Acquired - Acquired Episode 17- Waze

0:00We have a model where we think money from venture investors, we give it to engineers. That's how the business model works. Except for that, now that we're part of plan, we're part of Google everything's changed. Welcome to episode 17 of Acquired, the podcast where we talk about technology acquisitions.

0:34I'm Ben Gilbert. I'm David Rosenthal. And we are your hosts. Today, we're going to be talking about Google's acquisition of Waze. But first, we talked about in our last episode, we are going to be doing a community showcase. And this week, it's one of our listeners, Brian Sanders. He and his team are building something called NextCast. NextCast is a next generation podcasting client that has a lot of interactivity baked into it. So they look at the existing kind of flat one-way medium of podcasting as it is today and Brian and his team are looking at ways to make it kind of more of a two-way street so you can have a relationship with with a podcaster and click links and watch videos and things like that the apps not totally built yet but their customer development process and kind of their their

1:24pitching for funding and things like that is being covered in a podcast called buildingnextcast. So check them out at buildingnextcast.com if you're interested. It's really cool that we launched Community Spotlight and we did an episode about podcasts and it's like they were listening to the episode. This is perfect. Yeah, it's awesome. So if anybody out there is building a social navigation app, please ping us.

1:53Yeah, if you would like to be on our next listener showcase and you're working on something that you want to tell people about, shoot us an email at acquiredfm at gmail.com or tweet at us at acquiredfm or hit us up in the Slack group as always. All right, listeners. Now is a great time to talk about a new partner of ours here on acquired LaGora, the agentic operating system that is redefining how the world's best legal teams work.

2:21Yup, it's sort of obvious that AI is going to completely change the legal industry. I bet most of you listening have dropped a contract into some sort of AI chatbot out there. LaGora took that insight and asked the question, what if you really built something with that power from the ground up for the legal industry? So the founders did exactly what great founders do, operate with obsessive customer focus. They embedded inside a massive law firm.

2:48for months. They sat with the lawyers just watching how the work really gets done. And that's how you get features that customers love, like tabular review, where you drop in a folder of hundreds of contracts and it pulls every key term into a grid a lawyer can actually work with. Lugora's bed here is interesting. Since it lets each lawyer handle more complexity, any given person can increase the quality of their work and do higher value work. And this means that the pie can grow even as each individual task takes less time.

3:17And they recently launched LaGora agent offering greater intelligence and performance. The agent lets lawyers set an objective. Then it can handle the planning and the execution and delivery of the final product. Legal teams get to maintain full control and transparency since they're still involved where judgment is required. And LaGora works where you already work. You can use it within Microsoft Word while redlining or drafting. The early LaGora numbers essentially speak for themselves. When they have a head-to-head pilot with their top competitor, they win 70% of the time. Legora now has over a hundred thousand lawyers on the platform from 1200 legal teams in 50 countries. And crazily they went from one million to a hundred million in ARR in about 18 months. Truly insane numbers. And that is the real test.

4:09Plenty of things demo well, but the question is whether a busy associate actually reaches for it during crunch time or whether a partner trusts it before going into a conversation with a major client. If your legal team wants to check it out, whether you're a law firm or you're in house at a company, you can learn more at legora.com slash acquired and just tell them that Ben and David sent you. All right, Ben, should we get into it? Let's do it. Let's do it. Ways.

4:37I would presume most of our listener base is familiar with ways, but for those who aren't, it is a social navigation app. Much like Google Maps, or MapQuest going way back, or Apple Maps, we'll get into that in a minute. But you drive with friends. Yeah, and so Waze is, you know, Magical insight is that there's a whole bunch of data being collected on the road by other drivers all the time that can indicate Things passively like oh, there's a there's a traffic There's high traffic there because people are going really slow now Google's been doing that for a long time They noticed that in in 2009 based on data being fed back from Android, but what ways does is it?

5:20both plugs you in with a social network based on Facebook or importing your contacts. And you can while you're driving, report things like red light cameras, like police officers, like traffic accidents. And you kind of get a real time map when you're driving of the incidents on the road. And this is really cool because before ways, there was kind of like all of navigation and mapping was this like top down thing where like, you know, Tom Tom or Garmin like they had their data set that was like canonical and then you know even Google was collecting it from Android phones But before that, you know, they were just buying it from from these other companies But the key insight in ways was like hey people are driving around with this stuff like they should be sending data back about what's really going on in real time so yeah cool history about how this started so ways

6:15is actually an Israeli company, and this is our first acquisition that we're covering out of Israel. It was started in 2006 by five co-founders. I don't know if I'm saying this right, a food shop tie was the main founder in CTO, and he was joined by Amir and Gilea Shinar, Yuri Levine, and Ari Gilan.

6:44and Hood had been given an old GPS system, well, new at the time, but now old to our view, GPS system by a friend. You know, those things that like my dad still has one of these, that you like the portable things like a garment type thing. Yeah, like and once a year or something, you can download all the new map tiles. Yeah, and you like, you know, plug it into your cigarette lighter in your car and like, you know, suction cup it to your to your windshield. So he'd been given one of these in 2006 and He thought it was super cool, and he decided to write some software for it that would allow people to share information about where speed cameras were located on the streets in Israel. And it started to take off, but the company that made the GPS device that he had didn't like it, and so they sent him a season to CIS letter.

7:35And I believe we read that they said, they'd be willing to integrate the software but he had to stop doing it. And so rather than just giving them the software, he said, well screw you, I'm gonna take your mapping data out of this and I'm just gonna create my own mapping data and I'm gonna crowdsource it and have built this through the user base socially. So he started a project called FreeMapIsrael and the aim was just that to replace this sort of like, top down map data set that this company had put in their GPS unit with a crowdsource, you know, living in social data set. And it started to take off. Huh, a couple of years later in 2008.

