Born and raised in the city of Los Angeles, Alex has always wanted to solve the problems of the city. He has a bachelor’s degree in Business and Economics and a Master’s degree in Fine Arts, filming, and Production. His most epic contribution to the city and world is being a serial entrepreneur who has raised firms with one almost merging for $300 million dollars. Alex’s venture, Metropolis has acquired funding from top-tier investors like Dragoneer Investment Group, RXR Realty, Halogen Ventures, and 3L capital.
In this episode you will learn:
- How to develop ideas for a disruptive business
- How to improve user experience to get more build a reputable business
- Different ways that mergers and acquisitions can be successful
- How to keep investors when acquisition deals go south
- Importance of getting the right investors and how to vet them
- His top advice on how working with naivety to success
For a winning deck, take a look at the pitch deck template created by Silicon Valley legend, Peter Thiel (see it here) that I recently covered. Thiel was the first angel investor in Facebook with a $500K check that turned into more than $1 billion in cash.
The Ultimate Guide To Pitch Decks
Moreover, I also provided a commentary on a pitch deck from an Uber competitor that has raised over $400 million (see it here).
Remember to unlock for free the pitch deck template that is being used by founders around the world to raise millions below.
About Alex Israel:
Alex Israel is an active mobility entrepreneur, investor, and advisor. Alex is the Co-Founder & CEO of Metropolis, a stealth start-up based in Los Angeles.
Previously, Alex was the General Manager of an enterprise division of INRIX, the leading global traffic intelligence provider, delivering smart technology and data analytics to help improve urban mobility.
INRIX is at the forefront of connecting cars to smarter cities in more than 60 countries around the world. The company leverages big data analytics to reduce the individual, economic and environmental toll of traffic congestion.
In 2009, Alex co-founded ParkMe to facilitate a paradigm shift within navigation. Between 2009 and 2015 ParkMe grew to become the world’s most comprehensive parking database, including more than 29 million spaces in 100,000+ worldwide locations, 4,000 cities, and 64 countries.
Mr. Israel managed the Product, Marketing, Business Development, and Engineering departments. ParkMe acquired millions of users, as an “Apple Store Ranked: Top 5 U.S. Navigation Application”.
Alex also serves on the Board of Directors of Defy Ventures, the leading U.S. anti-recidivism organization.
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Connect with Alex Israel:
Read the Full Transcription of the Interview:
Alejandro: Alrighty. Hello everyone, and welcome to the DealMakers show. Today, I’m really excited. We have a fantastic founder, a founder that is doing it now for the second time—as they say: once an entrepreneur, always an entrepreneur. I think that we’re going to be learning quite a bit. We’re going to be learning about entering an old boys’ club type of industry. We’re going to be learning about M&A transactions that didn’t achieve the outcomes that were thought about. Also, we’re going to be talking about fundraising, you name it, but definitely a lot of dealmaking. So without further ado, let’s welcome our guest today. Alex Israel, welcome to the show.
Alex Israel: Alejandro, thank you for welcoming me. This is wonderful.
Alejandro: Fantastic, Alex. Originally born and raised in LA. How was growing up with all that crazy traffic that you guys have going on there?
Alex Israel: [Laughter] Yeah. I’m one of those rare born and raised Angelenos. Now that you’re bringing up the horrible mobility experience that is Los Angeles. I’m sure it really shaped my career trajectory to spend my whole career dedicated to mobility, but it was great. I grew up on the west side of Los Angeles. I went to a high school in LA called Crossroads. I finally escaped for college but then came back down here for graduate school. It was wonderful. LA is this dynamic city where you can see a new piece of the city every day for the rest of your life and never see all of Los Angeles. It was wonderful growing up here—great childhood with dynamic parents. My mom was a psychologist; my dad was a set designer for plays and operas—a unique, great upbringing.
Alejandro: That’s amazing. In your case, you ended up studying business and economics. Then you did a rodeo in the corporate world before going at it as an entrepreneur. You went to Walt Disney. You did Viacom. I’m sure that you learned a fair amount of good stuff from such great companies. I guess that was the segue into building your first company. What was that experience like?
