Lior Elazary is the cofounder of inVia Robotics which provides next-generation robotics warehouse automation solutions for e-commerce distribution centers and supply chains. The company has raised $30 million from Point72 Ventures, Upfront Ventures, and Embark Ventures to name a few. Prior to this, Lior Elazary sold his first business for $20 million and his next one for $400 million.
In this episode you will learn:
- Why Lior believes services and not products is the best way to build a business
- Elazary’s take on the best way to build a business that gets acquired
- Why you have to follow your passion if you want to make it
- Why entrepreneurs need to love to fail and embrace it from before day one
- How to get in touch with Lior
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.
Remember to unlock for free the pitch deck template that is being used by founders around the world to raise millions below.
The Ultimate Guide To Pitch Decks
About Lior Elazary:
Lior Elazary has more than 20 years of experience as an executive in internet networking, robotics, software development and enterprise architecture businesses.
Lior Elazary has led and directed diverse teams developing everything from back-office systems to core enterprise technologies.
Most recently, Lior Elazary co-founded and later sold EdgeCast, a content delivery platform with customers such as Twitter and YouTube.
Before that, Lior Elazary co-founded and later sold HostPro (now Web.com), an internet hosting company. Lior Elazary completed a master’s degree in computer science at the University of Southern California (USC) with a specialty focus on artificial intelligence.
Lior Elazary attended a Ph.D. program in robotics at USC, where he met his inVia co-founders. Their work together sparked a passion for the dramatic effect robots can have in driving efficiency and productivity and, most importantly, in helping people live happier and more fulfilling lives.
Connect with Lior Elazary:
* * *
FULL TRANSCRIPTION OF THE INTERVIEW:
Alejandro: Alrighty. Hello everyone and welcome to the DealMakers show. Today we have a founder from Israel, and I think that we’re going to be learning quite a bit. He’s quite a dealmaker himself. He’s done it multiple, multiple times. I don’t want to make all of you wait any longer, so without further ado, I’d like to welcome our guest today. Lior Elazary, welcome to the show.
Lior Elazary: Thank you very much, Alejandro. I’m glad to be here.
Alejandro: Originally from Israel, the startup nation.
Lior Elazary: Yeah, that’s right. We love technology. It’s amazing how much technology stuff happens in this world.
Alejandro: How was life growing up there?
Lior Elazary: It was great. When I was young, we were a little bit behind of the U.S. I think now, it’s actually, from technology, it’s way ahead. But it was great. We were exposed to the very early-age computers: Commodores, and Spectrum, and all that stuff. I was able to acquire a few and mess around with it and even write the early little robots with some motors and stuff like that. So actually, I was exposed to technology from a very young age. I really like that because I think Israel, in some sense, loves technology. So they always brought those into Israel as much as possible.
Alejandro: Just out of curiosity, how do you think that because I’m blown away with the innovation and with the startup mentality and the entrepreneurial mindset? How do you think that the country has been able to develop this so well?
Lior Elazary: Part of it is out of necessity. I think people don’t realize, even from agriculture and things like that. The drip irrigation was invented there. Because it was all desert, they had to bring water; they had to bring land to grow stuff. Innovation follows necessity. But at the same time, I think a lot of Israelis that I know, that I’ve been around, they love creating things. It’s really about creating and just moving and creating as much as possible.
Alejandro: For yourself, Lior, what do you think attracted you into the world of science and technology?
Lior Elazary: I don’t know. I was very curious from a young age about science, electronics. I took apart tons and tons of different stuff but used stuff. Again, part of it was necessity. I could not afford a brand-new TV or a brand-new VCR, so I would buy old ones that were broken and fix them. Then I had a TV and VCR and amazed my friends because no one else could afford that. So it was great, and some necessity, and I love doing that. I love creating, fixing, and innovating.
Alejandro: And in high school, you moved to the U.S. So what triggered this?
Lior Elazary: It was for my mom, actually. My mom is an entrepreneur. She loved creating, as well. Israel, for women, it’s a bit harder. I think she felt very frustrated, so she wanted to move to the U.S. In the U.S. she created a perfume store. In fact, I was working at the perfume store while I was at HostPro. We were running a multi-million-dollar business, and she would still call me to go work at the perfume store to wrap gifts because she didn’t understand this web thing and I didn’t even have an exit yet. She’s like, “Stop playing around. Please come and help us in the business.” It was very frustrating, but I would go there, help support her company during Christmas while wrapping presents. It was a lot of fun.