8:15Things are going well, and they changed the name of the project and the company to Waze. And they changed the terms of the map, from being open and being usable by anyone to being owned by Waze. So Waze now owns and can commercialize all of the mapping data that it's usually generating.

8:37And so that was in 2008. And then in March of 2008, they raised their series A, the first capital they raised. They raised $12 million, led by Blue Run Ventures, which is a US venture firm and Magma Venture Partners and Vertex Venture Capital. I believe who are Israeli venture firms. And it's interesting later, you know, this comes to play after the acquisition.

9:03known Bardan who became joined later in 2009 as the CEO of the company. He wrote a blog post and he said, one of Waze's mistakes was the valuation of its Series A, which significantly deluded the founders. Perhaps had we held control of the company as the founders of Facebook, Google, Oracle, or Microsoft had, Waze might still be an independent company today. This was after the acquisition he wrote in a blog post on LinkedIn. Oh, wow. Yeah.

9:30So, the company continues to grow after they raise the series A. Mostly in Israel, and then they start to add other countries as well. And in December of 2010, by that point, they've reached two million users, and things are growing pretty well. They have over 250 million kilometers logged in the app, which is huge. Again, compared to data that other mapping companies are using, which is not live real data, this is a huge amount of mileage that's on real city streets and routes that are getting uploaded to ways. So at that point, they raise a $25 million series B from the same investors plus Qualcomm.

10:15And that was at a $95 million valuation. This was all reported in a Wall Street Journal article after the acquisition. And at that point, they opened up their first office in the US in Palo Alto, which was really cool. I remember when I started at business school at Stanford and seeing the Ways Office just like on the street in Palo Alto, like, oh man, there's Ways, like that's super cool. There's a little storefront. I had that same...

10:42That same feeling I remember when I moved out to California first summer for an internship walking up and down Castro street and mountain view and just seeing like all the different startups the one that actually Sticks out my mind was weep me bow I remember it was like that web based chat software that I had used a lot and it's like really strange when you see a logo in real life that you're used to seeing digitally like a like a physical representation on a building and you're like whoa It's right there. Yeah, this is one of those like really strange things that when you live in Silicon Valley, you get used to really quickly and don't think about. But when you first move there or you visit, it's totally mind-jarring. You see these storefronts and they're actually storefronts in Palo Alto and Mountain View and sometimes even in San Francisco, they'll be next to retail shops and they're like, you know, ways. So they raised the series B. They had about 2 million users. That's December of 2010. Fast forward, not quite a year.

11:41to October of 2011. And here, the intrigue starts to begin. October of 2011, they raised their Series C. So less than a year later, they raised $30 million at about a $200 million valuation from Kleiner Perkins and Horizons Ventures. And they announced that they have 7 million users at that point. So October 2011, at the end of 2011, beginning of 2012, they announced they have 10 million users. So in just a couple months, they had 3 million users.

12:10halfway through 2012 in July, they announced that they have 20 million users. So they've now doubled from 10 to 20 in six months. And then later on by the end of 2012, they get to 34 million users. But a really important thing happens in the life of this company. And like I said, where the entry begins in the summer of 2012 at WWDC, it's amazing like how much you know, Apple and WWE DC ends up playing a role in, you know, our podcast here. Is this the forest all? Oh yeah. Oh yeah. Scout forestals last her last stand. It's like Custer's last stand. I was actually at, let me see what it is.

12:55Well, so yeah, I'm burying the lead here. Apple announces iOS 6 at WWC 2012, and in it, one of the marquee features is their launching Apple Maps. So they're ripping Google Maps out of the iPhone. So until then all previous versions of iOS had had the native built-in map software was Google Maps. That was built by Apple, but with Google's.

13:24data and data. Google's, you know, map tiles. Yeah. And I think it was something like the contract expired. And it was such that Apple didn't want to renew the contract with Google because they were starting to kind of part ways and get into a little bit of a war between the two companies. And Apple had to ship maps early because the they couldn't use Google's data anymore and they didn't want to re-up and they knew that re-upping would come with a really nasty price tag for them and a lock-in to send Google a bunch of data that they didn't want to. And I think Google is also requiring that people sign in with their Google accounts, which Apple didn't want to do for privacy concerns, even all the way back then. So Apple kind of like obviously rushed maps to market.

14:14Because there's even more context setting that needs to happen here, which is that as we were doing the research for this episode, it struck me just how fast the technology world moves. This was only four years ago, but it feels like a lifetime ago, and I hadn't completely forgotten all this stuff.

14:36This is in this like at this time the mobile platform wars you know quote-unquote were like in full swing like Apple and Google are going at each other's throats and like everybody in the tech industry is like who's gonna win mobile is it gonna be iOS is it gonna be Android and you know the tide swinging one way or the other and people think that this is gonna be a winner take all market at this point in time yeah and The other thing that happened is Tim Cook had recently taken over a CEO of Apple. Steve Jobs had passed away and the Apple was really in a tim and Apple. They were figuring out what was going to be the path forward. It was becoming clear that there was no way that they were ever going to overtake or catch up to or overtake Android on actual

15:32user numbers, but the world hadn't come to the conclusion yet, which now we just accept as a given, is that nobody won the platform war. iOS and Android exist co-exist peacefully. There's this everybody builds for both mostly, and Apple has the...

15:51the more valuable customers and Android has most of the customers. And that's just the way the world works now. And there are all sorts of tools now to make it easier to build for both. But that was not the world back then. And so, this is the stage, you know, ways that have been operating for four years at this point. And they've been growing the user base nicely and riding the wave of mobile. But all of a sudden, they are like at the center of this huge conflict between these two behemoths. Yeah.

16:20in at WWDC Apple announces Apple Maps and this has been years in the making but as Ben as you're saying they had to rush the product market when they actually shipped iOS 6 in the fall and it becomes super clear like there was a ton of hype for this product this was like the 10 pull feature of iOS 6 it becomes clear within a week that like it is hugely broken and there are all these reports of like people getting sent to the wrong addresses causing all sorts of problems and accidents and like it is a disaster for Apple when this happens. Yeah, and the story, you know, that Apple is trying to tell is like it's two-sided. One is that...

