Tom Livne On Raising $65 Million To Bring Artificial Intelligence To Transcriptions

Tom Livne is the co-founder and CEO of Verbit.ai which specializes in combining human and artificial intelligence to provide transcription and captioning solutions. The company has raised over $65 million from investors such as Vertex Ventures, Viola Ventures, Vintage Investment Partners, and Stripes. 

In this episode you will learn:

• Blitzscaling
• Culture and articulating your core values
• His approach to hiring
• How to breakthrough when you breakdown

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About Tom Livne:

Tom Livne is the CEO and co-founder of Verbit.ai. The company provides an AI-driven transcription service for the legal and academic markets that guarantees 99.9% accuracy through a combination of speech-to-text automated speech recognition and human editors.

Verbit recently has raised $65 million.

Previously, Tom Livne was co-founder and President of AppInsight.

Tom Livne is a graduate of the Yale School of Management and Technion, and earned a law degree from IDC Herzliya.

Connect with Tom Livne:

• Linkedin
• Twitter
• Crunchbase
• Facebook
• Angel List

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FULL TRANSCRIPTION OF THE INTERVIEW:

Alejandro: Alrighty. Hello everyone, and welcome to the DealMakers show. Today we have a founder from Israel. Definitely, I love founders from Israel, and especially because they have a level of seeing things and so analytical and so strategic that it’s mind-blowing, but I think we’ll let this founder tell it to us directly. So, without further ado, Tom Livne, welcome to the show today.

Tom Livne: Hey, Alejandro. Thanks for having me.

Alejandro: So originally born in Startup Nation and raised there too. How was life growing up there?

Tom Livne: Israel, I think, is the best place to live. Great weather and really smart people. We have an amazing beach, and life couldn’t be better rather than it’s a small country, and we always need to think about how we’re selling to the U.S. So, I think overall, it was a great experience living here. Also, the army service is something that not all people in the world experience. I think we are lucky to be born and raised here.

Alejandro: Tell us about the army process because every single person goes through that. Tell us about it. What did you do there?

Tom Livne: I’m like a typical Israeli entrepreneur going for the 8200 or any other intelligence work unit. I’ve been in the Special Forces of the Paratroopers, and still doing the Reserve. I also participated in a few wars. I think the most thing for an entrepreneur is resilience. I think the army service really helped me with that.

Alejandro: How do you define resilience? 

Tom Livne: Startups are like rollercoasters. You have ups and downs, and there are a lot of difficult moments and happy moments. You need to be really strong during the bad moments, and during the happy moments it is important too celebrate; but you know that tomorrow could be a bad day. I think, take everything in perspective, not get tired, be full of energy and motivation all the time, and think positively. As a founder and CEO, you have a kind of manic-depression. As an entrepreneur, you need to think positively all the time, and think that everything is good. As a CEO, you need to be optimistic all the time. Are we hiring the right people? Are we going for the right go to market? Are we spending too much money, etc.? As a founder and a CEO, you need to have a balance with both of them. It’s interesting.

Alejandro: In your case, you had a very interesting combination. You combined law and business. How did you come about with that combination?

Tom Livne: Yes. All my friends made fun of me since I was born, the lawyer certification was near my bed because my father is a lawyer, and my sister is a lawyer, and my brother is a lawyer, so I’m a lawyer too. When I go up to study, I knew that there’s an interesting combination in Israel both for lawyers and business administration, so I went for this route. I was more attracted to the business rather than the law, but eventually, I completed both.

Alejandro: Very nice. Then you started in the labor world. You were at LeumiTech, which was your segue into startups. What were you doing when it comes to investing in startups? What were some of those patterns that you saw on businesses that perform well versus those that didn’t perform so well?

Tom Livne: In my experience there, what makes you excited as an investor is a strong team that you want to work with for the long run; plus, big markets that you would be able to get good returns and added value or sustainable, competitive edge if it is technology or any other unique product and the combination of all of those will make you positive investment decisions. What you’re looking for in entrepreneurs is, as I said, resilience and someone that is fanatic about the business. He thinks about the business all the time, for example, when he is in the shower or when he goes to sleep, and the company is in first place rather than anything else. This is like the entrepreneurs you’re looking to back, and those are the ones that create great companies.

Alejandro: I know that while you were there, you had an encounter with an entrepreneur that came pitching to you, and that definitely turned out to be something that you had not expected. So, what happened?