Alejandro: That’s really cool. What did you learn about entrepreneurship from her while growing up? What were you seeing that you liked, and what were you seeing that you didn’t like?
Lior Elazary: First of all, from an entrepreneurship, I think it ends up being a lot of hard work. You really need to like it because it’s going to be a lot of stuff that you’re probably not going to like in some sense. I always tell people who want to do a startup, “Make sure you really like it because about 50% of it is going to be a lot of work and a lot of frustrations – ups and downs. If the other 50% you don’t like, then it’s not going to work. You’re going to give up. So choose something that you really like and are very passionate about.” I think that’s something that she had. She was passionate about the business, and not necessarily just the product that you’re creating, but the business creating the business, selling, and solving problems for other people. I think that’s what I liked about it, too. That helps a lot because sometimes, the business aspects end up being frustrating and you’ve got to like that portion to move that forward. It’s not about just creating a product; it’s about creating a business.
Alejandro: Finally, you go into college. What did you study?
Lior Elazary: At first, I went to Pierce College. It was a community college out here. I studied music for two years before I decided I should do something else with my life, something more productive or something that would give me a better income. So I transitioned to computer science. But at the same time, my co-founder and I were both fired from a PC store that I used to work at. I would fix PCs and things like that. He said, “We’re creating this new company. Why don’t you come and join us.” This was back in ’95, I think somewhere around that, very early on when it was just starting. So I went and joined them. It was him, myself, and another partner, Marc Afsharieh. Our first company was FoodMood. It was the idea that we were going to go to stores and tell them, “You can advertise online. People will order things online, and we will fax you the order.” Our first sales guy went out and tried to sell this, and came back and said, “Nobody understands what I’m talking about. Nobody understands what’s going on. ‘What is this: people buying online?'” Nobody bought it. Then we got lucky because Caesar’s Palace who saw that as a branding opportunity – by the way, this was the first type of shopping cart that existed online. They said, “Wow. Can you guys put a lot of forms in there.” They didn’t care about selling. For them, it was a lot more about branding and putting all their forms online and saying, “Wow. We’re innovative. Look. We have all our stuff online.” Then we grew it from there. I had other stores like Baskin Robbins and other types of stores. And as well, started hosting other customers and slowly grew that and ended up being engulfed in creating the brand, the hosting company. I was more involved in the technology side, and how do we make this efficient or the first ones who would have virtualized email servers and be able to have virtualized web sites where we can host it on one server and leverage that to be profitable? We grew that, and we ended up selling it to Verizon. In the meantime, I was still going to school, but one class every year. It took me seven years to finish my undergrad.
Alejandro: Got it. So this company that you did, this was HostPro. Right?
Lior Elazary: Yeah. This was HostPro.
Alejandro: So, HostPro ended up selling. You guys sold in an all-cash offer to Micron. Correct?
Lior Elazary: Yeah, correct. We sold to MicronPC. MicronPC would create computers back then, and they wanted to get into this hosting business. This was in 1999. They gave us a full-cash offer. This was more cash than I ever envisioned. We never built this business, thinking that we’d become multi-millionaires and grow big. It was amazing. We ended up selling to them. It ended up being a good move because right afterward, in 2000, you know what happened with everything crashing. But this wasn’t predicted. We thought we would grow more, and we were really happy with the outcome.
Alejandro: Just out of curiosity, how did the conversation happen? How did they come to you, and how did you guys start to discuss all the way to the closing? What was that process like?
Lior Elazary: At the time, they were looking to get into the space. A lot of companies, sometimes, when they’re trying to get into the space, they go look around. Which companies are in this space? And which companies they can buy and grow that forward. Compared to EarthLink, that had started doing some hosting, but they were doing a lot more on the consumer dialup side. There was a highway back then, and they were the top, earning a lot more revenues. I think they were looking for something that they can grow into and buy something important. Back then, I think it was relatively cheap from what we could grow it into, but they went in and decided to go with us. We talked to them about where this thing is going. Their vision was to own the hosting space, grow that internally. All of us loved that. We wanted to grow that. It was the first time that we would actually take in as well as a big infusion of cash into the company. We never raised any money. We grew that company internally. This was not an investor in some sense, but finally, we’ll have a lot of resources to grow that. I think it was a good fit for us and we went ahead and went forward with the deal.
Alejandro: This acquisition, how big was it?
