Saar Yoskovitz is the co-founder and CEO of Augury which is an Industrial IoT company that brings predictive maintenance to new markets with cutting-edge machine learning and AI technology. The company has raised over $60 million from top tier investors such as Lerer Hippeau, First Round Capital, Insight Partners, Qualcomm Ventures, Pritzker Group, Formation 8, Sound Ventures, Eclipse Ventures, and Munich Re Ventures to name a few.
In this episode you will learn:
- Managing dual offices in different regions
- What he learned from living in a Kibbutz that has helped build a great company culture
- The real definition of a company
- The advantages of starting out bootstrapping your startup
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.
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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 Saar Yoskovitz:
Saar Yoskovitz founded Augury in 2011 and currently serves as CEO.
An avid entrepreneur, Saar Yoskovitz has extensive experience in Machine Learning, Signal Processing algorithms, and System Architecture. Prior to founding Augury, Saar worked as an analog architect at Intel.
Saar Yoskovitz holds a B.Sc. in Electrical Engineering and a B.Sc. in Physics from the Israel Institute of Technology (Technion).
During his studies, Saar Yoskovitz initiated a voluntary project called “Select – Students for Technological Advancement,” for which he received Israel’s Council of Higher Education (MALAG) award for social involvement.
Augury is building the machine diagnostics back end of the Internet of Things. Augury’s platform automatically diagnoses machines based on the sounds they make by connecting vibration and ultrasonic sensors to smartphones and pairing them with machine learning algorithms.
Connect with Saar Yoskovitz:
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FULL TRANSCRIPTION OF THE INTERVIEW:
Alejandro: Alrighty. Hello everyone, and welcome to the DealMakers show. Today we’re going to be speaking with someone that knows a thing or two about scaling and building companies, but also about listening to machines and understanding what’s going on. Without further ado, Saar Yoskovitz, welcome to the show today.
Saar Yoskovitz: Thanks for having me.
Alejandro: Originally born and raised in Israel, and I understand that you were raised in a Kibbutz, so what is a Kibbutz? What is this upbringing? Tell us about it.
Saar Yoskovitz: Kibbutz, you could call it a failed social experiment in retrospect. It’s basically a commune where different families join. The whole idea is that everybody gets what they need and gives back what they can. So, one person is in agriculture, so he takes care of the fields, where another person is a teacher. Then they get everything they need to support their family. You could look at it as kind of a hippie commune, in a sense, where all the kids grow up together, and the values are very much those of sharing and taking care of one another. I spent ages two to seven in a Kibbutz. So, in my early childhood, those are the values I grew up in, and I think you can see them in Augury, the company that I built and run today.
Alejandro: Very cool, and we’ll talk about that and culture in just a little bit. You went to study on the equivalent of MIT in Israel. You were a student of electrical engineering in physics. How did you develop that type of interest for engineering and for physics?
Saar Yoskovitz: My dad is also an engineer. From an early age, they made sure to surround me with computers. I’m kind of aging myself here, but I got the first computer when I was in the second grade, and I fell in love with it. I learned how to program. I took a course in Pascal when I was ten years old. I learned how to program in C when I was ten years old, and then I taught myself from thereon. So, I was always into computers. It was only natural for me when I got to University and when I got into the Technion to go after electronics, engineering, and physics.
Alejandro: After this, you went into Intel. This was your big experience prior to going at it and launching your own thing. How was the experience working at Intel?
Saar Yoskovitz: It was really, really good. I actually got to Intel as a student as an internship. I always knew that I was going to start my own company. When I was finishing my Bachelor’s Degree, I said, “Okay. I’m going to have two years now after school to get the best kind of education I can, outside of University, to build the tools in my toolbox to be successful.” I had multiple options. I could go for a Master’s Degree; I could go work at a startup; I could stay at Intel, or just quit everything and start my own company. I went and asked a number of smart, experienced people what I should do. Surprisingly, they all said the same thing: I should stay another two years at a large organization to understand what it looks like when it’s successful. I learned a lot of things, both what to do and what not to do from a cultural perspective. What are the organizational values? Where are the different departments? What do they do, how they work, how they interact? I think from an early stage when building Augury with my co-founder, we took a lot of those lessons and put them into practice.
