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Neil Patel

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Rasty Turek has gone from living on his own at 14 years old to raising $64M for a startup that may be in one of today’s fastest-growing markets. His company, Pex has successfully raised funding from top-tier investors like Susa Ventures, NextGen Venture Partners, Illuminate Ventures, and Amaranthine.

In this episode, you will learn:

  • Rasty’s top book recommendations
  • Network effects and building a moat around your business
  • Why entrepreneurs should embrace the struggle
  • The pressing importance of online content attribution

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    About Rasty Turek:

    Rasty Turek is a founder and an angel investor.

    Rasty was born and raised in Slovakia. He currently resides in the USA, where he runs a company called Pex. He has started multiple companies in the past, of which 1/2 ended up being acquired and the other half was shut down.

    In his spare time, he mostly reads books or hangs out in Clubhouse.

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    Connect with Rasty Turek:

    Read the Full Transcription of the Interview:

    Alejandro: Alrighty. Hello everyone, and welcome to the DealMakers show. Today we have a pretty interesting founder, a founder that definitely got started very early on at his age and a remarkable, remarkable journey. I think a lot of you are going to get inspired with his story. Without further ado, let’s welcome Rasty Turek to the show.

    Rasty Turek: Thank you very much for having me.

    Alejandro: Rasty, originally born and raised in Slovakia. How was life going up in Slovakia?

    Rasty Turek: I was born in Czechoslovakia, which was a communist country. I don’t remember too much, but I do remember things like waiting for milk and bread every Wednesday for two hours in the cold. I’m from a very, very cold country, a very cold place in the country. I grew up in the mountains, and every Wednesday with my mom, we had to stand in line for four hours to get basic foods, basic groceries. Then the communist era ended, and a boom of entrepreneurship started. People didn’t know what that meant. We didn’t have basic infrastructure. For instance, we didn’t have IRS because everything was owned by the government prior. They didn’t need to tax people because there was nothing to tax from. All of the money was given by the government. While we did have an IRS as an institution, it just didn’t work the way that it worked in the U.S. or somewhere else. A lot of other things didn’t exist properly. We did have lawyers, but you couldn’t sue anyone for anything, so the lawyers were mostly for suing people by the state rather than the other way around. So it was quite an adjustment. My father, getting his hands wet as an entrepreneur, and this was 50-70 years of no entrepreneurship in the country, so for him, it was very challenging to have even the basic things. How do you start a company? What does that mean? How do you balance your books? What does that even mean? How do you run a healthy balance sheet? How do you manage your inventory? How do you do just basic stuff? They had a very hard time with that because there were no books. All of the books were liquidated when the communist took over, and there was no going into entrepreneurship. Everything was in foreign languages, which nobody spoke because they didn’t allow people to speak English or German or other languages. It was fairly challenging for them to start and watching them start. I always thought entrepreneurship was this magical kind of thing. I told my father when I was 11 that I wanted to be an entrepreneur because it was amazing that he could make a business by talking to people. That was his job, going to people and talking to them, and that somehow amounted to a business. I thought that was the best thing I had ever seen.

    Alejandro: In your case, obviously, it was not a path full of roses. At 14 years old, you left your home. That’s a life-changing and life-altering event, so tell us about that process because that meant you were homeless for six months.