Tom Livne: I was working at LeumiTech as an associate, and during part of the screening process, I met with an entrepreneur. His name was Elon. He pitched me his company, and then my feedback to him was like, “As a single founder, it would be hard for you to raise money, and if you approach LeumiTech in its present stage, you have no idea who you should talk with. You should talk with angel investors, Micro-VCs, Accelerate, or etc. Then, out of nowhere, he told me, “Look. I can solve those issues. Come and join me as an equal co-founder in the company.” I thought about it over the weekend, and I was opportunistic. I decided to join the ride, and it was a good learning experience.

Alejandro: What ended up being the business model in AppInsight?

Tom Livne: What we did was automated penetration testing for mobile apps. The business model was selling to the app owner, scanning every time they’re releasing a new version of the app, so this was like the business model. The best learning experience for me was that in every company that I will create in the future, I want to have real revenue from day one. I actually applied it nicely at Verbit, the company that I’m running today. I’ll tell you the story right after, but yes, we had to build the technology to do a lot of POCs. Then we were really far from revenue, and this was a real learning experience the first time.

Alejandro: And here, it was actually the first time that now you were on the other side of the table. What did that look like when you finally went to the other side and where you were the one asking for money rather than you giving the money?

Tom Livne: You know, I felt that I was going through an amazing journey and handling the real problems. As an investor, you have multiple companies, you sit on the board, and you’re not really touching how to raise the money, how to do the go to market and the strategy, how to hire people, how to build a product. As an entrepreneur, you need to think about all those things. As I said, it was a great learning experience for me, and I enjoyed it, and this is why I’m still in the operating role rather than investing. Although, from time to time, I do small angel investments on my own, but I’m mainly operating as a CEO and the founder of Verbit. It’s like 200% of my time.

Alejandro: I hear you. And, obviously, here during AppInsight, there was something completely unexpected, some news that you got from your co-founder. What happened there?

Tom Livne: Unfortunately, after a few months, after we raised the seed round, my co-founder informed me that he was sick with cancer. It was a really rough time for everyone, mainly for me. I’m in charge of the money that we raised from investors, my co-founder, now sick, and from the six employees that we hired because we were early-stage. So I’m in charge of everyone. It was a tough situation to make everyone happy. Then I made a great decision. I decided to give back almost 80% of the money that we raised from the investors and then shut down the company. It wasn’t easy. We spoke earlier about resilience — to have this experience, and then to still have the belief in yourself that you can create something big. Literally, a few months after, we started Verbit and brought Verbit to where it is today. Not every person has the resilience to go this cycle and still build another company. 

Alejandro: How long did it take from you being informed by your co-founder to the moment that the decision was made and that you had to close down and return the money to the investors?

Tom Livne: Within a few weeks. We tried to see if we could buy them out, or we tried to come up with creative solutions. Once we realized it wasn’t going to happen, I said, “Guys, I don’t want to burn any more of your money. I don’t want to be responsible for that, so I want to give you back your money. A few weeks after, we called it a day and shut down the company.

Alejandro: Because your co-founder was, obviously, not in a state to continue working?

Tom Livne: No. Unfortunately, he’s not with us today. It was a really tough situation.

Alejandro: I’m sure, Tom, that Elon is looking down and very proud of what you’re doing.

Tom Livne: I really hope so.

Alejandro: Yeah. Tell us what happened? Obviously, it’s a tough one to swallow. Here we are talking about resilience, so resilience to a whole other level. The money is returned to investors. You guys closed down the operation, and then you’re left thinking, “What’s next?” What happened?

Tom Livne: Yes, as we discussed earlier, I’m a banker, and I’m a lawyer. No one is perfect. I remember as a lawyer how much time and money we were spending on legal transcription. Every few months, we were changing the vendors that we worked with because they were always late and not accurate. I had to do the editing of those legal transcriptions in the position myself because it was not accurate, and we were spending hundreds of thousands of dollars for those positions. Then I said, “There has to be a better way.” As an entrepreneur, you’re looking for problems with high friction and low efficiencies that you can bring technologies and change it around. Then while I was starting to think about this professional transcription market, I said, “How big is the opportunity?” Think about, also, our conversation right now. We have your amazing broadcast, which I’m a big fan of, by the way.

Alejandro: Thank you.

Tom Livne: Then, there is a lot of verbal information. If you have a professional transcript and you can hear my terrible Israeli accent. If you want to get professional, 100% accuracy, it’s like there is no AI and no speech technology can do it. Then I was amazed at how many use cases you could do, not only in legal and creating very big opportunities. Then I decided I wanted to do something—this was also one of the learning experiences—something that I’m really passionate about. So the inside experience was around mobile security, and my background is not related to mobile security. Although, if you’re a quick learner, you can quickly learn everything. But then I said, “I want to have something with my own passion, and as an entrepreneur solving your own problem was really resonating with me, and this is how Verbit started. I said, “We have to reinvent and bring technology to legacy word of transcription, and instead of doing everything manually to bring AI and innovation to this huge market. Here we are today, a bit more than three years since inception building Verbit.