Alex Israel: It was really interesting, Alejandro. I would say generally, I took a very non-traditional path to go into entrepreneurship. I went to undergraduate school, studied business and economics, which was great, but I don’t think I’d do it again. I think I would definitely be a computer science major if I did it all over again. I think that’s more applicable to my career path. Then I came back to Los Angeles and got my Master of Fine Arts in Film and Producing. People always ask me what the parallel is between entrepreneurship and film. I would say that there are two very clear throughlines for me. 1) Creativity—I think being an entrepreneur is fundamentally creative, creative problem solving, creative dealmaking, and more than anything else, it’s about starting a business; it’s about taking something from abstraction and bringing it all the way to fruition. That’s exactly the same as film. You take an idea, and you put it on the screen. Here, we take an idea that something, just an inkling, as you and I have done before, Alejandro, and we turn something that’s just a glimmer, and we turn that into a product that people can use on a regular basis.
Alejandro: Let’s talk about ParkMe because that was the first one that you wanted to have people use on a regular basis. How did you come up with the idea, and what was that process of going from incubation to creation and to launching?
Alex Israel: Yeah, that was the first. I guess, for better or worse, I’m a serial entrepreneur now. The first startup I founded was called ParkMe. We invented a technology called real-time parking telling consumers all over the world that parking is available and licensing that data into mostly navigation companies from Porsche to Waze and everyone in-between. I really think that, for me, one of the core tenants of a great entrepreneur, a great product, is a product that you, yourself, are going to use. For me, parking is always a nightmare in Los Angeles. I was late for a movie with my previous co-founder at the time. We were lifelong best friends, and we missed the movie because we couldn’t find parking. We just realized something had to change. It couldn’t be this bad. So we launched ParkMe right in 2009 and raised around $10 million of venture financing, scaled the company, and then sold that company in 2015 to INRIX, which was a rollercoaster unto itself.
Alejandro: I can imagine. What was the business model there? How did it work, and how did you guys make money with ParkMe?
Alex Israel: The core business model was actually straightforward, which is, neither needs to pay for parking at the end of a journey, but everyone needs to find parking. ParkMe was fundamentally a data company. We would aggregate data across the globe as to where parking was located and the availability of that parking from parking on the side of the street all the way to garages. We gathered data from Los Angeles to China, to India, and most of the largest countries in-between. The core premise was that we could create a paradigm shift within navigation, whereby consumers no longer needed to be directed to the front door of their final destination but could, instead, be directed to a parking lot or parking space associated with their final destination. We took all of that data and licensed it directly into most of the largest navigation portals globally. If you go into your car, and you go into Google or Waze, and you see all those blue keys that represent parking spaces or parking locations, that data all effectively comes from ParkMe, or at this point, the company that acquired ParkMe, INRIX.
Alejandro: Got it. So let’s talk about the acquisition because your first baby gets a good first outcome. Obviously, that’s not the rule of thumb because typically, the first time around is tougher. You need to make all of the mistakes and all of that stuff. But in this case, you found a good outcome. Let’s talk about that journey and that acquisition process. Can you tell us how that came about and what was the process like for you guys?
Alex Israel: Of course. I was thinking, Alejandro, you’re absolutely right. Your first time around, you make every mistake possible. You look back—I just can’t believe how many mistakes we made, how many errors, how many misjudgments. I think that our acquisition was prototypical in the context that, as many other acquisitions, we were acquired by our largest partner. INRIX was our largest partner. They were one of the largest suppliers of automotive data at the time. It was a very natural, synergistic acquisition. Purely from an economic standpoint, it made sense, but none of it made sense for us. It was a really interesting process. It’s one of these things that nothing ever goes the way you plan, especially an M&A transaction. As you’re familiar, I remember. It was 2015. I was sitting in my board room with my co-founder. We had final docs printed out in front of us. We were about to sign, and one of the most junior employees walked into the room and said, “Alex, this letter came for you.” We’d been served with a litigation notice. It was the day of close.
Alejandro: Oh, my gosh!
Alex Israel: You can imagine the blood just draining from my face. It was a patent that was suing us at the time. It’s fascinating because it could have killed the deal. We were really lucky that it didn’t kill the deal. In fact, it just delayed the deal by about 90 days. That was something completely outside of my control. Often, it’s in your control, or often, it’s in your realm of understanding, but this was a perfect example of something that was out of my control and independent of our mistakes and just led to a potential nightmare. I’d say the biggest lesson for me that comes out of that is truly, to this day, time kills all deals. How fast you can get through those M&A transactions, the better.