Lior Elazary: It was 20 million dollars. We were three partners and split it into thirds almost, minus some of the bankers. Then from there, I think I worked there for a couple of years trying to grow that. I came to an understanding that it was a bit harder to grow. Their strategy at that time was to acquire more and more companies. As you acquire more companies, just culture fits and things like that, became more difficulties. Usually, it’s hard to acquire a company and get that company integrated together.
Lior Elazary: Obviously, I wanted to create more stuff and things like that. So I ended up created over there, trying to finish up school. All of us left that hosting – left Micron. They ended up acquiring a couple more companies; one of them was Numonyx. Then they started doing pretty bad; things just hadn’t been working too well for them. Then one of my good partners, Alex Kazerani – they asked him to come in. Initially, they asked him to be the CEO. We were doing another company at the time, and he went and helped them, basically just to be on the board and helped them rebrand it. We were hosting web.com at the time. So it helped them acquire web.com, transition to web.com, and really grow to web.com today.
Alejandro: Just out of curiosity, how old were you when this deal happened?
Lior Elazary: I was 21 or 22.
Alejandro: What did you buy with all those millions in the bank?
Lior Elazary: I know. Yeah. I was still living with my mom. I was finally able to go in and buy a –
Alejandro: Hopefully, you got her a nice dinner, at least. You invited her for dinner or something. Good stuff. So what did you do next, Lior?
Lior Elazary: After that, we started another company called KnowledgeBase. KnowledgeBase was a CRM solution. This was the first introduction to AI, where we had this autonomous agent that was able to search through tons of documents and give you relevant information. We were selling this to businesses. Unlike HostPro, which was more of a recurring revenue type of business, this was more of a direct sale where we have to go out and sell it. It took almost a year-long sales cycle, integrating into an enterprise-level and a company. It ended up taking a long time and a lot of different options that we had to come up with. But ultimately, we grew it, but it limited the growth. We had a couple of investors, but it wasn’t – DefCon, I can discuss it so much, but we ended up selling it to Talisman. We did pretty well. Not as much as we would have all liked to. At the same time, I think this is where Salesforce actually was just starting. One of the things I regret is really understanding this Cloud space and moving toward that. I think a lot of people were very resistant. Salesforce brut-forced their way, offering a lot of free stuff or had really cheap rates to build that up. Salesforce was a CRM as well but was able to build that out. I think that’s one thing that we might have missed over there.
Alejandro: From this experience, what was your biggest learning?
Lior Elazary: Selling a product as opposed to a service is a lot more difficult. I knew that I wanted to more sell services than a product because once you sell the product, it’s up to the customer to make sure he uses it. Where you sell a service, they hold you up more to it. When you sell the product, if they don’t like it, they won’t buy it again. But when you sell a service, you’re continuously interacting with the customers. I think my biggest lesson from there was that I wanted to be more on the service side in selling services as opposed to a one-time product and wash my hands and say thank you.
Alejandro: So this was your second acquisition. Now, you’re a dealmaker. When it comes to acquisitions, at this point, what was the key factors that you saw that were the critical ones in order to get a good deal done?
Lior Elazary: One of the things we’ve always done is, we’ve never looked at what the outcome is going to be, but how we wanted to build a business and concentrate on building the business and moving that forward. I think it always played in the deal. When we had a deal coming in – for this one, I think we went through some investment bankers. I forgot. They were to go in because we knew we wanted to move on from this company. It was a bit different. But we were able to talk about the business in terms of the growth, in terms of where we wanted to take it up next and how we were thinking of growing as opposed to “You know what? We just want to offload this business.” We’ve never created a business to go and sell it. It became a secondary part of it, which I think made a huge difference in the deal because it allowed us to talk about the opportunities of the business as opposed to somebody who is tired of the business and wants to get out.
Alejandro: Then, after this, you went on, and you started probably one of your biggest exits to date, EdgeCast. How did you come up with the idea of EdgeCast?
