A Conversation with Uri Levine, Co-founder of Waze & 2x ‘Unicorn’ Builder on Falling in Love with Problems, Not Solutions.

A Conversation with Uri Levine, Co-founder of Waze & 2x ‘Unicorn’ Builder on Falling in Love with Problems, Not Solutions.

Uri Levine is a passionate entrepreneur, a 2x ‘unicorn‘ builder (Duocorn), and the author of the book Fall in Love with the Problem, Not the Solution – A Handbook for Entrepreneurs.

He is co-founder of Waze, the world’s largest community-based driving traffic and navigation app, which Google acquired for $1.1 billion in 2013, and former investor and board member in Moovit, ‘Waze of public transportation, which Intel acquired for $1 Billion in 2020.

Levine’s vision is building startups that are doing good and doing well, focusing on solving problems and hence changing the world for the better.

He has been in the high-tech business for the last 40 years, more than half of them in the startup scene, and has seen everything ranging from failure, to moderate success, and big success.  Levine is a BA graduate from Tel-Aviv University. Before attending University, he served in the Israeli army at special intelligence unit 8200. In his public activity, he serves on the board of trustees at Tel-Aviv University. The startups Levine is Co-Founder, Chairman or Board Member, include Pontera (formerly FeeX); FairFly; SeeTree; Refundit; Fibo; Dynamo; Kahun, and he’s always working on the next one.

In this interview I speak to Uri Levine (Co-Founder of Waze) who has built 2x ‘unicorn’ companies with values exceeding $1bn. We discuss the realities of entrepreneurship, what it takes to build some of the world’s most successful technology companies, and why we need to fall in love with problems, not solutions.

Q: What do you think it means to be an entrepreneur? 

[Uri Levine]: Generally speaking, I advocate for entrepreneurship as being originating something entirely new – taking it from zero to one, so to speak. This endeavour doesn’t strictly have to be a technical startup or a monumental success. The main focus is on initiating something on your own, which essentially leads you into the journey of entrepreneurship. It’s a voyage that can be challenging and intricate, marked by a series of failures. Moreover, it’s a path that you’ll often tread alone.

Q: Why do we need to fall in love with the problem?

[Uri Levine]: Embarking on an entrepreneurial journey is fundamentally about value creation. At its core, the most straightforward way to create value is to solve a problem. When you provide a solution to someone’s problem, by default, you’re generating value for that person. Consequently, my perspective is that this journey must always begin with a problem.

Consider a significant issue, something genuinely worth addressing, a problem whose solution would make the world a better place. The subsequent step is to identify who has this problem. If you find yourself to be the sole bearer of this issue, consulting a therapist might be a quicker and less expensive option than launching a startup. However, if this problem is shared by many, your next move should be to engage with those affected to understand their perception of the issue. Only then should you embark on crafting a solution. Following this trajectory, if your solution proves effective, you’re assuredly generating value.

On the other hand, if you start with a solution, there’s a risk you might construct something that no one finds useful, leading to immense frustration. But when you centre your efforts on the problem, it serves as the guiding North Star of your journey. This guidance ensures lesser deviations, thereby increasing the likelihood of your venture’s success. There’s an additional element to consider – your narrative becomes far more compelling.

Imagine if back in 2007, I proposed to build an AI crowd-sourced navigation system; your reaction might be polite interest, but ultimately, indifference. However, if I told you I’m planning to devise a way to bypass traffic jams, then you’re engaged. It’s quite simple to differentiate between an entrepreneur whose narrative is solution-focused versus problem-focused. If their pitch starts with ‘our system’ or ‘our company is’, they’re solution-focused. Conversely, if it begins with ‘the problem we are solving is’, they’re problem-focused. If the dialogue opens with ‘this is the value we create for you’, then it’s oriented towards you, which arguably trumps the former approaches.

In conclusion, despite the volume of startup enterprises that approach me regularly, I’ve observed that very few of them initiate their pitch by articulating the problem.

Q:  How do you know whether a problem is worth solving?

[Uri Levine]: Determining whether a problem is worth solving isn’t as daunting as it seems. Start by engaging in conversations with about a hundred people. Realistically, you may not even need to reach that number. By the time you’ve spoken to the 30th person, you’ll have a good idea if your problem is substantial or not. If you’re met with responses such as ‘I don’t really care,’ you’ll find this sentiment is likely consistent, suggesting that it’s not a significant problem as people simply don’t care enough. However, if individuals start sharing their own experiences related to the problem, you’re on the right track. Hence, validation can be pretty straightforward.

I’d urge you to reflect on a problem you’ve recently encountered – perhaps something from today, yesterday, or last week. When people wonder if their issue is substantial enough, I tell them that their initial impression serves as the starting point, the catalyst. Validating the scale of the problem is then a simple process. All it takes is communicating with people.

Q: What are the secrets of rapid growth?

[Uri Levine]:  I would argue that it’s essential to set growth aside and prioritise achieving product-market fit. The logic behind this is straightforward: if you manage to attain product-market fit, you’ll thrive, but if you fail, your venture will falter. It’s that simple.