    Rasty Turek: Well, I got into fights with my family a lot. I was struggling in school; I was struggling at home. It started getting to a place where I was getting into fistfights with my father. It was just not a good place for any of us, so as a very strong personality, I decided, “I am better than anyone else, and I can do this on my own,” which was a childish mistake and childish foolishness, but I packed. I literally had nothing. I had the clothes on me. In fact, I actually bought new clothes with my saved money, and I returned the clothes because I wanted nothing from them. I thought that I would hang out with some friends, but my friends were 14 and 15. They, obviously, couldn’t hang out with me. They couldn’t shelter me or do stuff for me. So I ended up being alone on the streets. When the reality kicked in, it was quite challenging. Fortunately, it was coming to summer; otherwise, I think I would have frozen to death. Then learning to live with that, the more narrow, one thing that people don’t realize is that once you become homeless, life becomes very simplistic. You have very few goals in life. There’s no future; there’s no planning; there’s no nothing. In my country, it was illegal to have a bank account before you were 18. It was illegal to work before you were 18, so I had to do all sorts of things in order to actually be able to function. For instance, for three months, I worked at a bar where I was helping with anything they needed, and I was stowing all of the money in my socks because I couldn’t put them anywhere. There was no bank account that I could open. There was nowhere to put the money, and I didn’t trust anyone, so at some point, I had dozens of bills in my socks every day. So that was quite interesting. Over time, I was able to figure things out. I was able to convince a lady to rent me an apartment, to which I could have moved into, and she was very skeptical, so she asked for three months upfront, which was an insane amount of money to me at that point. It was a process, but over time, I got used to that kind of life and figured out what is necessary. The challenge, obviously, was for a person that was obsessed with computers since a very young age. I didn’t have computers for years because I couldn’t afford it. I didn’t have a mobile phone for four and a half years because I couldn’t afford it. So it took a long time to get the baseline of an average person.

    Alejandro: So, in this case, there was a lot of uncertainty during those days, and I think that part of being an entrepreneur is being able to deal with uncertainty as well and to deal with whatever is in front of you. How do you think that this phase in your life shaped you to become who you are today?

    Rasty Turek: I’m definitely risk-prone to a point of maybe a little too much because I know where the bottom is, and the bottom is so far from where I am at this point. I’m willing to sacrifice much more than maybe other people, so there were times in this company’s life where I was willing to go not just into debt but also way deep into that hole. It didn’t move me as much as maybe other people. I mean, I didn’t lose sleep over it because I understood what the consequences are and how far I can really go, which is the positive. The negative is, I have a very unhealthy relationship with money. I think people react one of two ways: either they’re obsessed with money, or they ignore it where money doesn’t mean anything to me, so I work with them very frivolously, which is not necessarily a good thing, at least in my personal life. In my professional life, I try to be more careful, but there are some of those. The other one is it took me years to start trusting people. I was very internally closed off because I always understood that people will take advantage of you, and that was my experience. Once I ended up on the street, people do want to get ahead through you. It’s essentially a very [9:17], especially by the people in the same situation. The fact that someone is left behind doesn’t matter if you are [9:25]. That definitely took a while to wipe out, and there were a lot of other habits. For instance, food. To this day, I cannot not finish a plate in front of me. It just doesn’t mentally allow me to because I know what hunger looks like, and it’s not a pleasant thing.

    Alejandro: I’m wondering, as well, because up until now, 22 years later, you haven’t spoken to your parents. Do you think that you’ve been able to get complete with that chapter, and how were you able to get to that completion moment?

    Rasty Turek: I’m not in touch with them. It’s been 22 years. I left when I was 14. At this point, it’s so far from where I was. I have very hard times remembering them. I don’t know anything about them. I don’t keep in touch. I don’t follow them. I don’t know anything about the family, in general, so it doesn’t really impact me emotionally anymore. I think there were times when I was much younger, but at this point, it’s so long ago in comparison to how long I was with them that it feels very beast of memory. Sometimes it feels like it just never happened. I don’t think there is a way for me to go back because, to me, they are strangers at this point.

    Alejandro: Absolutely. I can hear you. In this case, for you, when you finished high school, you joined the Synopsi Security Consultancy in Boston. All of a sudden, you go from Slovakia, from living on the streets for six months to all of a sudden, you find yourself in the land of opportunity in the United States of America. How did you land in Boston? It seems like a long journey from where you were on the streets to be able, here, to go after your dream. Tell us about that transition.