Lior Elazary: We talked about many different ideas, my partner and I. He also loves technology. With almost every company, we not only acquired capital, but we also acquired great partners. For example, Phil Goldsmith, who was our first sales guy at HostPro was a partner at KnowledgeBase is now partner at EdgeCast. James Segil was a part of another company that when Micron went in and bought, we met him through there. We were, at the same time, building a good team with great talent. Jay Sakata, same thing. He helped us back at HostPro, and then we brought him back in at KnowledgeBase. We were able to build a good team. We talked about together, what are we passionate about; where we want to go with. In the past two, what we’ve done is, is look at the major players in a particular market and say, “You know what? We could do better. We can improve this.” We’ve always gravitated to technology. I always wanted to do something with robotics as well, but back then, every time we talked about it, it was difficult to have the business model work with robotics, especially back then. We ended up sticking to what we know best, which is more of the web. EdgeCast, which was a content distribution network, almost went as an evolution of hosting. It was basically hosting on another level where your hosting customers on many, many servers across the world as opposed to one server in one spot. We felt like we all knew that very well. We could grow that. One of the challenges we had right away was that Akamai, who’s been there for almost 15 years had a lot of patents, a lot of very direct ways in which they were doing things, and we had to go and reinvent how CDN is done. And we reinvent a whole new set of algorithms and exactly how you forward traffic across this network and be a lot more efficient. We’re able to actually beat them on efficiency and the way we were doing it.
Alejandro: Very cool. Just for the people listening, CDN, Content Delivery Network. For this business, how did you guys end up making money? What was the monetization model?
Lior Elazary: We looked at various models on there. In fact, Amazon started, at some point, entering this business and going very basic. The idea there is that you’re selling bandwidth at the end of the day. You’re selling bandwidth that is distributed. The more customers use you across the web, the more bandwidth you sell. However, that became a commodity quickly. There were other companies that were doing the same thing, and now we had to differentiate ourselves and start selling more features and more value-added services. For example, WAFW, Web Application Firewall, so not only we were delivering your website faster, but we were also protecting it. So our servers would look at all the data that’s going in and out of your origin, out of your server that’s sitting all the way at the end. We can detect intruders. We can detect people trying to hack and people trying to steal information and alert you or block those depending on what rules you wanted to do. So we’re able to offer more services, and that’s what we ended up doing. We were also, for one of the early, early services that we offer that, I think, didn’t exist out there, was for companies like e-commerce that are selling software that wanted to make sure that when you buy the software, only one person can download it, only one person can use it. We were able to tag this software and deliver it through our network in such a way that had a key that they could use without them having to worry about it on their origin and how they protect their origin. That’s one of the services we’re able to do. Then on top of it is being able to transform the way the web works by delivering the data to be as close to you as possible. Really, that’s because you can’t beat the speed of light, and even though you have fibers, let’s say, from here to China, if you’re trying to view a video from the U.S., it will still be pretty slow because the speed of light for people is still very slow. If you have any kind of buffering and any issues on your website, usually, you’ll move on. In order to speed that up and to make that faster, you have to have a server that’s sitting close by. That encompasses the whole network. Then for monetizing it, part if it was based on pure bandwidth and how much bandwidth you move through our network. Other portions were based on other services like the WAFW, the Web Application Firewall, Token Authentication, which was part of that delivery for executables and things like that.
Alejandro: Obviously, now, things are different because you had two exits under your belt. I’m sure that at this point, investors were literally knocking on your door and throwing money at you. What were some of the critical factors that you were looking into partners because I believe that you raised quite a bit of money for this company, and you also started raising quite early too?
Lior Elazary: Yeah. We did. We raised from the get-go. One of the things with this particular company is that it required a lot of capital upfront. So you have to raise more money in order to compete. We can’t compete if we have one server sitting there. Back in the old days, we could have one server because nobody was on the web, but nowadays, you have to have servers all over the world, and that takes a lot of infrastructure, a lot of setup, and things like that. I remember we had a lot of discussions of how much money we’re going to collect, how much money we’re going to do it. It’s always like the question, do you take more money and have a smaller chunk of a pie but build a bigger pie? Or you’ve got to be careful with that because you could end up raising a lot. In fact, one of the companies, one of the people we’ve talked to before ended up raising – this is back in the day where Micron – when MicronPC was going around buying different companies, I was involved in due diligence and going around and looking at different companies and helping them decide which one they should buy and which one they shouldn’t. What happened was, we found out one company, they end up raising so much money that in order for them to sell the company – and for the founders to actually make money, not the investors, but the founders, they would have to double what they were worth, and nobody was buying. It was very difficult for that. Obviously, the investors would have made money, but the founders worked there for almost ten years without getting a penny if they did that. So there’s always that balance where you have to decide how much money you’re raising versus how much you’re willing to give up and making sure you’re actually using that money productively. Make sure you’re using the money for growth and creating a bigger pie because if you don’t create a bigger pie, you end up losing on that deal.