17:04You know, we really messed this up and we apologize and that's kind of Tim Cook comes out with that public letter writes a writes a letter posted on apple.com Apologizing. This has never happened before in the history of Apple like people are saying is what never happened under Steve right right, but on the other side You know apples hedging and they're saying well, you know, it takes a lot of time for the data to come in for it to get better Apple maps is only gonna improve which is true which is true dramatically better and that's the exact same story they had with Siri yep and Going back to the Steve Jobs comment it's funny Steve this feels like actually a tremendously Steve Jobs move because like Steve is famous for you know saying is gonna go thermonuclear on android and like when when he gets into a tiff like they get into a tiff and like even if it is it has some fallout like we saw here I think that that's a very Steve move and that's actually

17:58Scott Forrestall was largely responsible for this and he was at Steve Jobs protege. closing the loop on the Apple intrigue here. This ultimately ends up in Scott Forestle getting fired. Scott refused to write the letter, Tim said. I'm going to do the first three. I'm going to do the first three. I'm going to do the first three. I'm going to do the first three. I'm going to do the first three. I'm going to do the first three. I'm going to do the first three. I'm going to do the first three. I'm going to do the first three.

18:29The public talked about like, hey, it's Scott Forrest, all the next CEO of Apple, right? Like, this guy is not, he's not just like some Apple exec, he was like Steve Jobs's protégé. Yeah. And it's amazing that in this letter that Tim Cook writes, he lists some alternatives for people that are dissatisfied with Apple Maps and says it's gonna get better, but actually, this is- Alternative products. This weighs as one of the products that people should go and try out instead of Apple Maps.

18:58in the in the letter, uh, which is, um, again, this is like uncharted territory for Apple at this point. Um, again, because with the backdrop of their locked in this feature war with Android and another one of the reasons why, uh, that people speculate about why Apple and Google couldn't come to terms to keep Google maps within the native, uh, the native iPhone software is that Google had recently shipped turned by turn navigation in Google Maps for Android but not it wasn't available on Apple and people were speculating that Google was withholding that ability which is hugely compelling. You got to remember again this is like more context like the like Tom Tom and Garmin and all these guys had navigation apps in the app store at the time and they cost like a hundred bucks. I think they were patented like Apple

19:53for whatever reason. I remember, maybe I was wrong about this, but I remember the reason being that Google Maps for the iPhone didn't have turned by turn is because those companies owned the patent today. Could have been, maybe Apple was concerned about that. But it was bizarre, like the official Maps app on iOS.

20:13You only just got a list of directions. It wouldn't talk to you and say, like, turn right and 600 feet or whatever. You had to scroll through the list as you were driving or walking or whatever. It was terrible now, looking back on it. But if you wanted to turn by turn directions, A, you got crappy products with crappy data from companies like TomTom and whatnot.

20:37But you had to pay 50, 100 bucks for that. Just for the app. Like, could you imagine paying 100 bucks for an app now? Right. Right. Right. So the stage is set. I mean, the stage is set. So in the middle of all this, ways is free and ways provides pretty good mapping data and application. So this was, it was kind of October, 2012, by the time the dust settles, apples fired, scot forest, all.

21:04And then rumors start swirling that Apple is looking at acquiring ways. Which was actually never true that I believe it was who denied it. Apple. Well, Apple denies everything. Yeah. Anyway, Apple denied publicly. Apple Apple denied publicly, but you got to imagine that, you know, in the wake of this, that they're looking around and saying, oh my.

21:32gosh, what are we gonna do? We just have this egg on our face. And here's this free app that is pretty good in the store and has a really interesting data model. Maybe we should buy it. And the rumors were that they were talking about about a $500 million acquisition with ways. How far that went? We don't know, but it doesn't come together. At the same time in December of 2012, so a couple months later, Google launches a standalone Maps app, the Google Maps app on iOS, which many of us myself included now use and love does include turn by turn directions, but is just a regular app in the app store. And it was great. It was like this incredible. Actually, I know there was a five person team that did the.

22:21native code and actually in the Kirkland office here in Seattle. Oh, cool. Yeah. I didn't know that. Yeah. I think the backend was all all down on the valley, but the actual iOS app, the objective CU is written up here. Wow. That's all. And when it comes out like It gets huge praise and it was like better than the Android. And there's all these, yeah, that was a big blow up. There's all these articles written about Google's new design paradigm because it was uniquely iOS but still familiar for people that love the Google interface and they found this amazing way to combine the two design languages. And there were pieces written. There was a fast company piece that was written about how Google's new Google had this like design studio in New York and they would go and work with all these individual business units.

23:04it was like, I mean, I thought that it was really well made and I think the rest of the world did too. It was so well received. And I think actually that moment looking back on it now is the beginning, the heralding of the end of the mobile platform wars. Like now, I think we can look back on that and say that was the moment when the world, at least Apple and Google both decided like, hey, we can peacefully coexist here. Yeah.

23:32Yeah, and Google knew that they had a good product on their hands and if they released it And I believe you still have to when they released it you had to sign in with your Google account So that was a path to getting a whole bunch of data that they wanted yeah, and they Google realized they were getting all this data and all this monetization opportunity on iOS and it actually was super valuable for them So that was at the end of 2013 2012 going into beginning of 2013 another piece of context here is that Facebook is now emerging as the big, giant counterbalancing Google in the, you know, again, in the post, you know, as the world is determining that, you know, Apple and Google can peacefully coexist. Like, Google's main enemy shifts from being Apple to being Facebook. Yeah, and it's funny that it was Apple. This is weird, due to our Google's core competency is being the best search engine and

24:30that turns out to be a tremendous ad platform. So 90 some percent of their revenue to this day still comes from search ads or search and display ads. And they shifted direction. It almost seems like Android was a little bit of a distraction to go to war. They needed Android for a variety of reasons, but it made them focus on Apple as the enemy since Apple was also producing this rival OS that came with great hardware. But really, Apple wasn't after Google's core business of search queries that led to a lot more of Google ever after Apple's core business of hardware sales. Like Google doesn't make money on hardware sales for Android. No, but they really went to bat on trying to displace the iPhone. Yeah, and it's weird like

25:21you know, historically, Google and Apple had always had this great symbiotic relationship. Google does the services, Apple does the hardware, native software. And, you know, Eric Schmidt was on Apple's board until Steve Jobs kicked him off after they launched Android. And really, but you know, then at the end of 2012 when Google launches Google Maps on iOS, it's like the day time is reached.