Alejandro: How did you assemble the founding team?

Tom Livne: The founding team was Kobi, Eric, and me, three founders. Then I said, “This is the idea: I have to bring an AI and speech recognition expert. I will start to reach out to my network, and through mutual friends I got connected to Eric, our CTO and co-founder. He has a Ph.D. in the domain, third-time entrepreneur, and vast experience in speech-recognition. Then we got connected. He was just about to finish investing in Intel after they acquired [0:15:41] that he was part of. We said, “Let’s start to build it.” It was funny—we were having Skype calls twice a week, and he was in the Bay Area. I said, “I’m buying a one-way ticket. Let’s start working on it more seriously.” I flew over. I slept on his couch for a few weeks, and a friend of ours gave us some space to start working. Then we built the whole plan, and I told him, “Look, Eric. I’m going to go back to Israel, raise some money, and if I am successful, then I want you to come back, and we can start working on it seriously.” Then, after there were two of us working, he was like the brain behind the AI and the speech, and I was more on the business side. But then we said, “We still need to have someone in engineering and the product-related that will help us build the marketplace because today, we have 15,000 freelancers in our community at Verbit because our solution is hybrid of AI and speech and human in the loop. Then, Eric told me about Kobi that was a co-founder with him in one of his previous companies. We felt that we needed a third angle. Then he introduced me to Kobi, and I managed to convince Kobi to join us. Since then, the three of us are working happily together until today.

Alejandro: That’s amazing. What ended up being the business model for the people that are listening to get it?

Tom Livne: The business model is quite simple. It’s per audio minute. Usually, your broadcast episode is around, let’s call it 60 minutes an hour. So, a dollar per minute. This is really rough, with the price a dollar to two dollars. It depends on the industry and the volume and the turnaround. There are a lot of parameters, but this is the price. We are aiming more to B2B-related because we have different competitors buying for the longtail that you can upload any audio, put your credit card, and get a transcript. We are aiming for the enterprise to become a customer of Verbit, a minimum of $10,000. For all the entrepreneurs out there, there are different go-to-market strategies. If you want to do more inside sales-related, it depends on the check size. If it’s more self-serve, so it’s more marketing. If it’s more a big-deal size, then you need to go more up-market and enterprise sales-related, which is priceless. So, you need to understand for the customers, what is the average deal size, who is the buyer? And then to make the go-to-market accordingly. Then it could be really good advice for all entrepreneurs.

Alejandro: In this case, you were alluding to once the team was coming together, then you were immediately thinking of funding. How much capital have you guys raised for the company so far?

Tom Livne: We’ve raised up to date, 65 million. Most of them are still in the banks, so it’s good for us. We’re growing very fast and efficiently. An interesting story is that even before raising some money, we were starting to sell the product. I remember the first customer. We managed to convince him to buy the product. We didn’t have anything ready yet. Then he started sending us some audio files to transcribe. Then I remember this moment that I was doing the transcription myself. I was telling my co-founders, “You have to start writing code and build a product because I won’t be able to do it for all of them myself.” Then the pitch for the investor was like, “We already have paying customers. It’s such a big market. We can keep bootstrapping the company. Why should we take the money from you?” Then the whole pitch and the whole story was like why to convince them to give us money and why they should convince us to choose from them. So far, we were lucky that every funding round that we went through, we got multiple offers. Then we were able to choose who is the partner that we wanted to work with because eventually, while choosing to exceed fairly working with is really critical, the partner that would join your board, how you get along, are you sharing the same vision. So there are a lot of parameters you need to check as an entrepreneur while doing the first due diligence for the VCs. 

Alejandro: Recently, I saw that you guys raised a Series B. You announced that last month, so congratulations on that. That’s fantastic. I’d like to ask you here, what have been the main differences that you have encountered from going from the seed round to the Series A round, and then from the A round to the B round?

Tom Livne: A great question. The seed round is more about promising and selling the dream. Then if you have a strong team and a compelling story in a big market, I think you should be able to raise money. Then in Series A, they want to see that there is what I call technological risk and if you are able to build the product, and you’re able to show the initial product/market fit. For example, if there are three or four customers, initial attraction, and they are interested in what you build and the technology. Then Series B is showing, “We raised the Series A. We managed to grow from one million to four million in revenue.” Then you say, “Now, we want to take the four million and make it 40 million.” That is more the growth stage and the Series B. Every stage is different risk elements that the investors are examining when they’re looking at your company. 