Alejandro: So to recap, Lior, what do you think about raising all the money that you can get, or raising the money that you. What are your thoughts on that?
Lior Elazary: Really, what it comes down to is you should set goals. If you think about it if you knew exactly what’s going to happen in seven years, and you can convince an investor that the company will be worth x-amount, you already know what percentage, and you can raise it right there and use that money and grow that. The problem is, it becomes almost impossible to predict seven years or five years, let’s say, for an exit. It’s almost become very difficult to even predict the next year. When we work on financial models and show it to investors, the way I see it, it’s more of a proof of how the company would operate and how we’re thinking of monetizing it and building a story versus what exactly is going to happen in the next year? I’m going to work really hard in achieving that, but things happen so much, and things change so much, especially in the first couple of years. Because in the first couple of years, you’re trying to find a market fit. You’re trying to adjust. You want to pivot. You want to be nimble. Then the question is, how much do you raise? I think it comes down to – to set up your goal, let’s say for the next 12 to 18 months and raise for that amount knowing that things will change later on, and then you can make another decision. So you would want to raise a little less, or you want to raise as much as you need to get to that next goal. If you raise too much, you end up giving too much value. And if you raise too little, you don’t end up getting to the goal, which is really difficult. It’s easier said than done. That’s the way I think about it, and therefore, you have to figure out how much to raise. I remember there was a Silicon Valley episode where the guy talks to another guy, and then he’s like, “One of the things that I learned is that you don’t have to raise as much.” The other guy that had a company and had lost everything was like, “Wow. You mean that was an option?”
Lior Elazary: So, I do think you have to really watch out how much you raise, but at the same time, it does help. It gives you the capital to grow, you just have to make sure you are using that capital for growth and create a bigger chunk, so everybody wins.
Alejandro: Of course. For EdgeCast, how much capital did you guys raise in total?
Lior Elazary: I don’t have then numbers in front of me.
Alejandro: Close to 80 million?
Lior Elazary: 50 million or 100. I think the last one – in the beginning, we did the Series A. It was around 10 mil. I’ll have to look. I forget the numbers. They’re around the 50, 100, somewhere around that.
Alejandro: You guys did an A, B, C, and a D Round. Right?
Lior Elazary: Yeah. That’s right.
Alejandro: Got it. Obviously here, this is the time where you take it to the next level when it comes to financing compared to the previous experiences. In terms of fundraising, what did you learn about fundraising?
Lior Elazary: 74 million in total. So, for fundraising, in fact, the D Round was interesting because we raised it and right afterward, very close right afterward, that’s when Verizon came in and bought us. One of the things we learned from that is that the timing is really important because often investors want to – they’re not doing this for 2x. They really want to get 10x on their money. One of the issues is that if you don’t get that timing right, and we actually had that at EdgeCast, then it could become a big problem later on. For example, our Series D investor, one of the issues was that initially the first offer that Verizon gave us, they wouldn’t have made as much now. They were only there for six months and still would have been a great turnaround if I [29:14] wait. They wanted to hold on. In some sense, it ended up being for the best because Verizon ended up giving us more money, but it was also riskier because we could have lost that deal because of that. It really comes down to negotiation and trying to get everybody aligned and everybody on board. My partner, Alex Kazerani, has done a great job in making sure everybody’s aligned on the outcomes that they’re looking for. From the board, I think managing it and making sure that everybody is on the same page or at least guiding them to get toward the same page is important because you’re going to get into these issues. Like I said, that investor that was like, “I want to hold on.” They went in with the mind frame that “We’re going to grow this even bigger. We’re going to get to a much bigger outcome.” And we could have. We really had that potential to grow this and move that in a much bigger direction. That’s why we ended up raising actually quite a bit, plus took a loan, so the amount ended up being close to 50 million that we had now for expansion. That, by itself, was great, but we didn’t end up spending it because we ended up selling it right away. That’s the same thing with initially what you asked me about how much money have you raised? I think that all comes down to it because, at any point in time, you could have an exit. Somebody could come in and buy you. If you don’t understand the outcome or the exits or where you’re thinking to go, you might end up raising too much in which case that investor, let’s say was only there for a few months end up getting a huge chunk taken away because they just took away that chunk from you, and you end up giving it away. Again, it’s very difficult to predict, and you never know exactly what’s going to happen, but the better job you could do with that, the better the outcome it is for founders. And I think often for founders, we’re so engulfed into building the business and creating the business, and I feel that sometimes we’re willing to give up more from our stake just because we’re really there to build the business as opposed to necessarily make money. I think that’s the right approach that you need to take, but at the same time, you do want to get a better outcome, so I think you want to watch out for that.