Product-market fit boils down to creating value for your customers. If you fail to do that, your business won’t survive. Customer retention is the solitary metric indicating product-market fit. If you offer value, your customers will return; if you don’t, they’ll disappear. However, this journey towards product-market fit is lengthy, complex, and challenging.

You’ve likely never come across a company that failed to find its product-market fit because such companies have ceased to exist. Yet, when you contemplate the apps we use daily—Google, WhatsApp, Uber, Waze, Netflix, Instagram—their user experience remains essentially unchanged since the first time we used them. This consistency indicates that once a company figures out product-market fit, they stick to it because it’s the value they create for their audience. This journey, however, can take years—five years for Microsoft, ten for Netflix, and four for Waze, for instance.

Once a company determines its product-market fit, it can shift focus towards growth strategy. Startups typically begin with no assets, just a vision and an idea. Their initial mission is to discover their product-market fit, which can be a multi-year journey. Subsequently, they may choose to focus on growth, business model development, or global expansion.

This entire process is a rollercoaster ride, replete with ups and downs, failures, and a significant time investment. After seven to ten years, many startups evolve into corporate entities, with a clearly defined value proposition, customer base, product line, sales strategy, growth trajectory, business model, and pricing structure. Startups, on the other hand, must embark on this journey with nothing established.

When asked about growth strategy, I always suggest a return to basics: understand how your product is being used. This understanding will guide your growth strategy. If your product’s frequency of use is high, word-of-mouth will likely become your primary growth driver. Initially, you’ll promote your product, but eventually, you’ll find it’s not necessary. High-frequency usage means plenty of opportunities for customers to recommend your product to others. In such cases, your journey will generally follow this sequence: product-market fit, growth, then business model.

However, if the frequency of use is low, word-of-mouth marketing won’t be effective. You’ll have to continually acquire users, making it essential to figure out your business model before you can focus on growth. If your business model isn’t viable, you can’t afford to acquire users—you’ll simply bleed cash. Therefore, the value you provide and the frequency of your product’s use will define your entrepreneurial journey’s progression.

[Vikas: Can you give an example?] 

[Uri Levine]:  You might recall an app named Bump, designed for exchanging contact details or business cards simply by bumping phones with someone else. This company experienced record-breaking growth, attracting investment from top-tier firms like Sequoia, who were impressed by its rapid expansion. However, Bump suffered from a fatal flaw: it had no retention.

After one instance of phone-bumping, there was no compelling reason for further interaction with the app. Hence, the frequency of use was essentially once in a lifetime. While they successfully mastered growth and virality, they failed to establish product-market fit. Consequently, despite various attempts at transformation, they ultimately met their end.

Even with substantial funding from firms like Sequoia, which can prolong a company’s lifespan, the inevitable downfall arrives if you fail to create consistent value. In essence, the tale of Bump underlines the importance of product-market fit over explosive but short-lived growth.

Q: What is the role of fundraising in the entrepreneurship journey?

[Uri Levine]:  I’ll start by emphasizing that this will be a long journey. Think of fundraising as refueling your car for the trip. It’s essential – you can’t undertake the journey without fuel. But that’s all it is: fuel. It isn’t the objective of your journey. Once you’ve secured your funding, it becomes much less significant. Picture yourself on a road trip, running out of gas. All you care about in that moment is refueling. However, once you’ve done so, your focus shifts back to the journey itself. The importance of this journey lies in creating value, not in refueling. It’s essential to remember that.

If we depict this journey as a rollercoaster ride, then for most entrepreneurs, especially at the start, fundraising is akin to experiencing that rollercoaster in the dark. You don’t see what’s coming. It’s a game with rules you may not initially understand.

Out of all the startups that approach investors, less than one percent will secure funding. If you don’t grasp this reality, you’ll struggle to successfully raise capital. It’s a critical point. Many first-time entrepreneurs don’t comprehend this 1% ratio, but it’s not about them—it’s about the investors’ selection process.

It’s crucial to understand that fundraising is a different ball game altogether. It’s as if you’re coming from the US, where football involves using your hands, then going to Europe and trying to play football in the same way. You need to understand the rules of the new game.

The second point concerns many conversations I’ve had with investors. Two major themes emerged: How quickly do they decide whether they want to invest? How fast do they decide if they like the entrepreneur? The answer to both is often within a matter of seconds. First impressions are key. If you disagree, consider how quickly you form an opinion about a student, a date, or a job candidate.

[Vikas: You just know, straight away.]

[Uri Levine]:  Indeed! That’s exactly how it works. You might give yourself a few more minutes to either cement or reassess your initial impression. If this is true, as an entrepreneur, you must lead with your strongest points. By the time you get around to presenting these, however, they may have already formed an opinion, and at that point, it may be too late to change it. It becomes a foregone conclusion.

I often ask investors why they choose to invest in a startup, particularly in the seed round or the first investment. The responses tend to echo the same sentiment: they liked the CEO, they were captivated by the story. This implies that the CEO should attend the meeting solo. If other team members are present, they might distract from the CEO, and that’s not what you want. You want all the attention on you because likability can significantly influence investment decisions.