25:47And since then it's like, I wouldn't say it's back to the good old days, but like Google and Apple both realize like, hey, we're not each other's enemy here. Yeah. Yeah. Apple makes hardware and software that are excellent, sells the hardware. They have services that differentiate them, but ultimately you can plug in Google superior services on any of those devices and have a great experience and it's symbiotic. Yeah. But you can see why Google felt so strongly that they needed to control the input pipeline. It's the same reason that they make Chrome. It's the same reason they're distributing Chrome books. Anybody who's the front door to the user?

26:23How's the power to redirect that like Apple shipping all these services associated with Bing in Siri and I maybe even the default search engine on iOS Still Google, but that's always back and forth. Yeah, it's it you can totally see why Google's like okay, we need to make sure that we don't like lose You know billions of people the front door to the internet, which is where we make our advertising money which is foreshadowing Yeah, yeah, so Facebook goes public, you know the right around the same time as WWDC in 2012 the beginning of this maps drama the real threat emerges to Google and that's Facebook's IPO Yeah, Google's you know castle is where people gonna spend their ad dollars digitally And that's linked to where people spend their time and where people's front door to the internet is and right like oh man That's Facebook increasingly. Yeah, Apple's not gonna eat Google's launch They have no incentive to to try and get that advertising pie, but like

27:20Facebook sure is, that's their core business. That's the real threat. Yep. All right, listeners. Now is a great time to tell you about a longtime friend of the show, Vanta. AI has scrambled the whole security picture. It used to be that you proved that you were secure once a year on audit or a static PDF, then everyone would nod and you're done. But in an AI first world, that doesn't hold up anymore. Yep. Your risk surface changes every week now.

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29:14We've just gone through this wild ride Apple was rumored to be circling around ways thinking about a half a billion dollar ish acquisition To fix their mapping issue Falls through but then a couple months later in the spring of 2013 Rumors start circulating that Facebook is not only interested in ways but is going to buy ways and going to buy ways for about a billion dollars. This was in the press for weeks. It was all the remind me of the Twitch deal about about a year later in that like everybody just thought this was like a done deal that Facebook had bought ways. Yeah, and in my research, trying to look and see, you know, how Google justified this acquisition and you know, how ways was doing as an independent business beforehand. So many of these articles of

30:09that are all loosely titled why is ways worth a billion dollars were written before the acquisition. Yeah, nobody even knew Google was in the mix at this point. This was about Facebook. Yeah. Yeah. So the Facebook deal falls through. And we don't know, you know, unfortunately, ways was not a public company. So we can't go through all the SEC filings and do our usual magic and to date there haven't been any lawsuits for us to go through a discovery. So.

30:38We may never know exactly what happened with Facebook, but in some of the comments that the way his team is made after the acquisition, one of the key sticking points apparently was that Facebook wanted to move the whole company to Menlo Park, to California. And the team really wanted to stay in Israel. So a couple of weeks keep going by and the world assumes Facebook has bought ways, but it hasn't, hasn't been announced yet. And then kind of out of the blue. June 2013, it's announced that Google is buying ways for right around a billion dollars, somewhere between a billion one and a billion three. Most of it was cash, but there were other stock and other considerations and that the team is staying in Israel. Some of the wazers who were in Palo Alto are joining Google in California, but the core team is staying in Israel. Yeah, and this

31:36You know, they had a pretty immature location-based advertising product right around this time. Do you know when they actually started having a business model other than wasted? Yeah. I thought you were referring to. Google had a pretty immature location-based advertising product at this point in time, which also might be an accurate statement. This was, I believe, when did Marissa Mayer leave Google to take over Yahoo?

32:02Topical as Verizon just bought Yahoo this week, but Marissa had been in charge of Google of Local and location based advertising products at Google before leaving for Yahoo, so I don't remember I think she had left for Yahoo at this point, but yeah Anyway, what I was sort of getting at there's this this billion dollar evaluation has Yeah, very very little. Wherever ways was in their monetization path and they were doing things like they had sponsored gas stations and they had some you know like Safeway and other location based advertising on the map, but I mean this was a Well, we'll get into acquisition category. Well, let's just get into acquisition category right now. I mean This was not a business line acquisition. I will come down hard on that now. What's your what's your categorization Ben?

32:56I want you to go first because I'm going to do some on orthodox. I'm going to do something on orthodox. That's why I turned on it. I'll go first. I'm doing it. Traditionally on this show, we categorize either by people, technology, product, business line, or other. I don't believe this falls into any of them because this is a data acquisition. David, you were just bringing this up right before we talked about the show.

33:26I want to introduce for acquired going forward another category of asset. This is clearly an asset pie. That's exactly what I was going to say. All right, so apparently we are. Are we sharing notes or something? Are you cheating on the test them? We actually started like what five or six episodes ago. David and I realized that it wasn't very fun when we like talked beforehand and then we're of one mind when we got into the show and then we would refer to things like we were talking before the show, which is less fun for you guys.