    Rasty Turek: I got lucky. I got recruited in Slovakia by a few folks to help them start a computer café, which was very popular at that time. Across the world, people didn’t have the internet at home. It was very hard to get a connection. So I opened it up with a few other folks, the very first internet café in the city, and through that, I was able to get back to computers. From there, I was able to explore other things, including security. The white side of security is usually [11:52], and the black side of security is what we call hacking, at least in the very simplistic form. Fifteen, 16-year-old me, didn’t care about consequences or anything, so I played around, and [12:11]. The owner of the company noticed me. We started exchanging some messages and emails over time, and he became a second parent to me, and he still is. He is 18 years my senior, so he became more like an internet mentor. As I was finishing high school, he started pressing on me, “Why don’t you come here? Why don’t we do this?” etc. First, it felt like it’s just not even possible, something that I can’t really do technically; it doesn’t add up to me. But over time, I was able to see that this was an opportunity. I didn’t have much, so that also meant that I didn’t have much to lose. I packed my hard drive. That was the only thing I took: my hard drive, three tee-shirts, some underwear. He sent me money by Western Union. That was my first experience with it. He sent me money for the ticket. I bought a ticket and then flew to the States. I went through Customs, which was quite interesting. Then I joined him in Boston. It was a different world. I especially remember the prices were so off. A cup of coffee in my country, at that point, costs 10 cents or maybe less. A loaf of bread was maybe 40 cents. I came to Boston, and I remember s Starbucks was $2.00. I thought they were joking. I thought it was literally the most hilarious joke that someone can pay two dollars for a cup of coffee because it felt to me that it was all of the money of the world, that it’s so expensive that one cannot afford. As I got to meet my colleagues and people, the money discrepancy was quite severe. They were willing to spend a hundred dollars on a dinner. I don’t think in my life I heard of people spending that kind of money for a whole month of groceries. It felt very different, and it was very early times in my country as it was trying to get out of communism and come closer to the western world. So the differences between the prices were quite severe. It took me a while to get used to the new world and to the new opportunities.

    Alejandro: Got it. Something that is really interesting here is that you end up joining Google. I mean, out of all places, it’s like so crazy, your story, Rasty. It’s unbelievable the incredible shifts that happen in life. You end up in one of the biggest companies in the world to work as an engineer, so how did that transition or exciting chapter happen in your life?

    Rasty Turek: When I was joining, it was by far not the largest company. It was actually quite small. I think it had only 700 engineers. It was big by my account, but nothing like it is today.

    Alejandro: Yeah, 250,000 employees today.

    Rasty Turek: Yes. The company I worked for got acquired by them. In the process, they looked at the profiles of all of the employees, and they excluded one other person and me. The other person, for reasons I don’t know, but me for lack of education. I was 19. I didn’t have any college degree or any advanced degrees of any kind, and they said, “This is not how this company works.” I remember my boss stood behind us and said, “You take everybody, or you take nobody.” So he risked the acquisition for two of us to get in, which I am eternally thankful for. I was able to join the company. I joined what was then called the Enterprise Theme as a security engineer, which was mostly Gmail. We were just getting Google Maps, and they had just acquired Quickoffice, and it became Google Docs. I joined a fairly small team of four people. It was very early on. It was fairly small. I do remember in the three years when I was leaving, the team grew to 1,200 people, and the company grew to 25,000 people. That was remarkable growth. I do remember that every month or so, we were struggling with space. My table always got chunked into halves and quarters. I had four people, and then they moved me to a full table, then they halved it, and I had a desk-mate on that table. Then they halved it again, so I had three others. Then they moved me again. This happened like clockwork every three months. I changed managers maybe dozens of times. At this point, I would not even be able to count them. It felt like every week there was a new manager. That was very interesting. I learned a lot, obviously about the scale, about the technology, about how the company works. I also learned some very unhealthy habits. Google had this [17:30] situation that you couldn’t do anything wrong. So we thought that we were the biggest geniuses in the world because no matter what we did, the company went up. The price went up; the stock went up. I joined after the IPO. Everything was going up constantly. I do remember when my boss said that if Gmail ever gets hacked, we are over. Then, after I left, they did get hacked, but nothing happened. It’s like, essentially, the company couldn’t do wrong. There was a time when I told people in the Bay Area that I worked for Google, and they looked at me like the second coming of Jesus. It was a very different experience. One of the largest changes in my life was when I went from a very, very modest lifestyle to an abundance of money to a point that essentially, there was nothing to buy at some point—not for a kid that didn’t know anything about the world.

    Alejandro: Yeah.