Alejandro: Got it. Let’s talk about how you met your co-founder. At some point, eight years ago, you decided to drop everything and go at it with your company, Augury. But basically, how did you meet Gal Shaul, your co-founder, and how did you guys start to think about what’s possible, and how did that transform into you saying, “I’ve got to give my notice, and it’s my time to shine.”?
Saar Yoskovitz: I met Gal in my first semester. When I was studying engineering, he studied computer science, and we met in the basic math classes. We became good friends right away. Then we spent the next five years just talking about technology and startups. Growing up and studying in Israel, it’s very similar to being in Silicon Valley. Everyone around you is in startups. We always knew that we were going to start something and do it together. When I started working at Intel, I said, “I’m going to be here for two years.” Then after one year, I understood I had enough and started to think about what’s next. Of course, my first option was to go to Gal and start talking to him about, “We’ve been talking so long about doing something. I think it’s time to jump into the water and start swimming.”
Alejandro: When you guys were having those discussions, were there specific markets you were looking at or specific problems, or how did the specific idea of Augury, which you would go out and pursue, how did that come about?
Saar Yoskovitz: When I was in school, I focused on speech technician using machine learning. When you think about it, it’s very similar to what we do today. Today, at Augury, we take machine sounds, the noises that machines make, and we analyze them, and we try to find meaning inside of them and tell you what’s wrong, which is very similar to what you would do with speech technician. You take audio and try to find meaning inside of it. So the core technology came from my project at school. At the time, Gal was working at a medical device startup. They built this large machine with a lot of working parts, similar to a small MRI system. He was sent to a customer’s facility to try to understand why the machine isn’t working from a software perspective to understand where the bug is. As a software developer, he found himself washing the filters and fixing the problem. When he got home, he told me, “I could hear something is wrong from the moment I entered the room. Why can’t my computer code, the software understand that something is wrong? We started looking into that problem of diagnosing mechanical systems based on audio and found our way into the market from there.
Alejandro: So, basically, becoming the doctor of machines with code. I love it, Saar. Tell us about it. What did you guys do next?
Saar Yoskovitz: The first thing we did, we were still working at our old jobs. We decided to take one day off every week and spend 20% of our time on what became Augury. We followed a very strict regimen of lean startup. Back at the time, it was called customer development. We said, “We can download the machines based on audio. What type of machines?” We talked to car fleets, commercial buildings, factories, overseas international shipping to understand where the market is. We spent roughly six months in that capacity. The day we left our work, which was August 2011, we decided that before we brought in any external investor, we wanted to prove that 1) the technology actually worked, and 2) that there was a market for it. We started bootstrapping our way into the market, and it took us two and a half years being self-funded, just the two of us until we got to a very large [0:10:36] with a Fortune 100 company here in the states. We then took that contract and raised our first VC funding here in the U.S.
Alejandro: I understand that bootstrapping, and especially for a hardware company, is definitely a tough one. And I know in this case, you guys were almost on the brink of bankruptcy in several instances. I understand, as well, that there were some fun stories around credit cards. So, what happened there?
Saar Yoskovitz: Originally, we opened the company in Israel. Then, when we started doing business with American companies, we also had a bank account here. Somehow, we found ourselves, two people, with four different credit cards. There was one specific day where we got an email from both of the bank accounts that told us, “You’re a commercial account. You can’t have $100 in the bank. It doesn’t work that way. If you don’t fix this within a week, we will have to close your account.” That same day, when we got those two emails, we received news from our very first pre-seed investor that he’s cutting us a check for $40,000. We were just two days away from closing our bank accounts when the check came in.
Alejandro: Wow. Quite procrastinating a little bit there.
Saar Yoskovitz: It’s living on the edge.
Alejandro: That’s it. I’m sure that there are a lot of people listening now from all over the world, thinking, “Should I relocate to the U.S. and go after the big opportunity, or should I stay in Europe, Asia, or from wherever they’re listening. What do you recommend? In your case, why did you make the decision that it was crucial for you guys to come here to the U.S. and have operations in the U.S.?