34:06We were like okay, we're gonna stop talking before the show except for like a few things here and there to make sure we have all of our bases covered and sure enough Here we both are again. Yeah, and it's like this is so clearly what it is because you know if you run through all the all of our previous categories for acquisition like this was not a people acquisition like the ways talent though the ways founders were clearly very talented but That's not you know Google had plenty of people who were great at a billion dollars is not a talent acquisition yeah, well, I mean Yeah, no, it's not. This was not a technology acquisition. The technology, as we were just saying, that was actually in the Google Maps asset was arguably as good or better than ways at the time. Yeah. They didn't have active reporting, but they had the passive reporting of traffic and had been doing it forever. I actually had in my notes from early research, why doesn't Google just do this themselves? Because this is exactly the kind of thing they're good at. Yep.

35:01It wasn't a product acquisition, like ways still exists and lots of people use it and love it but like they didn't replace Google Maps with this. No, and it's in fact not even part of like the Google suite. Google finally now was bundling it as one of the OEM options when you get to choose all the Google services when you're making an Android phone, but it's still not a Google branded product. No, Google Maps is still clearly the flagship location based product. Definitely wasn't a business line, but it definitely was an other Other slash asset buy, and the asset was, you know, I think a couple of things in this case, which is really interesting. I think we talked about this a little bit with LinkedIn, but A, this was a data asset. Ways generates so much very, very valuable data.

35:48for that would be valuable to lots of people, but especially to Google in terms of improving their core-maps product, in terms of their driverless car initiatives, and everything they're doing with transportation, having real-time data, and not just passive data being streamed back from the phone like they're doing with Google Maps, but...

36:06things like, you know, where traffic stops are, like user reported accidents, you know, controversially, but has always been part of ways, you know, reporting where police officers are, officers are in speed traps and red light cameras and things like that. But also, like, super clearly, as we've just been talking about with this whole drama leading into the acquisition, this...

36:30had huge defensive value for Google. Like they did not want Facebook to have this. Yeah, and even more than the actual asset of the data is they bought this data gathering machine. And I think that's why we haven't seen them mess with it at all. It's because it had a great growth trajectory, particularly after the Apple Max Obacle, it was growing at like 100,000 new users a day. Yeah, it was insane. And that obviously a short lived.

36:58They recognize that this thing is going to continue to feed us really great data and Data about the real world and mapping data is something that is in need of being constantly updated and people they like ways has invented these great mechanics that People often complain about because they say they're distracting while they're driving, but they've really created mechanics that People reliably feed really up to date information in high fidelity. Yeah, but passively and actively yeah, and you know the the super high value asset is nailing the creation of that machine and the user experience that compels people to continue to do that over and over again. Yeah. Well, I don't know if I want to say I'm glad we're in agreement, but I think we should add this to our categories going forward. Because this is so usually in other, it's like, oh, it's a one off, but like this is very clearly a category that we just haven't come across before. Yeah, I agree.

37:58Cool, so what would have happened otherwise I feel like you know in a lot of ways it's it's Through what we were discussing in the history with the drama and all the different big tech companies circling around ways You know this company was gonna get acquired by somebody so I think that's what would have happened otherwise. Yeah, it's also interesting to think though. I mean, you know, this was 2013 again not that long ago reminding me again now fast The technology world moves. I feel like Ferris Bueller here. If you don't stop and look around once in a while, you might miss it. Nobody was thinking about driverless cars then. Today, people think driverless cars are going to be the second coming. Every tech company and their mother is going after it. What's interesting is that Israel is actually really...

38:47Companies in Israel and talent in Israel are really well positioned in this. There's a company called Mobileye, which is a large public company now that makes a lot of the sensors that go into cars that are used for autonomous and semi-autonomous applications. Is it the military influence? Well, everything in Israel is military influenced, but this is what yes. It's interesting to think like would a is independent is really based transportation and driving focused company, software company combined with the hardware talent there. Be a real player in the race for autonomous cars today. I don't know, I mean, you know, big asset to Google right now. Yeah, the hard part would be production. I mean, that's something that traditionally American manufacturing has been very good at making, but, you know, Japanese are probably forthcoming Chinese cars.

39:45Well, it's interesting too. I mean, it's just like That market is so still has so far to go to play out like do you actually have to make the whole car yourself? Could you make kits to put into cars? Lots of people are trying to do You know, can you just be a pure software platform? Yeah, my I think if I'm the car companies right now and Realizing that there's gonna be this driverless future. I think you have to make the bet that People aren't gonna want to buy your cars in mass, but people might want to subscribe to your fleet. And it would be like a Mercedes-Based Uber, like a self-driving Mercedes-Based Uber. And the question is, would people rather subscribe to an individual auto manufacturer's fleet, or the things you can do for lock-in there, or would people rather subscribe to a more generic fleet, Google or Uber? In terms of thinking about themes we've talked about on this show a lot, in terms of

40:39Ben Thompson's aggregation theory and owning the customer and the user experience, you know his ways is Google Maps is that the user experience for driving now and like then the cars of the back end I don't know Maybe we should also spend a minute I think it would be because this is pure speculation as well this next topic, but what if Facebook had bought these guys like what is the world look like now? Facebook has basically no play in transportation. Yeah, did you see a This isn't quite transportation, but Facebook's doing some crazy cool drone stuff. Oh yeah, super cool. So Facebook's core competency is delivering ads to people and they've basically run out of people with internet. So to expand past their existing massively saturated user base, they're trying to get internet to more people. So there's a team, I think it's a London based engineering team that... Yeah, I believe it was a company they acquired. Yeah, but they created this...