    Rasty Turek: It took me a very long time to square these two things out because, at 18, I was living in a studio apartment alone, barely surviving, and then by the time I turned 20, I had hundreds of thousands of dollars in a bank account, and I could have bought anything I wanted. It didn’t square well, and it took me years to figure out my relationships with money, how to use it because money is a tool, and you need to know how to manipulate it and how to manage it in order to have benefits. It took me quite some time.

    Alejandro: Do you remember that event that got you to be more self-centered with money?

    Rasty Turek: It wasn’t one thing, but I do remember leaving Google. At that point, we had everything. They bought the groceries for you. They gave you haircuts. You didn’t have to worry about anything. I do remember quitting Google because of some situations that were happening, and I was fed up with everything. I walked into a store, Safeway. I looked at an avocado, and I think it was a dollar. I thought I was dreaming because it was so expensive. I started realizing, “Now, I’m on my own, and now the money will not be coming in. Money will be going out.” That was the first realization of crashing with reality. This is one of the things that you can tell when somebody does have money or grew up with money, or someone didn’t, just learning the basic things like what’s the difference between different types of [20:13]? Or what does Parmesan mean, or what does aged vintage wine mean? What does that feel like, or how do you select them? How do you buy them? How do you spend money on certain things? Those were simple things that most people don’t even think about that took me years to go through because the world is large, and there are a lot of things to learn. It took me a very long time to figure things out for myself. I think I was fortunate enough that I didn’t care about money that much, so I was willing to invest in these experiences.

    Alejandro: So you leave Google, and you start this journey of building and scaling a bunch of companies that ultimately led you into Pex. The most important is Synopsi, which is something that you did first. You went at it. You were able to sell the assets to Imperva, but then you started Synopsi again because they did not acquire the name. Whatever happened the second time that you were doing Synopsi?

    Rasty Turek: The idea was to build a social version of IMDb. I always believed people loved to share information with each other about what they watch through recommendations. I think I was right on that goal. We were able to quickly get a million users or so. It was the time when a million users were monetizable and it [21:50]. I do remember other companies telling us that maybe six months prior if you ever reach a million users, we’ll be willing to pay you for doing x. Then once we reached out, they said, “Now it’s 10 million.” I remember how I felt betrayed that we worked so hard to get here, and we just couldn’t get past that. We pivoted towards B2B. The idea was, what if we provide Netflix-like recommendations for everybody. Other companies mostly set their boxes that would take advantage of these. I thought I was very late to the market, so we got some to start using us, some platforms, some companies. It was going fine. The problem was that there was no market. Then as the time was going, I was looking at this, and I was like, “Do I want to do this company for the rest of my life,” which was a struggle. One thing I did not know was there would be the boom in VOD, and everybody will start having their own service that they will actually need services like these, but I just didn’t see that coming. I don’t think, even if I had, I don’t think I would ever be that passionate about it. The part that led to Pex was very interesting because we had no money for the company. It was mostly funded by three individuals and me. We didn’t have any kind of money. I took an idea that was: what if we build a chasm for video? That will be a self-propelling market. The idea was that people would love to download these applications because it’s going to be so clever, and it will attract everybody to it. That’s actually what led to the initial version for Synopsi. That would then translate into Pex when Synopsi was closed because it was just not—I didn’t see the future of the company. I was sitting on [24:04] that I had nothing to do with, so I went to pitch the idea of Chasm for video-to-prime pictures, and we looked at each other, and they said, “Yeah, nobody cares.” But people copy content all over the internet and maybe you can look at that.” I started looking. It took me a few months to even get the basic idea. I had heard of copyright. I had never understood anything about UGC, user-generated content like YouTube. I knew nothing about it. I knew YouTube existed. That was most likely it. Maybe three or four months of research led to the idea that this actually could be viable, not only as a business of identifying content but what if licensing was possible. That’s where I started Pex. I established it on February 14, 2014, which I realized three years later when I was signing some documents that it was Valentine’s Day. It took years before the market materialized for us in the direction that was getting more obvious to the investors and to the outside world. Even the company struggled significantly for the first four years. We couldn’t raise any money. Everything was funded by a few angels here and there and me. It was very humbling, again. For a very long time, it felt like it would be a disaster, and I would have to move on and go back to Google or something else because my money was running out.