Alejandro: And, of course, storytelling has also been a key component there, so tell us about storytelling and fundraising, Tom.

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Tom Livne: Yeah. I think a lot of people had already discussed it. It’s all about the storytelling. The investors need to fall in love because eventually, they’re betting their career on you. They want to get the comfort that they want to work with you, and then you can return their fund, and you’re a resilient entrepreneur that is obsessed about his company. You need to be able to transfer all this information and message in the first hour of greeting. It’s kind of like when you go for an audition, and you need to be able to convince them and to show that you’re confident in yourself. It’s all those parameters. You need to know all the data and all the information. Usually, you need to practice a lot of other fellow entrepreneurs and feed you the story and shape it. Then once you feel you’re ready to have the flow—my personal experience is I never use a deck to fundraise. It’s all about me sitting there, telling the story, and sometimes even showing the demo of the product. For us, it’s compelling that you know, for instance, that we can take this episode and literally upload it to the Verbit platform and get the automated transcript fast, and then for me showing, as a freelancer, how I’m doing the correction where needed. It’s about the experience that you’re transforming to the investor and how you communicate the story. I think it’s really important.

Alejandro: Obviously, in your case, you did think a lot about Blitzscaling, which is what Reid Hoffman alludes to doing that crazy hypergrowth when you’re a startup. What did you get out of that Blitzscaling mentality or mindset, and how have you applied that to Verbit?

Tom Livne: Yeah. Great stuff. I think it all starts high-level. Eventually, in order to create positive momentum when you fundraise, it’s all about the [0:24:48] missing out, and you gave really good buys and momentum around your company. The number one indicator to create value is growth. What investors are looking for is growth. Once you’re able to back it with data so it’s critical, but if you’re going back for the Blitzscaling, I think it’s like the ability to live with uncertainty. You need to make a lot of decisions when you don’t have the perfect data, and you need to make an educated bet, I would call it. So, you need to embrace the uncertainty, and to live with it, and to be able to grow your company in this direction. I think the army service that I had as a young kid — you need to make a lot of decisions with uncertainty and to embrace this kind of situation, so it’s helping you be more a risk-taker and to keep fueling the momentum and the growth in order to keep the Blitzscaling going.

Alejandro: And you definitely kept it going because you went from the founding team to 100 people in no time, in just a few years. In a process like that or in a transformation like that, that the business is experiencing, how do you embrace culture, and how do you make sure that you keep a good culture with big-score principles?

Tom Livne: Culture is one of my favorite topics in general. Early in the days, we created our core values. When we got started, a lot of people told me about how important core values are and culture, etc. but I didn’t know what it meant. I tried to educate myself in all of that and learn what it meant. Then I saw an interesting movie of Jeff, the CEO and founder of Twilio, talking about articulating the core values. Any entrepreneur should watch this video. He gave a good framework about how to build the core values. Then I sent this link to our VP HR. She saw it, and she came to me, amazed. She told me it was great, and “Let’s do it.” We built a presentation presenting it to our management team why we think it’s important to have core values in the company. Then we got the alignment of everyone who is critical. Then the VP HR interviewed each one of the employees in the company asking what Verbit is for them, why they came to work for Verbit, and all these kinds of questions. Then we got all the information. We not only did calibration; we also gave it a sentence that could explain exactly what we meant with calibration. So, we can only succeed together. Then we created the five core values for Verbit. Then we had a whole announcement in front of the company of the results. Also, for the board level, we presented it. Now, every time we are hiring new people, we build a list of questions that reflect those core values and to see if there is culture fit for this candidate. Also, when we do the employment assessment every year, then we ask questions around these core values and make sure that the core values are reflected in our company and represent who we are. Eventually, it’s all translated together in the business results. I think it’s important for every startup that is growing in order to maintain the culture. But eventually, culture is defined, and I think it’s from the Netflix founder that said, “Who you hire, who you fire, who you promote so that you can have all these core values.” I think those three are critical.

Alejandro: Talking about hiring, I know that for you, you always think about potential candidates as people that you would actually see yourself working for. Also, for you, hiring senior people has been top-of-mind early on. Why was that the case?