41:37gigantic drone that can is super lightweight and as like can beam internet down and can fly for like a month at a time. And so it's like it's interesting like while they're not in the transportation space, they are in sort of the large scale manufacturing space for completely different reasons. Yeah, super cool. This thing is awesome. Like it is a giant drone that can stay in the air for, for, you know, months at a time and beam internet down and probably do satellite imagery applications as well. Super cool. Yeah, it is interesting. Like why why you could see Facebook buying this just to more effectively deliver local ads. I mean, this feels like Facebook at this point is looking for basically Facebook is buying digital social billboard space. And that's what Instagram is that

42:32I don't know if that's what WhatsApp is. That eventually is what Oculus is. They create these experiences and Facebook extends their core competency of being an advertising company into that. I think it's wildly speculative, but basically ways fits into that category of digital social billboard space where stuff comes up that is relevant to you or people want to show to you or your friends recommend. I think it makes sense in that context and it just doesn't get used.

43:01for the autonomous car stuff at all. Yep. It is interesting to this point until about two minutes ago, we started, we've been talking about ways in the context of the world when it was acquired. And it is interesting now to start thinking about it in the context of the world several years from now that's much more focused on requiring a super high-fidelity data asset for autonomous vehicles. Yep. Yep. Which is like, you know, Clearly Google, they'd already announced that they were working on self-driving cars as part of Google X at that point when they acquired ways. But very few other people were thinking about this at that point in time. How much did that play into this acquisition or not at the time? Hard to say a bit of it, but it's clearly for them as a defensive move versus everybody else that's trying to get into it. Now, I mean, Facebook might have bought about what if Tesla had bought?

44:00What if Apple had bought ways as they were trying to and Apple is now widely reported working on self-driving cars. Yeah, did you just see that they put Bob Mansfield in front of that in charge of it? Bob Mansfield is like their senior VP of hardware and then didn't agree with management or something when Scott first always still there and then moved to head of special projects.

44:24and seemed like he was half retiring, but now he's like really back in full forest with Project Titan, or the Apple, I think that's a code name for the Apple self-driving car thing. Yeah. All right, listeners. Now is a great time to thank our longtime friend of the show, ServiceNow. If you are running a large enterprise, AI agents are likely spread across every team and deploying them is no longer the hard part.

44:48Yeah, the hard part is knowing what permissions they have, what employees are using them for, or what decisions AI is making. AI security for an enterprise at scale is not a small concern. Like the risks are real. Exactly. And the challenge with AI is governing it, securing it, measuring it, and making sure that it actually delivers value. That is why ServiceNow built the AI control tower.

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45:30And ServiceNow can do this because they've spent more than 20 years building the operational backbone of the enterprise. The workflows, governance, approval, security controls, and institutional knowledge that power how work actually gets done across IT, HR, customer service, finance, and security. ServiceNow already runs more than 100.

45:49billion workflows annually, and trillions of transactions for more than 85% of the Fortune 500. So when companies need a place to govern AI at enterprise scale, they're building on a platform at the center of how their business already operates. And in a future that isn't going to be one AI, it's going to be thousands of AI agents working across every function of the company. But the question is, who's managing them all? So if you're trying to turn AI ambition into real business outcomes and make it work safely, securely at scale, Go check out servicenow.com slash acquired and tell them that Ben and David sent you. All right, should we move on to tech themes? Yeah, not that we haven't been in there for the last couple of minutes. Well, I've got two here, actually. And one, I'll just do quickly, which is we've mostly covered in this past section, but it's sort of the value of a data asset. But specifically, the bent I wanted to talk about it is like,

46:48It's when you have the potential for a very valuable data asset, you can use that as like a way to upend the business model in... in the industry that you're playing in and just give something away for free. So in this case, turn by and turn navigation apps cost 50 to $100. But ways can just give it away for free because they're going to get their value out of getting the data. And they don't have to pay to acquire it. And they don't have to pay. And I think we've seen this in various ways in other Acquisitions both that we've covered on the show and ones that we haven't yet like I'm thinking about Instagram, right? Like Instagram was a social network, right? But there was also this app called Hipposomatic that was out before Instagram that was basically just the same thing but it cost three bucks and it gave you a cool photo filter for your photos and Instagram came out and made it free and like lots of people I'm sure tried Instagram because they're like oh cool. I wanted to use Hipposomatic, but I didn't want to pay three bucks, you know

47:52And, you know, same with LinkedIn. Like, if you wanted access to people's resumes, you had to, you know, pay recruiters and, like, go through databases and what on LinkedIn was like, resumes are free, you know? Skype did the same thing with phone calls. What's app did the same thing with text messages? So I think it's a... That's a really interesting way of looking at that that I really thought of before. It's like all of these companies found a way to make something free that was previously expensive.

48:18and then could up in that business model. And I think a lot of the initial users that came onto these platforms were probably just like Cheepo's who were like, oh yeah, I want, I want to was thinking about using Hipposomatic, but I really don't want to pay three bucks, you know? Yeah, which is like everyone, right? Like as much...

48:37I do that you do that like we exactly like we're all cheapos in various ways and But that's the thing about like how you can get these winner-take-all markets and what you need to tip the marketing your favor is you need to like I love the the Jeff Bezos quote at the code conference which was this year which was one of our carve-outs a while a while back, you know, he says has this thing he says I think it was I do care or while it was asking him about Prime and he's like I want it I want it Amazon Prime to get to the point where it would be irresponsible Not to be a prime member because you're getting so much value out of it And like that's what that's what this is here is like it would be irresponsible to pay for his dramatic because you get more value out of Instagram and it's free right Which especially with networks of network effects of course you get more value out of it everyone's using it because it's free Exactly network effects. They're a beautiful thing. Yeah, all right. I'll I'm gonna do

49:37My two now, that was just one of yours, right? You've another one coming. Yeah, but it's it's fast. So all right, cool. I'm gonna do both my nowcs are related. One is bringing measurable online advertising into the real world. Google and Facebook both have ad units around this now. I've trying to try to attribute when you see ads online and when you go to physical retail stores.