Saar Yoskovitz: For two major reasons: 1) If you look at the largest companies in the last couple of decades, they were all built here—not all, but mostly built here. The knowledge, the ecosystem, finding the right talent with the right experience to help you scale, it’s much easier here than anywhere else. 2) Our market is here. We are going after industrial companies, manufacturing companies. For us, the U.S., specifically, the East Coast and the Midwest area, is where they’re mostly concentrated. That’s why we chose New York to be our headquarters.
Alejandro: In the bootstrapping phase, why did you guys wait so long to go out and get the investment in?
Saar Yoskovitz: Again, we wanted to prove that we had problem/solution fit or product/market fit because it’s much harder to pivot and change your way after you get the first investor in. So, at the beginning, we were looking at five different markets, which are five very different businesses. Going into automotive versus shipment versus factories versus commercial facility management are four or five very different companies. We wanted to have the quiet headspace to make that decision without having to optimize for what does the investor want and being that uneasiness of feeling that they gave us money to do x, and now we want to do y, and we’ll need to manage that conversation. So we decided that we will keep bootstrapping until we prove where we’re going.
Alejandro: Talk to us about the fundraising process. How was that process for you guys? How much money have you raised to date?
Saar Yoskovitz: To date, we’ve raised close to 60 million across four rounds. When we started, it was 2011. We actually started raising money at the end of 2013, 2014. Back then, being a hardware company was the worst thing you could do and focusing on industrial market versus building a social network or a photo-sharing gap, which was all the craze back then. We had a tough time finding the right investors that were looking to build something that would transform a whole industry and not just looking for the next big craze. Luckily, for the seed round, we found Howard Morgan from First Round. He has a deep technology of background as well as he’s on the board of John Deere, and he knows the industrial market very well. He was really excited about the opportunity and the problem we were trying to solve. He was our first investor, and from there, we started to build it.
Alejandro: Got it. For the people that are listening, you were alluding to it on the business model of Augury. How do you guys make money? What does the business model of the company look like today?
Saar Yoskovitz: We are a full-stack company in the sense that we design and manufacture our own hardware, as well as do the connectivity and run the agnostic algorithms. We work with the largest manufacturers today, so you could think of the largest beverage companies, the largest food companies, pharmaceuticals, consumer-packaged goods; they’re all working with us. Our goal is to make the production lines more productive. Even though we have a hardware component, we try to be pure SaaS. So, we give away the hardware for free and then charge an ongoing, per machine, per year type of model.
Alejandro: In terms of having dual offices because you guys have an office here in New York, and an office in Israel, so how do you go about having the dual-office approach?
Saar Yoskovitz: It’s challenging. I won’t say it’s not. The way we were structured today, our product engineering is in Israel. Then, here in the U.S., in New York, we have the sales marketing customer, operations, customer success, and so on. When we started, it was important for us to focus on culture because we knew that we were not building an Israeli company or an American company, we’re building a global company because our customers are global, and we will need to serve them everywhere. So, we put a lot of focus on culture. I think one big understanding for us, and it took us quite a bit of time to get there is that you can’t force one company culture around all the different sites and the different things that you have simply because engineering and sales have small changes in the culture as well as Americans versus Israelis versus people in Europe. They come from different backgrounds and the norms have been different. Our guiding principle today is that when you go into the Augury here in New York, you know that you’re in New York, and you know that you’re in Augury. Then when you go to the Israeli office, you know that you are in Israel, and you know that you’re in Augury. Trying to have a core language that everybody speaks and everybody understands each other is critical for us. Then, we don’t want to force both sides to be 100% the same.
Alejandro: Understood. From your early days in your life as part of the experience with the Kibbutz, how did you apply some of that to the culture of Augury?
Saar Yoskovitz: Our first company value is people first. I believe that it stems from there. It’s not about who you are or what you do. Everyone on the team, we treat them as people, and also outside. We say that we do business with people and not companies. We have multiple examples of champions that used to work with us in one company, and then they left and started working for another company, and they took us with them to their new place. Having this people-first approach, one is crucial the way I see it to building a strong team because a company is nothing more than a set of people that are all fighting towards the same cause. If you don’t have the best people, then nothing else matters. You will never have the best technology. You will never have the best sales team. I think that specific value came from my upbringing.