Moreover, you need to master the art of storytelling—a hurdle many entrepreneurs stumble over. A compelling story creates emotional engagement; it isn’t just about presenting the facts. It’s about making someone believe they can be a part of this story, making them envision their role in it. Discussing problems tends to be more engaging. If you talk solely about solutions, well, nobody gets thrilled by that. People become excited when they’re emotionally engaged, so learning how to tell your story is crucial. If you don’t nail this, you might miss the mark.

Q: What’s the reality of entrepreneurship that you wish people knew?

[Uri Levine]:  It’s a trial, no question about it. To quote Ben Horowitz, former CEO of a startup, when asked if he slept well at night, he replied, “Oh yeah, I slept like a baby. I woke up every 2 hours and cried”. That’s the stark reality – there will be days when you question why you embarked on this journey. Until you pinpoint your product-market fit, this sentiment will persist, often for years.

The instances when you come perilously close to failure are far more frequent than in other types of business. Ask any entrepreneur, and they’ll tell you about the countless times they felt on the brink of demise. That’s an intrinsic part of the journey.

The real challenge arises when you finally nail down the product-market fit. That’s when you’re on track to success, and people begin to take notice. But what they don’t see are the years of struggling, the uphill battles, the seemingly insurmountable ice wall. It feels as if someone is clipping off your nails, making the climb even more difficult, and as if the slope isn’t already steep enough, it sometimes feels like you’re scaling a wall that’s more than a vertical climb.

Yet everything is difficult until it’s not. Most people only notice and get excited when the tough part is over. But I would say, remember, you embark on this journey driven by a mission, a vision of creating value. Your vision and mission resonate with your team, inspiring them to join you on this journey. This mutual commitment between you and your team is what helps you overcome the difficulties of the journey, leading you towards success.

Q:  How do you prepare yourself for exit?

[Uri Levine]:  Indeed, the change is stark and unprecedented. While fellow entrepreneurs may prepare you for the challenges of capital raising and the arduous journey, few will discuss the exit stage. Steve Wozniak, co-founder of Apple, once said he wished he’d had access to my material when he was starting out. For me, it’s the wisdom encapsulated in chapter 12.

It provides the perspective that it’s not merely about financial gain, it’s about planning for the day after. As an entrepreneur, you’re steering your own ship, but after an exit, you become a cog in a larger corporate wheel, with someone else directing your course. That’s a jarring transition, especially if you’re averse to taking orders.

You need to consider three pivotal aspects: the deal itself, life post-deal, and your personal well-being. Investors are typically focused solely on the deal. Employees may think about the deal if it’s transformative for them, but the aftermath isn’t as impactful – you aim to maintain their trajectory and shield them from corporate red tape.

Many find it difficult to transition from a dynamic startup to a corporate environment. For some in supportive roles, joining a larger corporation may be beneficial: better resources, improved workspace, daily lunch, yoga classes. However, if autonomy is your preference, it’s a different story. You suddenly find your startup DNA mutating into corporate genetics, which can be a challenge.

So, my advice for entrepreneurs is this:

  1. Don’t actively sell your company. A buyer should approach you with an offer.
  2. If you receive an offer, contemplate these factors:
  3. Will it significantly alter your life? If not, continue to create value until such an opportunity emerges.
  4. Is it a game-changer for your team? If not, negotiate to make it so. Your team has been your backbone throughout the journey.
  5. Is this your once-in-a-lifetime startup, or do you plan to build more? If the latter, seize this opportunity.
  6. Carefully plan your life after the exit. Align your vision with the acquirer’s, understand who you’ll be reporting to, and ensure you share good chemistry with them. Without these, you might soon find yourself on the outside looking in.

Q: What do you hope your legacy will be?

[Uri Levine]: It’s crucial to recognize that one’s legacy evolves over time. My mission is straightforward: I’m dedicated to creating value. This is how I fulfill my destiny, how I find significance. Because the alternative to being meaningful is being meaningless, which hardly seems like a viable option, right?

Fortunately, I have two robust personas within me: an entrepreneur and a teacher. I find equal satisfaction in either crafting something myself or guiding others in their creation. As a result, if you asked me about my most significant accomplishment to date, I’d point to the book. I believe its impact will exceed that of Waze. But who knows? If we were to meet again in five years, I might tell you a different story.

So, in that regard, I see my legacy in helping others achieve greater success.

Thought Economics

About the Author

Vikas Shah MBE DL is an entrepreneur, investor & philanthropist. He is CEO of Swiscot Group alongside being a venture-investor in a number of businesses internationally. He is a Non-Executive Board Member of the UK Government’s Department for Business, Energy & Industrial Strategy and a Non-Executive Director of the Solicitors Regulation Authority. Vikas was awarded an MBE for Services to Business and the Economy in Her Majesty the Queen’s 2018 New Year’s Honours List and in 2021 became a Deputy Lieutenant of the Greater Manchester Lieutenancy. He is an Honorary Professor of Business at The Alliance Business School, University of Manchester and Visiting Professors at the MIT Sloan Lisbon MBA.