Alejandro: Oh, yeah. In many instances, you also experience deal fatigue either on the buy-side or the sales-side, so you definitely want that momentum. I find, too, that momentum can be applicable to fundraising. We’ll talk now about the fundraising experience with your next company. But here, after the transaction, you joined INRIX, and you were with them for a few years doing what some people call the vesting and resting. I’m not sure how much resting was there. Then after that, at one point, you decided to go at it again with your next company, which is Metropolis. Tell us how you got the Metropolis idea knocking on your door, and what was that process to bring this to market?
Alex Israel: Alejandro, I loved the nomenclature of vesting and resting. I’m going to have to use that. Now, it’s such an interesting component of startup life. I was two years into INRIX. I think I was ready. There were two things going through my mind. 1) I love being an entrepreneur. I love this concept we started this narrative with, this idea of taking something from abstraction to fruition. I love leading teams, and I think I want another bite of the apple. The other thing for me was I had a bit of a chip on my shoulder in the context-independent of ParkMe, which was, for all intense purpose, a great success. I think the chip on my shoulder was tied to the fact that I didn’t disrupt parking. Parking is this old-school boys’ club of an industry that, for the most part, and to a great extent, hasn’t evolved in a long time. I set out with ParkMe to truly disrupt the user experience associated with ParkMe. After building the company, after exiting the company, and then after becoming an executive at INRIX, I looked around, and parking was still effectively the same. While ParkMe was a success, our core mission to disrupt parking hadn’t succeeded, so I wanted to take another swing at the bat. I wanted to satiate this chip on my shoulder, and I realized that the only way to do that was to disrupt the industry from the ground up, which was to find a way to not only change the experience for the consumer but fundamentally change the urban landscape and how people interact with parking across the United States.
Alejandro: In that case, what were the early days like? How did you bring this to life? Also, when you were thinking about the execution of this and putting the team together, I’m sure that you learned quite a bit with ParkMe that you knew you perhaps wanted to do differently with Metropolis. Is there anything that you can share there?
Alex Israel: Oh, so many lessons, Alejandro.
Alejandro: What would be the top three?
Alex Israel: First and foremost, we were so young when we started ParkMe. We surrounded ourselves with our friends, which was great. There was a comradery; there was a loyalty; there was a warmth of culture. We have that today. The difference would be 1) how I assembled the team and 2) how I thought about investors. I’ll start with the investor’s side. I think that there’s this sentiment within the investment community, and I bring up investors because, for better or worse, and you know this, Alejandro, that we spend a lot of our careers raising money.
Alejandro: Oh, yeah.
Alex Israel: And these large, kind of scaled capitalization initiatives. A lot of investors qualify themselves as strategic. That can be in their strategic relationship to their portfolio company. That can be that they’re part of a larger entity that could provide strategic value to your asset or your company. I think the biggest question for me or for me at the time was how do I define what a strategic investor is and what am I going to look for when I try to assemble a board room. The biggest shift was at ParkMe. I was looking for capital. At Metropolis, what I was looking for was a specific type of capital. For me, it was strategic capital. What that meant was something very specific, and it’s not the normal nomenclature associated with strategic capital. It’s not someone that can bring a relationship to bear. It’s not someone that has a large portfolio of assets that can provide strategic value to Metropolis. It’s simple. It’s an investor base that’s willing to invest the time and understand our business. I think the biggest toxicity associated with investors today is not any sentiment of malintent. So many entrepreneurs are worried about their board trying to do something to them.
Alex Israel: I don’t think that’s where investment goes sideways. Often, there can be contentious relationships with investors because the investor doesn’t invest the time to understand the business. If they don’t invest the time, they can’t provide strategic value. If they invest the time, they provide strategic value. We’ve assembled a suite of successful investors in ParkMe, and we’ve assembled a suite of very successful investors at Metropolis. But it was really interesting that my core focus shifted to find investors that really were going to always invest the time and understand our business so they could come to a board table and they could talk as fluidly and as intelligently about my business as I do myself, and it’s hard to find.
Alejandro: Let me ask you this quickly so that the listeners get it. How do you guys make money at Metropolis? Obviously, the approach and the problem are very similar. As you were mentioning, that chip on the shoulder needed to be addressed, so how are you guys making money? What does the model look like at Metropolis today?