Alejandro: Some of what you guys are doing involves cutting-edge machine learning and AI technology. I think that on AI and machine learning, there’s so much noise out there. Everyone and their mother are saying that they’re using AI and machine learning. Where do you think this entire machine learning and AI type of space or segment is heading as a whole?
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Saar Yoskovitz: I’ll quote a survey from Gartner that came out at the end of last year, where they found that 82% of companies have a digital information strategy. Yet, only 7% of boards feel they’re getting good ROI.
The reason for that is, everyone took the approach of, “I need to have digital. I need to have AI just to say that I have AI.” That doesn’t work. What does work is saying, “I want to solve a specific problem? What is the best way to solve it? Oh! AI looks like a good tool.” You see a lot of horizontal platforms. Like, “Give me all the data, and I will crunch it until you provide insights, whereas, we took a very different approach. We are a vertical solution provider. We say that we do, yeah, but we don’t lead the conversation with it. We lead the conversation with, “What is the impact of machines failing unexpectedly in your organization? Let’s try to solve that.” The way we do it to scale is through AI. So, I think over time, much like databases—it used to be people had no SQL databases. Today, nobody talks about what database they use. It’s just one piece of their full-stack. I expect AI to be the same. People will go back to focus on, “What is the problem we’re trying to solve? What value are we actually providing to the customer?”
Alejandro: Got it. Imagine, today, you go to sleep, and you wake up five years later, and you wake up in a world where the vision of Augury is fully realized. What does that world look like?
Saar Yoskovitz: We’re here to build a world where people can always rely on the machines that matter. Machines that matter is the key phrase. Customer machines that matter are the critical machines on the production line. So the machines that fill the bottles with beer or the machines that cut the diapers. But if you take a step back and look at the greater society, everything we do in our lives depends on machines: electricity, running water, the medicine that keeps us and our kids healthy all depends on machines, and we’re here to make them more reliable and dependable. There is one story that really stands out. A couple of years ago, on August 5, 2017, the skies over New Orleans opened up, and 11 inches of rain poured down in the city within a couple of hours. As a result, the streets were flooded, and over 100,000 people were evacuated from their homes, and a million people suffered from property damage. This isn’t Katrina. This is a random storm that swept through the region. The reason that it got to these floods is because New Orleans is below sea level, and they have eight critical pumps that pump the water from the streets back into the ocean. During that specific day, four of those pumps were down for scheduled maintenance, and two of the other pumps stopped working during the storm. So, two pumps caused 100,000 people to lose their homes. That’s where we are today. If I wake up and our vision is fully realized, that will never happen again.
Alejandro: That’s amazing. For the folks that are listening, this is a question that I typically ask the guests that come on the show, and that is, knowing what you know now because now, you’ve been at it for eight years—many experiences, especially the early years at the brink of bankruptcy and many instances as you were bootstrapping the business. If you had the opportunity of going back in time and having a chat with that younger Saar, the Saar that was at Intel about to make the leap of faith to start Augury if you had the chance to have a coffee with that Saar and sit down for 10 or 15 minutes and give that younger Saar one piece of business advice before launching Augury, what would you tell that younger Saar, and why, knowing what you know now?
Saar Yoskovitz: I think the biggest learning for me is that as a founder or a CEO of a growing company, your job changes every two quarters. Every six months, there are very different challenges that you need to do. The main recommendation and that’s what took me time to understand, and I do today, is always be on the lookout for what’s next. Every quarter or two, I go on these discovery journeys talking to people that have been through what I’m about to go through and try to understand what are the major pitfalls? What do I need to start planning for? What skill sets do I need to start building for myself? Or, what type of people do I need to surround myself with now in the company as we go international and move more into enterprise sales? Always be on the lookout to what you don’t know that you don’t know and be curious and proactive in figuring that out.
Alejandro: I love it. Saar, for the folks that are listening, what is the best way for them to reach out and say hi?
Saar Yoskovitz: My email is [email protected] I’m always open to helping entrepreneurs. On LinkedIn, you can find me there. Twitter is @yosko_s Please reach out.
Alejandro: Amazing. Saar, thank you so much for being on the DealMakers show today.
Saar Yoskovitz: Thank you.
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