    Alejandro: What ended up being the business model of Pex?

    Must Read: Sridhar Ramaswamy On Becoming Google Ads Boss And Then Raising $77 Million To Create An Ad-Free Search Engine

    Rasty Turek: The initial business model is based on the idea that UGC is becoming a dominant form of communication. In fact, YouTube just outran Netflix in a form of revenue. UGC, when I started this company, it was YouTube on daily motion. Most people barely remember these companies, although [26:09] was given public. There was no video or audio of any kind on Twitter, Facebook, and many other platforms. When I pitched this to owners of the rights or the platforms or the investors, everybody looked at me funny and said, “Nobody cares. Nobody’s using these.” YouTube was barely a revenue company. It was tiny; nobody paid attention to it. Then what started happening is more UGC started becoming more popular. The tool started becoming more structural. Phones got better, and they got better cameras. Mine was a big boom to these. It was obvious that there was a hunger for it. Today, we have TikTok and others that we can tell that the market is there, but not only the market is there. There’s actually a business in it. This is very interesting. Twitter started in 2014 for people to buy something. If you see something that you like, you could buy it through Twitter, and nobody used it, so they closed it down. They are bringing it back because the market changed and society shifted enough. Now it’s one of the most dominant ways for how to buy clothes and other things on Instagram, for instance, or at least the dominant business model in Instagram. This is very interesting because it becomes quite significant and popular. When I looked at the market, it didn’t look likely that it’s going to happen in a short period of time, but over time, in maybe five years or so, it was very obvious to me that this market has to materialize because people will have better and better devices. They will want to share more and more, and eventually, there will be a challenge of every person that creates content is by default and rights by law. These people will want to eventually retain the rights and manage their rights and be able to say who owns what and what will happen when you want to use that. So the original business model was to work with the largest rights for this and give them access to these platforms. As the platforms were growing, the rights were more interested, so we charged a SaaS fee. We extended that fee later on, where we added commission. That means if you make more money, thanks to us, you share some upside with us. Then, finally, we were able to fulfill the original vision for this company and bring in what we call the Visa of the Digital Rights. So copying a Visa kind of experience, three-sided marketplace infrastructure that allows creative rights and platforms to come together and exchange licenses at a point of publishing and a speed of internet, and the scale of the internet as well. That took seven years to materialize. It helped a) the UGC became a dominant way and form of communication and entertainment, and b) the society shifted in opinion about the [29:23 – 29:25]. As I mentioned, when I joined Google, people looked at me in awe because I worked at Google. However, that’s not true anymore. So, people sway to the other side. As such, it allowed the governments to introduce new legislation that are essentially now temping down the platform and are removing all of these predictions that they had. The European Union just enacted a law two years ago, which will come into practice next month, which shifts the liability from the rights to the platforms. Platforms, historically, had no liability of content that was uploaded there. Now they have obligations to license everything. We were patient, quiet, waited, worked our asses off to deliver on these. As such, we popped up in a market that is now ready-made for us, and there’s almost no competition. So now a lot of investors are coming to us and saying, “This is genius. I never even thought about it.” The reality is, seven years ago, there was no market. There was no such a thing. Society had to shift before this was possible. That was the bet.

    Alejandro: In fact, you guys have definitely raised some money. How much have you raised so far for the business?

    Rasty Turek: I think $64 million. It’s likely more than that.

    Alejandro: Also, how big is Pex today? Anything that you can share with the listeners in terms of employees or anything else?