Alejandro: Yeah. I remember that Bill Gross did a TED Talk on his portfolio companies, and he took a look at the data and determined the success of them. Over 42% of the success was timing. I think that timing is critical when doing this. In EdgeCast, Verizon came into the picture, and then there’s a deal that happens. How big was this deal? This was the biggest to date. Right?
Lior Elazary: Yeah. It was close to 400 million dollars. It was an amazing amount.
Lior Elazary: Yeah. I think one of the biggest in LA.
Alejandro: Wow. That’s amazing. Did it take a long time from start to finish in the process?
Lior Elazary: Yeah. Around seven years that you’re talking about from the company.
Alejandro: No. For Verizon – for this deal to come to fruition.
Lior Elazary: Oh, for that deal. No. It went quickly. There was this one hiccup for the negotiation in trying to get it. They first offered us 450, which that’s what the news brought up. Then we had that investor that held that out. It was a few months, but it wasn’t a tremendously long time.
Alejandro: Cool. Then after this, you were not done. You went at it again as a founder. You founded inVia Robotics, which is your latest venture. Tell us about this one.
Lior Elazary: Sure. I was trying to finish up my Ph.D. right at that same time in robotics. I really wanted to start something in robotics. I felt like now I was in a position where – I was just going to invest my own money. I knew that the product and the market are very new, and some of the markets might take a long time to materialize or actually get an exit. All the previous businesses, we always had somebody else. We had a well-defined market that we knew where we’re competing, even pricing, and figuring out the marketing, and all that stuff. We just knew that we had to do better. We had a template for what that looks like. Here, with the robotics, there is no market yet. A lot of this stuff is brand new. I knew that was going to be a huge challenge. I initially started this thinking, “I’m going to invest my own money. I’m going to start this up. I don’t know if investors what to join.” We had a lot of friends and family and investors that knew my exit before, so they were able to give us some money. In fact, I didn’t want to take as much, but it felt like I was obligated at that point to take some of it. We looked at the various markets. I knew I wanted to do something with robotics. We looked at various markets out there and decided that I didn’t want to be in the toy business. I didn’t want to create a toy or something like that. Even I would talk about toys in terms of robots that might look like they’re doing stuff. There are a lot of robots out there that you sell for the home that don’t solve a problem. I put them in the toy category because people still buy them. It’s amazing. It’s cool, but at the same time, the problem is actually not so. We wanted to also not be in a huge R&D faux pas business where all I’m building is a company that is just a bunch of engineers, and there’s no real product. When we looked at different markets, the self-driving car really intrigued us, but I felt like this is going to be an R&D project for at least ten years or so before you could really sell that. You would build a company in the exit that would be selling it to another company. It will require a tremendous amount of money and a tremendous amount of resources to get something like that off the ground. When we looked at e-commerce, I went in and talked to some of my customers from EdgeCast because we were hosting their websites. I went in and looked at their warehouses, saw what they were doing, before designing anything, and looked at what problem can we solve for them? We noticed all of them has the same exact issue, which is labor. They’re like, “Please, please help us. We can’t find the labor. This is really difficult for us.” Amazon, in some sense, is brute-forcing the problem. They’re spending a lot of money. We looked through their financials even, and they’re spending billions of dollars on brute-forcing this problem, and nobody else could keep up with them because of that. They really needed help, and this is where we thought, “Wow. This is a great opportunity.” One, is because it’s finally something that we could build and actually have working as a product in a very short time, so it’s not going to be years into the future before we can sell this thing. The other thing is, there’s a huge need there. One of the things people don’t realize is that when you click Add to Cart, you have a personal shopper that’s going out and shopping for you. Most people don’t want to pay for that, which makes it an amazing opportunity for automations because that’s where you could leverage that piece. The idea for us for robots is the ability to adapt and the ability to get into different environments without having to rebuild a machine. If you think about it, one of the reasons that we’re doing self-driving cars, or people are working on self-driving cars, instead of changing the roads – we can change the roads and have this problem solved, but it’s going to require a tremendous amount of capital to do that. Instead, we’re augmenting the car to work on the existing roads and existing infrastructure. We felt we could do the same thing in the warehouse being able to provide a robot that could go into an existing warehouse and provide and offer a huge solution for our customers. Now, one of the things that came right about is a business model. When I looked at the various businesses out there that existed for selling these capital automations, all that really ended up being is selling a product. I knew from KnowledgeBase that I did not want to do that. I wanted to do it as a service. Also, I felt like it didn’t make sense for a company to own 100 or 200 robots; they become part of the robot business. They have to figure out how to use it. They have to figure out how to optimize it, and that’s not what their core competency is. So this is where we also came up, and I think we were the first ones, too, in this space to do robotic as a service from very early on to decide, “Look. We’re going to be your robotics partner. We’re going to provide the automation. We’re going to provide it as a service where we’re going to deal with all the issues with the optimization, and really own the productivity of the robots. So we get paid based on the productivity, not based on just a product itself.