49:59and understanding where those places are tracking you either via GPS or sensors when you're in the store trying to bridge transactions in the store and really get some good measurement around the holistic view of view in the real world and you online and you know ways totally does this you see a digital ad you tap on it you navigate to go there and like there's people don't even think twice about the privacy because like the main purpose of ways is knowing where you are so You hand that data right over, you say I want to go to this place, you navigate there, they might have paid for that ad, and then, or it might be a place that you're organically trying to go to, and then ways knows that you for sure went there, which makes it a pretty valuable ad unit and kind of ahead of their time. I think people were talking about doing this for a long time, but the idea of putting it into an app where you very explicitly have said, please track me. It's pretty interesting to go there. Yeah. And then this kind of falls out of

50:56My second piece, which is, or my second tech theme, which is banner ads totally failed on mobile. Display ads were a thing on websites, and people tried to put banner ads on mobile, but there's such a little screen real estate that even the display ad people on mobile have mostly fallen back to just putting a big freaking desktop square in the middle of articles. Remember when this would be a fun episode to do at some point, but when...

51:20Google but AdMob and Apple but it's a quadruo wireless. Everybody thought like mobile display was gonna be such a thing. Yeah, I mean, there's like there's that slide every single year in mary meekers deck that says that the mobile ad opportunity is still huge because the amount of minutes spent on mobile versus on desktop way outpaces the actual ad spend on mobile versus desktop. And that's because like This is this is my tech theme We're just now seeing the emergence of effective native advertising on mobile and as it turns out, it's not a banner ad, it's not a square, it's not an intersearchal, it's none of those things, it's not Instagram. Yeah, yeah, and it's Pokemon, right? Like it's it's figuring out what the very specific tailored experience someone is in when they're immersed in this, you know, single full screen application. And like in the Pokemon case, it's my god, they're so obsessed with finding the

52:18we are so obsessed with finding the poke stop or the gym and businesses can pay for the right to direct people to go places in the real world. And that's going to be, in my opinion, the way that mobile advertising succeeds is that it's native, it's very specific to the platform, and it took us freaking 10 years of mobile to figure out what the right way to advertise to people on that platform. It's such a classic case of the, mobile display ads being like the head fake that you know it was a faster horse right like it just wasn't you know it was the totally wrong way to think about it and we see this over and over again in technology that like and we especially see it like being in in you know the startup world like so many times people recognize an opportunity coming in a wave but their mode of thinking is stuck in the old world right and like you know

53:15It's the faster horse thing like, you know, it's like, you know, you need to build the car, you know, and like Pokemon Go is the car. Snapchat is the car. Instagram is the car. AdMob was the horse, you know. Yeah. It's a $750 million horse, but hey, you know, good for, good for that. And Omar, I believe the CEO is at Sequoia now. So yeah, he's doing great. Everybody worked out for everybody. I'm gonna do my second one real quick.

53:44We've also talked about this before, but I think this is really, I put this in here because there was a great quote in that same blog post I referenced earlier that we'll put in the show notes from Noam Bardan who was the CEO of Ways and still is from 2009 onward. And the theme is that like entrepreneurship is a global thing now. And like Silicon Valley is this...

54:08incredibly special place and has its own network effect and is where the vast majority of startups are going to come but like Innovation is not a physical location-based thing anymore and no one puts this great in his blog post. He writes about how a ways was an Israeli company and the importance of that. He says growing up in Israel in the 80s and 90s, I lived in a radically different world than my American cousins.

54:36We had one channel of Black and White TV. Music and movies arrived 10 years later. There was no fast food or American brands and we lived very differently. And then he talks about how cable television started flattening the consumer experience when that came out in the 90s and early 2000s But then he says then the internet like accelerated this change is people globally used Windows PCs and explorers to surf websites social and platforms have pounded at it again And today most of the users have the same Facebook account or Gmail interface and use it very similarly the final flattening of innovation in the world came from mobile. Anywhere you go in Israel today, you will see iPhones and Android phones. The same as in San Francisco running the same consumer apps and delivering equal joy on a family vacation with ways management. It was amazing watching our kids both Israeli and American naturally communicate and share apps without the need to speak the same language. Like, this is like a sea change that's happening in innovation. And we're seeing it with stuff like apps like musically now that are getting big. Like it's based in Shenzhen, but like

55:38It's a big social network in America. Yeah, I mean, there's still something to be said for density of networks, like just the people you encounter and the people you work around and the speed of which information gets, gets exchanged there. Absolutely, but I think the nuance here, though, is like something like musically, something like ways, like it's in both places, like musically is in Shenzhen and it's in Silicon Valley. Ways was in Palo Alto and in Israel.

56:04Yeah, yeah, I definitely the dual office thing. I would say like, you still sort of need to have your finger on the pulse in the hub. Yep. Absolutely. What we talked about this with Scott, right? Like the importance on with in the exact target episode. It was so important to Scott and Indianapolis that they get the direct flight to San Francisco. Yeah. Yeah. It's a great point. Okay. Great. Great. Let's create it.

56:33So it's interesting there's probably there's like two criteria to think through here There's we're three years out from this acquisition. So we have a little bit of perspective We can see what they've done with it so far But then you also have to take into account the speculative view looking forward which is a lot around autonomous vehicles and You know, I think they've done a pretty It's really hard to figure out what the size of the ad business within Waze is. I predict it is nowhere near close to paying back the purchase. This as a product. This as a product is not going to pay for itself, but the data asset has stayed really strong. People still use Waze all the time. Many Uber drivers are using it and preferring it to Google Maps.

57:24It's in developing countries, it's used way more often because the crowdsource data is way more accurate. So as those countries really start to come online, I mean their default experiences ways, it would be not great for Google if that was out of their hands. And I think that that combined with Google's autonomous vehicle future and the great data that it develops, that it creates for itself, for its use in its own app, and it feeds into Google Maps.

57:51You know, I'm going to go A minus only because these days that we've given out are just like wildly successful on a ridiculously fast scale. Yeah. I mean, to me, it's almost like in some ways this is a cut like I am going to give it a great, but but how I really feel is and I know this is a cop out in some ways, but ways quote unquote. It's too early to tell.