    Rasty Turek: I think we’re around 100 right now. We tried to stay very small and nimble, so we could have been five times bigger when it comes to the body count. We try to stay very small, as small as we can while still delivering on the business because the challenge is, this is still not a fully established business. This is a market in creation, and as such, it still requires a lot of work, and a lot of things have to go right. The smaller we are, the more nimble we are. It’s much easier to turn a tugboat than it is a massive boat. Being big is great when you have a strong product/market fit, which we do have a strong product/market fit, but what we don’t have is a strong development of marketing. So we try to stay as small as possible, trying to stay focused on the market and giving ourselves time to actually see this being developed. We raised $7 million, and then we followed with a $57 million round, and the reason why we did that and why we’re so interested is because they’re betting on the market, not necessarily on the company. We still have a lot to prove. There are still a lot of unknowns. This is not a fully developed market, but as a benefit of that, we are kind of an Airbnb-style situation where we are the market maker. While we have benefits over other platforms, like Airbnb, our [32:49] are quite significant because our network is so strong that when someone works with us, it’s almost impossible to go elsewhere. It’s the same with Visa. Visa works with your merchant and the bank, and the customer has it in their wallet. It’s almost impossible to start a next company network because you will have to sign the same amount of merchants and the same amount of banks overnight, and that’s almost impossible. There’s a reason why Visa and Mastercard, which is essentially the same thing, and nobody else. It’s super hard to start these. So we are in this kind of position, and we might have the network effects of Visa, but we are not there yet.

    Alejandro: One of the questions, Rasty, that I ask the folks that come on the show is if I bring you back in time, and you have the possibility of having a chat with your younger self, with that younger Rasty that was thinking about starting Pex, what would be one piece of business advice that you would give to your younger self and why before launching the business?

    Rasty Turek: Honestly, I like it as it is. It was extremely painful. There were times when I personally was in the hole for half a million dollars, and I didn’t know how I would pay for that. But it made us who we are. It allowed us to get to a place where nobody got in the past. This was one of the reasons why a lot of the investors were skeptical because a lot of companies tried, and most of them failed. I do think that the resilience that came from the experience and one of the things why we are set up well for the market that is coming, I believe, is because we had to struggle so much. If I change something along the way, I do wish it would have been less painful. I do wish people had paid more attention to us and do wish there was an easy path, but I do not think that we will be where we are, and I do not think we will have been able to have the shot that we have now.

    Alejandro: What has been one book that you wish you would have read sooner?

    Rasty Turek: I read a lot of books. It’s not about reading something sooner. Sometimes I read some older books, and I realize that you have to be emotionally and mentally, and intelligently ready for a message. I’ve read books multiple times in the past. Let’s say I was a teenager, and then I read it later, and then I read it again later. I take very different messages from each reread, so I don’t think there’s a book that would have helped me better sooner. I think most of the books are great at the time that I read them, and some of them are even too early. So I have to go back to them and try to ingest the message once again.

    Alejandro: Is there a book that you’ve read the most as you look back?

    Rasty Turek: Definitely, Papillion is one that I reread fairly often. I do like the biography of Edison; I do like the biography of John D. Rockefeller and Vanderbilt. They’re obvious people. It’s not that I learned something specific from them; it’s that it gives me comfort that they had very hard times initially, too, and they had to struggle. Usually, it’s kind of always the same story. You struggle, struggle, and then you don’t. Then you struggle in very different ways, and you have very different problems in life. It’s comforting to me to know that there’s no way out like everybody had to go through the same, and nobody really escaped this. I think the best analogy to that is working out, running, bicycling. The first time you start running, it feels challenging in all sorts of ways. If you don’t like that feeling, that feeling will never go away. You will just get faster. This is the same thing with confidence. When I started this company, and I was alone, or when I had the first few employees, it was literally the same challenges as today, but in different ways. When I had five people, my biggest challenge was how do I do product? How am I going to manage these resources? Now, when I don’t have five people, now my biggest problem is, how do I manage those 100 people or so. The challenges change, but the feeling stays the same. So the mental muscle is reacting equally to all of these challenges.

    Alejandro: I love it. Rasty, for the people that are listening, what is the best way for them to reach out and say hi?

    Rasty Turek: I’m very active on Twitter. My handle is Synopsi. I generally respond to everyone that reaches out through it. I also have a blog that I don’t publish anything on, but there is an email address on it. It’s info@pex.co, so people can reach out to that.

    Alejandro: Amazing. Rasty, thank you so much for being on the DealMakers show today.

    Rasty Turek: Thank you for having me.

    * * *
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