Alejandro: Got it. Very cool. How did you guys go about capitalizing this because, at this point, you were able to even self-finance this thing, so why did you decide to go and get others?
Lior Elazary: One of the things that we noticed was that the opportunity for market share and grabbing a lot of market was large. If you look at anybody that uses robotics in the warehouse, Amazon is the only one right now. I think they’re estimated to be at about 200,000 robots and only 30% of the warehouses are actually automated. Everybody else is either using old-style technologies or just using people, manual labor, as much as possible. They are struggling with that and having a hard time. This is why I think a lot of people don’t realize one Target, or Walmart, or just anybody to compete against Amazon. The reason for it is, it’s not that easy getting that technology; being able to do this efficiently without losing money is a big deal. Amazon had a huge break on losing money for a very long time. In fact, a lot of their stuff is also finance for AWS where a lot of our customers don’t have that secondary source. So you’re trying to figure out how to really solve this problem. In our mind, real technology has to be it. The idea is that you can have one person being able to pick orders for thousands of customers at the same time. You can’t be one-to-one. It’s not going to work. So when we looked at that market, we decided, we’re going to have to raise. For raising for this company, it actually was one of the easiest raises as possible. I think part of it is the market; part of it is the robotics. We had great opportunities, so Upfront Ventures, who’s in LA, heard about us? It was a very quick time to term sheet because we weren’t planning on raising at that time, but we thought that we could really get a big boost, and we saw a much bigger – I still see this huge opportunity here for robots. Like that pie, I was talking about, there’s a really, really large pie that you can grow this to. So we decided to bring that on. Then within a few months after almost a year, we ended up raising Series B. Overall, we raised about 30 million so far, and we have a great runway, and it helped us grow the company and take on more customers. If you aren’t doing the robotics as a service and trying to disrupt that portion of the economy or the market, then we probably would have been fine. We were being financed by our customers. But doing it as a service really means that we’re taking on that risk. We’re taking on that opportunity for us for the longer term, and we’re selling that service to our customers by building the robotic fleet. Creating all those takes more capital, so that’s why we decided we really want to pursue robotics as a service. We think that is the right approach here, and we’re going to grow that, and so we ended up raising. In fact, we just saw – I don’t know if you saw one of our competitors, which is amazing, just sold their business for 450 million dollars. They’re about a year older than us. From a revenue perspective, from a company perspective, it’s nowhere near to the amount of effort that we had to do back at EdgeCast to get close to 400, where with them getting 450. It just shows to the market how much there’s a need out there for this, for these products, for these solutions to be out there. I think they got 60x multiple on their revenue or something like that. Really unheard of for that kind of stuff.
Alejandro: It’s amazing, Lior, the trajectory that you have as a founder. All these different companies and initiatives that you’ve been involved in. We all know that the journey of an entrepreneur has the ups and downs. It also has grey days. So, now, as you’re looking back at this incredible journey that you’ve been in as a founder, what would you say that probably has been the biggest breakdown that has led to the biggest breakthrough?
