, “Why?” It can help you overcome this barrier. But in general—and this is something we have to accept—there are too few entrepreneurs in the world, and not everyone is cut out for this irrational leap of faith.
Duncan: It may seem counterintuitive, but you say that a start-up is a journey of failures. Why is failure so important?
levine: Startup is a journey of failures mainly because we are trying to do something that no one has done before. We start out believing we know exactly what we’re doing, but in reality, we don’t.
So, for example, we try a solution or a product, and once we realize it doesn’t work, we try something else. We do this over and over again until we find the one thing that works. Once you realize that this is going to be a journey of failures, the most important insight is that you must fail fast, because then you have time for another attempt and another experience. These extra attempts are essentially increasing your probability of success.
Imagine you’re trying to make a three-point shot from half court. If you have a stroke, your chances are pretty low. But if you have ten shots, you increase the probability of scoring by about 10X. With limited time and funding, the best way to get more shots is to fail fast.
Duncan: One of your “sound bite” tips for entrepreneurs is “Launch before the product is ready.” Please give us an example of how it works to your advantage.
levine: The only real way to make progress is to test your product and get user feedback. The sooner your product gets in front of real users, the faster you can move and the faster your product will be good enough. Many people would like to think that the risk of releasing a product prematurely is high, but in reality there is no risk. You don’t have a brand yet, you don’t have users yet, so there’s nothing to lose but a lot to gain by moving faster.
Duncan: How can a disruptive point of view help an entrepreneur identify promising opportunities?
levine: It’s the other way around. Almost all of the disruptions happened to startups that had nothing to lose and could therefore take a completely different approach. It can be about a product, a business model, pricing or making information available. The disruptor’s POV is very simple. It always starts with the totally wrong current state as a trigger for a different thought process and a disruptive approach.
Duncan: For entrepreneurs, what seem to be the keys to successful fundraising?
levine: Let me share two comments I’ve received from seasoned investors over the years. The first one was basically about the first impression. I asked one of Israel’s leading venture capital management partners how long it takes them to decide whether they like the entrepreneur they know or not. The surprising answer was, “Before you sit down.”
While this seems completely irrational and definitely inappropriate, ask yourself how long it takes you to form a first impression on a candidate or a date? Seconds. And maybe allow yourself a few more minutes to let that first impression sink in, or to change your mind.
Now, if that’s the case, then you want to start with the strongest point at the beginning because by the time you get to the point, they may have already made up their minds.
The second view is perhaps even more important. I’ve asked some investors why they decided to invest in certain companies (first round of investment) and I’ve heard very consistent answers: “I liked the story and I liked the CEO.” If that’s the case, then I’d say there are two takeaways here: (1) The CEO goes alone to the first investment meeting: The CEO needs the stage to shine, and no one else in the spotlight will help. (2) The CEO must learn to tell a good story, and a good story is not about facts or data. It’s about creating an emotional engagement with the audience and establishing the trust that the CEO can deliver.
Duncan: What are the telltale signs of a startup opportunity that should be abandoned?
levine: I’ll start by saying that my friend and super-entrepreneur Dov Moran, who invented the USB drive, told me that an entrepreneur never knows when it’s time to quit. He is right. Entrepreneurs will never give up. But there are two main signs that an entrepreneur should stop: (1) The equipment is not right and you cannot change it; you may want to consider switching equipment when you leave. (2) The problem or perception of the problem disappeared.
Duncan: What seem to be best practices when it comes to hiring people to staff a startup operation?
levine: There is a whole chapter in my book called hiring and firing, and when I sent my book proposal to several publishers, I told myself it should be hiring and firing and I said NO! Firing is a difficult decision. Hiring is an easy decision.
Hard decisions are hard, easy decisions are easy. The first is to shoot. Forget hiring. Start by knowing who and how to fire, and then it almost doesn’t matter if you’re an excellent or above-average hiring manager.
When someone doesn’t fit, everyone knows within a month, sometimes even sooner. Therefore, your recruitment process should have a critical phase. One month after you hire a person, ask yourself, “Knowing what I know today, would I hire this person?” If the answer is no, shoot them immediately. Everyone already knows they don’t fit, and the longer you wait, the more damage you do to everyone: the organization, you, and especially the new hire.