58:15like even though this happened three years ago and it's too early to tell because just like three years ago and this whole waste story I feel like was really the closing chapter of the mobile platform was quote-unquote you know what's happened since then we're now at the emerging of the era of like machine learning is the really important thing in technology. Like we went from, you know, Google's being very open and saying this, you know, about themselves, but we went from a world called it 10 years ago, where companies were, you know, internet first companies. We weren't software companies. We were internet companies to, you know, from 10 to five years ago, the world shifted to mobile first companies. Companies aren't, you know, aren't just internet, like they're mobile and they're not just building desktop websites, but

59:05Now, like we're shifting to a machine learning based, you know, companies are ML first. Like Google is very explicit. We are an ML first company now. And you see that across all of our products with Google brain, with maps, with TensorFlow. And the first, I think, like huge native ML application that industry that's going to happen is going to be probably autonomous vehicles.

59:33already is. Well, yeah, it already is. I mean, Tesla is doing it. Like, it was like, you know, this was the Trojan horse. So how important ways and the ways data becomes in that to Google, like, like I said, I think the value is still in the future. But that said, like, for the defensive reasons we talked about and for the value that they've realized even so far along that, yeah, I mean, I think it's an A minus because Like you said, the bars our bar is very high for the a's Yeah, it's like it's an a minus with low confidence that it's gonna stay there, right? Like it either is gonna be an a or it's gonna not be an a minus. Yeah, right Yeah It's interestingly compare that to cruise which GM bought for a billion dollars like right around the same amount of money You know arguably there's a lot more value in

1:00:32ways thus far that Google has realized, then cruise is still very much pre-product. So we'll see. Part of why I say, though, is that it's too early to tell. Let's bring this one on home. So follow-ups, we got nothing for you this week, but maybe next time. Maybe we'll talk about autonomous vehicles. Carve out. What you got, Ben?

1:00:59All right, so I've got a podcast for us this week. I listen to one episode of this because I got totally roped in actually a while ago to a podcast called Song Exploder by their first episode which featured the Postal Service. And what the host does, Rishi K. Shereway, he sits down with an artist, a musical artist, does an interview.

1:01:25and also gets them to provide the actual track, all the different tracks that make up that song and he'll listen to each layer and play each layer individually and have a conversation with that artist about Where did this individual sound come from and where did this instrument come from and who provided this and who did you collaborate with and a lot of times they even come with early recordings and demos and songs that inspired that song and he does a really great job of kind of isolating these individual pieces so you go oh whoa I can totally see that and one of my favorite bands is Odessa I saw them

1:02:02this weekend in Seattle at Capitol Hill Block Party. Their episode is super, super cool. They talk about, you know, when they went over to Bainbridge Island to compose this song and that's super cool, but the best episode, in my opinion, and it's sort of dangerous to start with this one because it says the bar high is an interview with Weezer where...

1:02:22the systematic approach to songwriting by this dude is absolutely amazing and he has like spreadsheets full of lyrics that come out of his journaling that he highlights that he and puts in there and tags by the number of syllables and the onbeat and offbeat and then combining all these different ones after he writes a riff it is like I'm not doing it justice. You gotta listen to this. It's the Weezer episode of Song Exploder. It's so good. Dude, that's awesome. I've heard about this podcast, and been meaning to check it out, but I really need to know. That sounds really cool. It's like they're doing to songs what we do to M&A deals. They are. And the production is so, so high quality. It's like a total treat to listen to each one.

1:03:11It's gotten me into bands I didn't like before and it's gotten me into songs where now when I hear some of these songs after I hear it get exploded for 20 minutes before it's like that song that comes on that's like one of my favorite songs if it was if it was an episode that's awesome so my carve out for the week is an oldie but goodie that was sent to me recently by a really good friend And I'm so glad he sent it to me because I'd watch it's a TED talk and it's Simon Sinek's start with why TED talk it's one of the one of the top 10 TED talks and it's interesting. It's a TEDx talk done at TEDx Puget Sound here in I believe it was in Seattle in 2009 and

1:04:02It's just such a cool concept and it's called Start With Why and then he ended up writing a book about this but in the sort of more raw version of the TED talk he talks about it as the golden circle and it's you know, there are three levels of communication about a company or a product or a person or a firm. There's the what you do, there's how you do it, and there's the why you do it. And 99% of companies or firms or products or people say, hi, I'm David. I'm a venture capitalist at Madrona Venture Group in Seattle, Washington, and we do seed and series A deals, invest in seed and series A stage technology companies largely in the Pacific Northwest and would love to talk to great companies, right? So it's like people start with what, then they do how, and then maybe they do a little bit of why. But if you actually want to inspire people and reach people and do something that has a much higher chance of success, you need to start, you need to reverse the order and start with why, say,

1:05:11I'm David Rosenthal. I believe that all great companies in the Pacific Northwest deserve a chance to have an experience with their venture capital firm that's every bit as high quality as the best companies in Silicon Valley get.

1:05:26Yeah, that was a lot more than that. Do you want my money, right? Like, you know, then that, like, it just comes across, like, you're just by reversing about, like, talking about why you're doing something and what you believe in. It's going to be so much more powerful than starting with the what. And interestingly, Apple is the company that he uses as the canonical example here. We think differently at Apple. We design Beautiful, we have beautiful, intelligently designed products, and those products happen to be phones and computers. Not, we make computers and cars. And cars, yeah. Not, we make computers and phones, we design them beautifully, and we believe in thinking differently. Yeah. Yeah, that wouldn't fit on the poster. It would not. All right, listeners. Now is a great time to talk about one of our favorite companies, Statsig.

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1:07:15Alright, if you aren't subscribed on iTunes and you want to hear more, you can subscribe from your favorite podcast client. And if you feel so inclined, we would love a review on iTunes or tell your friends, share us on Twitter, and we'll see you next time. We'll see you next time.