Lior Elazary: The philosophy that I go on and I talk to, and I feel a lot about this is, you want to embrace failures. Like you said, there are ups and downs. In this country, in some sense, we actually don’t embrace failures. When we look at companies, and we look at success, you just look at the top. If you look at the journey of an entrepreneur, when you first started, you’re very optimistic. You’re like, “Wow! This is amazing. This is going to grow in two seconds, and everybody is going to want to invest in my business. Then you’ve finally started, and reality kicks in, and problems, and everything. You usually have failures after another. The idea, the way I see too, from raising money is being able to control these failures, finance these failures, and understand, learn from them, adjust, pivot, and move forward. But I think, often, people don’t see that. If you look at the bottom, you’re just constantly creating, failing, creating, failing, creating, failing, and slowly adjusting that until you finally get to that success point. A lot of people don’t see that road, that they are just constantly stumbling, constantly trying to figure out the market fit, to figure out pricing, to figure out, in fact, this company’s probably one of the most challenging companies I’ve done just because, even right now we’re talking about pricing. How do we price this? How do we market this? There’s nothing that we can go on and copy from. That doesn’t exist. So you’re going to fail in those, and you’re going to create those, and you’re going to fix them and move forward. I think the biggest, biggest take is to just embrace that process, understand that process, and understand that as soon as you’re going to do, it’s going to fail. You’re going to fix it, and you’re going to move forward. I think a lot of people that end up giving up, it’s because of that. It becomes overwhelming. They don’t think, “Wow. You know what? When I saw this company, I thought it was going to be a huge success, and it would be right away.” But that’s not the case. You can probably talk to any entrepreneur, talk to any business, and ask them about their failures. They will go through and list – they can go on forever listing the failures. Going into a business expecting that you’re going to fail, and you’re going to fix it, and you’re going to move forward is really powerful because it can get very daunting. If you don’t expect that, and you keep getting hit by another and another and another, you feel like, “Wow. I’m never going to be able to do this.” As opposed to understanding that that is part of the process. That’s when you learn. That’s where you can fix. That’s where you can learn what you need to do and move forward. I feel like most people are all creators in some sense. They can all figure out one piece or another. It’s not about trying to – every problem can be solved in some sense, but it’s about solving the problem. A lot of times, we just end up getting depressed and not solving that problem. That’s where I see other entrepreneurs having a hard time. It’s about knowing that they can solve the problem. You just have to embrace that process.
Alejandro: Got it. That makes absolute sense. Lior, one of the questions that I always ask the folks that I have on the show is, if you had the opportunity to have a chat with your younger self, and especially knowing what you know now after all these companies and exits, what would be that one piece of advice that you would give to your younger self before launching a business and why?
Lior Elazary: That’s a really interesting question, especially for me because I love learning. I love failures, and I love moving that forward. People often ask me that, but I have a lot of advice for myself. But I wouldn’t want to give it to me because I would want to experience that failure. People often told me those things and people tried to explain to me, and with that failure thing too. Just keep on going and to embrace that process. I would have told that to myself, but I probably wouldn’t have listened. I would have still gone and done it, and still stumbled, and continued with that. It’s hard for me to say what advice. But for other people, the advice is, first of all, do something you’re very passionate about, and you like doing because, like I said, 50% of it is going to be daunting. It’s going to be failures. It’s going to be very difficult. So you want the other piece to be rewarding for you so you can keep going. I think finding that is very difficult. Again, I would tell that to myself very early on. I was fairly young when I stumbled across it, but even before in high school, I wish I would have done things sooner. But I don’t think I would have listened to myself. So I don’t know what to tell you.
Alejandro: I think that being passionate is #1, especially during the early days, at least 95% of the days are pretty awful. It’s like putting out fire after fire, crazy hours, Ramen noodles if it’s your first rodeo and you need to sustain the operation. So I’m right there with you.
Lior Elazary: Yeah.
Alejandro: Lior, for the folks that are listening, what is the best way for them to reach out and say hi?
Lior Elazary: You can email me directly [email protected] if you have any questions. I can’t promise I’ll get to all the emails.
Alejandro: Amazing. I’m sure for all the folks that listened all the way to here probably they’re going to know you well. So that will be cool. Then, also, any social media handles, Lior, that you use?
Lior Elazary: Twitter @liorelazary
Alejandro: Okay. Fantastic. Well, it sounds like a plan. I think that many, many people are going to be wondering, “Maybe I’ll reach out to Lior, or not.” But in any case, Lior, I have to say that it has been a pleasure and an honor to have you on the DealMakers show today. Thank you so, so much.
Lior Elazary: No problem. Thank you very much, Alejandro. I really appreciate it.
* * *
If you like the show, make sure that you hit that subscribe button. If you can leave a review as well, that would be fantastic. And if you got any value either from this episode or from the show itself, share it with a friend. Perhaps they will also appreciate it. Also, remember, if you need any help whether it is with your fundraising efforts or with selling your business, you can reach me at [email protected].