Alex Israel: We found Metropolis as we looked at the urban landscape, and the urban landscape today, Alejandro, is 14% of a city like Los Angeles, or like São Paulo, or like New York is perfect. The surface area is comprised of parking, and it’s never the highest investment use. So we looked at that underlying real estate, and we said, “How is that real estate going to evolve over the next 20 to 50 years? We realized that the first way to look at that fundamental infrastructure was to look at how it’s being utilized today and see how we could shift that experience for the consumer. It could create a paradigm shift in how consumers interact with parking. The parking experience today is fundamentally broken. It’s riddled with, effectively, a horrible experience. Metropolis, at our base, is a computer vision-based operating system. We deploy camera-based solutions that provide, you could think about it, akin to Amazon Go. Have you been to an Amazon Go store before, Alejandro?
Alex Israel: So you can think about that checkout-free or seamless commerce experience.
Alex Israel: That experience whereby a consumer can pull into a Metropolis-enabled facility anywhere in the United States. Our camera technology recognizes their vehicle. You get a text welcome; you park. You go to leave. The gate automatically bends. You get a text thanking you for your visit and automatically charging you—checkout-free commerce. You don’t have to think about any of the normal pain points associated with parking.
Alejandro: Very cool. Going back to the investors, how much capital have you guys raised to date for this?
Alex Israel: We founded the company in 2018, and we’ve raised right around $60 million.
Alejandro: You were making a very good point, which I love, which is making sure that investors are going to have the time. They’re going to be putting in the time to understand the business and to be helpful with the business. When you’re going out and raising money and finding people that have an interest in putting money to work in your company, how are you able to filter them to know whether or not they’re going to be able to put the time down the line.
Alex Israel: I think that’s a great question. I think that you start to realize right off the bat, or at least I have found that you do. Right when you start to engage a venture capital firm or a private equity firm, the commitment they’re making to their underwriting or investment thesis. What type of questions are they asking? Do they fundamentally, by the third meeting, understand your business, or are they still asking questions that you qualify as 101? How much diligence have they done? How many questions have they asked the industry of other experts? I think there’s this Litmus test that effectively gets processed really early on in fundraising that allows you to garner a sense as to whether or not an investor is truly invested in what you’re doing, or they’re just looking to write a check.
Alejandro: Yeah, because this spray and pray model could be catastrophic because if the investor doesn’t reinvest down the line, then there are negative signals that are sent to the market where they are probably not executing the parada or whatever, and then other newer investors on the next round are going to be like, “Hold on. There’s probably something off with this business because these other investors aren’t reinvesting.” I like the way that you look at it because I think that expectations also need to be completely met on both sides, and I find that level of communication doesn’t happen pre-transaction, then post-transaction; it could be lethal to the business.
Alex Israel: Yeah. I think entrepreneurs have to stick to their intuitions. They have to understand that this person is really going to be by your side in good times and in bad, and how committed are they to your thesis? Do they really understand your thesis? I think you’re absolutely right. This spray and pray mentality leads to dynamics that are really unfavorable to entrepreneurs. To your point earlier, this idea of taking in a top tier investor that may be a spray and pray investor, and they do not follow on—even if they don’t follow on at their parada level, it sends a message to the industry, whether perceived correctly or incorrectly, that there’s something wrong. I think that entrepreneurs, as a whole, don’t spend enough time vetting their investors.
Alejandro: 100%. It’s like, “I want the money now.” But I think that people don’t realize that getting the money now could address your problems of being short on cash and getting that runway to be thinner, but it’s like putting a band-aid on something that is going to require surgery down the line. So, I actually love the fact that you actually touched on that, Alex. That’s amazing. Also, in your guys’ case too, I know that you went through an M&A. As we continue talking about dealmaking, you went through an M&A that didn’t have the outcome that was desired. So tell us what happened there.
Alex Israel: It’s always interesting. As I said earlier, I don’t think any M&A process goes the way you expect it to, but I think you’re referring to an M&A transaction that we pursue very early in our business. We came out of the gate really swinging, and we went to one of the largest real estate asset owners in the United States. They committed $300 million to Metropolis to acquire a third party. We started very aggressive diligence and got a third party with a great level of tenacity. We were probably about 45 days from closing the deal, which would have been a capitalization of $300 million into a company that had only been seed-financed at the time. The company we were going to acquire, the revenue went off a cliff. It was this amazing learning experience going from raising $300 million to looking at my counterparty and realizing we both had to walk away.
Alex Israel: That was painful, candidly. The capital partner is still a very close colleague and working partner, but it was such a difficult transaction or transition to go from thinking you were going to consummate a $300 million transaction to being back in a seed-funded position. In the end, my executive team and I are thrilled that we didn’t consummate that transaction. That deal continued to get more and more stressed, and it potentially could have been the downfall of our company. But it was strenuous unto itself to go from this serial tech entrepreneur looking to acquire an asset for north of $300 million and then to have that deal fall through.