Tom Livne: Great questions. I think when you’re growing so fast as a company, then you have those people with whom you started the company in the early days, and now they reached your ceiling, and you need to keep growing the business. I was lucky as a co-founder to have this compounded growth on a personal level. I’m still ahead of the curve as the CEO of the company, but it’s not always the case that other VPs, etc. are growing at the same pace as you. Then, they’re in the ceiling, and you always need to consider what the best interest of the company is. Then, it’s like, now we want to take the company from 10 million to 50 million in revenue, this guy is not good enough, or this girl is not good enough to take me through this journey. Then you need to upgrade your management team. Then you’re looking for strong candidates that are much better than you. As a CEO, you need to be innate in every discipline whether it’s finance, HR, sales, customer success, marketing, product, R&D, whatever. Then you need to bring someone who is ten in each one of the disciplines. Once you bring senior executives with a lot of experience that have done it before and have more experience than you, then you need to get used to the situation that they know better than you and how you can challenge them on their professional areas of responsibilities. Now, the average age of the Verbit management is around 50 years, and I’m only 34 years old. Then I have more than 80 years of accumulated experience. Then within one quarter, I need to ramp up and catch up with all the experience to be able to be the manager and the leader that they would look up to me. Then, creating good dynamics around the team working well together, I think of having this transformation of uplifting the management team and creating a good working environment and work together as a team all that is interesting and learning experience that every entrepreneur in a growth-stage company most likely will experience eventually.

Alejandro: To that, it’s interesting what you discussed there in terms of dynamics because it doesn’t matter if you hire a rock star because, at the end of the day, what you want to make sure of is that rock star is able to work with the other folks because ultimately, you can go fast or long, but further always when you go together. How do you foster and embrace those dynamics to make sure that people are working well together?

Tom Livne: I think having a long process with multiple interviews. Every hire for the management team is critical. You need to make sure you make introductions to all the peers around the table, the management team. Then have an open discussion about the specific candidate, and usually have multiple candidates interviewing for a specific role, and not only one. Then have an open discussion. Also, when you see multiples, then you can benchmark them against each other. Then reaching a decision, and how to get the final decision of who to hire.

Alejandro: Let’s say, Tom, that you go to sleep tonight. A long day at the office. You put out a couple of fires, which is what founders always do, and then you go to sleep, and you wake up five years later. So, a tremendous snooze. You wake up in a world where the vision of Verbit is fully realized. What does that world look like?

Tom Livne: Yes. We are, as a management team, ringing the bell, going public in the Nasdaq. Then we’re creating the biggest technological transcription platform in the world in multiple verticals, multiple domains and building a meaningful, big company, and doing good returns to our investors who believed in us along the way and creating value to all the stakeholders, which are our employees, keeping and serving our customers well. Also, as I said, we have 15,000 freelancers all around the world. You can think of us as the Uber for transcription. We are creating a lot of jobs for people around the world. Then, as we are growing, we are creating more jobs for more people. We also have people from third-world countries. We’re getting emails, “Because of Verbit, we have the ability to feed our family and take care of our kids.” Then, keep doing what we were doing and creating a lot of work for homes for people who need it. Also, to be a leading company in our domain. I think it’s ours to choose because, in terms of competition, we don’t have a real serious competition, and we are well-funded for the opportunity, so I believe we are on the right path to reach in five years for going public as I just described.

Alejandro: Very nice. For the folks that are listening, typically, we have the same question asked to the guest towards the end, and that is knowing what you know now, Tom, if you had the opportunity to speak with your younger self, that younger Tom that is perhaps still working at a large corporation. If you had the opportunity to really share one piece of advice before launching a business, what would that be and why based on what you know now?

Tom Livne: As I said, you really need to enjoy the ride, and to be passionate about what you’re doing because to be an entrepreneur is really tough, and you need to be resilient. If you won’t enjoy it and won’t be passionate about what you do, then you won’t be able to survive the journey because it’s a tough journey. So, be passionate about it. Again, it’s all about the people. You need people that you would like to work with, and you want to learn from them. Then the people that surround you are who you are and will define which company you’re going to have. It’s all about the people and to be passionate. Those are the two main things.

Alejandro: I love it. Without a doubt, passion and people. Good combination there. So, Tom, for the folks that are listening, what is the best way for them to reach out and say hi?

Tom Livne: Via LinkedIn. Tom Livne at LinkedIn or in my email to*@ve****.ai — feel free to reach out.

Alejandro: Fantastic. Tom, thank you so much for being on the DealMakers show today.

Tom Livne: My pleasure. Thanks for having me. As I said, I’m a big fan of what you’re doing and keep on doing that.

 

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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 al*******@pa**************.com.

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