Alejandro: Yeah, I can imagine. Obviously, the amount of time invested, the emotional attachment to that outcome, which also happens at certain points in the dealmaking process, but things happen for a reason, as they say. But in your case, now, things are definitely going the right way. You guys are in this rocket ship. What I’d like to hear is as we’re looking ahead and thinking about the future, imagine you were to go to sleep tonight and wake up five years later and all of a sudden, Metropolis has finally been able to completely realize that vision that you had hoped for when you guys got started. What would that world look like?
Alex Israel: I’m sitting in my office right now and overlooking Sana Mónica, and to my left, the rest of Los Angeles. For me, Alejandro, our vision is so closely linked to the urban landscape and how we would revise that urban landscape. What does that landscape look like over the next 20, 30, 50 years? I am, as a default, mobility obsessed. I spend most of my time thinking about future forms of mobility, whether it be vertical takeoff and landing drones, autonomous vehicles, scooters, fleets, and how those services change and shift urban life and the ecosystems and equality that those transformations can afford. For me, one of the largest stepping stones or barriers from that future coming to fruition is fundamental infrastructure. Where do all of those vehicles go? What does the mobility hub of the future look like? How do you facilitate the cleaning, servicing, charging, and deployment of all future forms of mobility? That’s where Metropolis comes in. Metropolis is that glue, that empowerment, that fundamental service that empowers all future forms of mobility. I think that we can look over our urban landscape and see that the parking ecosystem be shifted to a higher and better use across the board and a fundamental service that would provide significant value both to consumers and to real estate asset owners.
Alejandro: I love it. Imagine that I put you into a time machine, and I’m able to bring you back in time to that moment where you were thinking about giving your notice at one of those big corporations that you were working at and building something of your own. Bringing something to life, obviously, what eventually became ParkMe and was a success. But imagine that you were able to talk to that younger Alex that was thinking about doing something, and you were able to give that younger Alex one piece of advice before launching a company. What would that be and why, given what you know now?
Alex Israel: It’s such an interesting question, Alejandro. I think that it would be to run. [Laughter] What I mean by that—
Alejandro: I’m wondering, in what direction? [Laughter]
Alex Israel: For me, the greatest threat for an entrepreneur or a company or a startup is inertia. What’s inevitable in every startup is failure, whether it’s failure on a daily basis or it’s failure on an absolute timeline. Every company fails at some point, and every entrepreneur fails at some point. It’s how do you respond to that failure? It’s how are you going to respond to the fundamental rollercoaster that is founding a startup, and it’s running full speed ahead? It’s remaining deluded. It’s that delusion that this time is going to be different. I think that is one of the fundamental traits that makes for a great entrepreneur, this idea that you’re going to run through walls that no matter what comes at you, you’re going to survive and succeed and endure another day. There are so many entrepreneurs that get dissuaded by failure, and most of us fail more on a daily basis and on a weekly basis than we succeed. The question is, how will you fail, and can you fail up. I don’t know if it’s delusions. I don’t know if it’s persistence, but this idea of running full speed ahead, knowing you’re not going to get it right, but knowing that you’re going to keep moving forward and fighting off inertia and building momentum is a fundamental lesson because none of us know. You’ve started multiple companies, and everyone that I know that started a company thinks they have a plan for the future, and it’s going to unfold the way they think it’s going to unfold, and they’re always wrong.
Alex Israel: So you’ve got to be prepared for those shifts, those challenges, and those failures, and you’ve got to be prepared to just run through them.
Alejandro: I love it. I love what you were talking about failing up because I think that ultimately, failure is just going to get you closer to success. It’s like getting more swings at the bat, so I love that. Alex, for the people that are listening, what is the best way for them to reach out and say hi?
Alex Israel: That’s always a good question. I think at one point in my life, Alejandro, I would have said: email. I will definitely say email is not the way to reach out. Probably the method that is easiest to get in touch with me these days is on LinkedIn. If someone wants to reach out and request a connect, it’s probably the best tool or the best method would be LinkedIn.
Alejandro: Amazing. Alex, thank you so much for being on the DealMakers show today.
Alex Israel: Alejandro, it’s wonderful to be here. Thank you so much for having me on.
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