Surviving the Next Crisis: Waze Co-Founder Uri Levine on Cash Shocks, Lost Product-Market Fit and Never Giving Up

Levine explains that he added a chapter on crisis to *Fall in Love with the Problem, Not the Solution* because recent years brought Covid, rising interest rates, inflation and wars. His example is Order.chat, a restaurant-reservation chatbot he describes as the first AI chat of 2020. It worked with restaurants over chat, with no integrations, and did well in Israel until Covid shut the restaurants. The company lacked the funds to pivot, so it closed.

He says entrepreneurs should not care about industry-wide pain: "your problem is your problem." He defines a crisis as something significant you already had that goes away, such as losing a big customer and half your revenue. The first type is a cash crisis, where revenue, funding or projections change. The second, more serious type is losing product-market fit.

Levine says product-market fit means creating value, and its one metric is retention: if people are not coming back, you are not creating value. Finding it takes many iterations and a journey of failures. If it disappears, because of regulation, a competitor or a change in the market, you must restart from the beginning, and companies unable to do so die.

His main example is the iPhone in 2007. He says Microsoft, the leader in smartphone operating systems, said it would never work, and Nokia and Motorola also failed to adapt. Their products did not become irrelevant, but people wanted something else.

His startup Fibo made tax filing simple, under three minutes in Israel, and enlarged the market by 25% in a year because filing is not mandatory there. The extra load displeased the tax authority, which shut it down. The company was near break-even with no funds to fight the regulator, and Levine resolved not to rely on regulators again. He adds that Waze's early plan to sell traffic data to municipalities moved too slowly, so it switched to advertising.

Rachitsky compares this to Dropbox facing Apple, and Levine says Waze lived through the same thing. In 2010 Waze was the only free turn-by-turn app, because it built its own maps. Then Google announced free turn-by-turn navigation. He says TomTom, which supplied maps to Google at $18 million a year under a five-year contract, was dropped, though Google kept paying the contract.

The industry told Waze it was doomed, and even investors advised selling for $20 or $30 million. The evening before a partners' meeting at Khosla Ventures, a partner said his Google contacts reckoned Google was at least two years from its own maps, and the next morning Google announced. Raising money was extremely hard.

Waze survived because its use case differed. It targeted daily commuters and was meant to be used twice a day, with a simpler map, while people use Google Maps when they need it. Microsoft, which had no maps of its own, decided to invest in Waze.

For any crisis, Levine says, first ask what is being impacted: run rate, product or revenue, and whether you are still relevant. Then ask how long it will last, and how much runway you have. He gives an example of $5 million in revenue and a net burn of $200,000 a month. If you lose half your revenue with $2.5 million in the bank, you have six months left.

You may stay the course and deal with it in five months, or cut expenses now to keep 12 months. Whichever you choose, he says, decide today, because waiting removes options. Rachitsky stresses that a small crisis, such as an A-player leaving, does not count, which Levine confirms.

Levine adds a second reason for speed: the team already knows there is a crisis. You may decide to run full steam ahead and hope to build the velocity to clear the wall, but you must tell the team so. Otherwise they see no one at the wheel, and top performers will leave.

Levine describes WeSki, which he calls the booking.com of ski vacations, and which was set to be profitable for the first time when Covid hit. Cancellations jumped from a few a day to hundreds. Strategic investors in the travel industry had their own problems, and new investors would not talk to a ski company in a world without skiing.

The team assumed two lost seasons and approached existing investors, including Levine, who also stalled. They did a pay-to-play round, forcing investors to participate or be heavily diluted, which was complicated by SAFE instruments that had to convert first. They shrank the company to a lean size, raised just enough, and improved the product during Covid. WeSki is now profitable and growing.

Levine says that from the middle, the chances of success looked small, and luck helped. He tells a story about New York developer Silverstein, who said success was 85% luck and 15% skill, and wished to swap the skill for more luck. Levine defines luck as opportunity meeting readiness. Readiness is up to you, but opportunity is not.

Rachitsky says it is always the founder's fault when things go wrong, and Levine corrects the word to responsibility. Rising interest rates affect everyone, but you have only one company. "Not just me" will not make you successful, while taking responsibility means you control your own destiny.

The most important behaviour of successful startup CEOs, he says, is never giving up, and the second is making decisions with conviction, because otherwise the team will not follow. He recalls the CEO of a travel startup who said the company had nine lives and had already nearly died nine times.

Levine gives only two good reasons to quit. One is that your mission is wrong because the problem has disappeared. The other is that the team is not right and you cannot change it, for instance when toxic investors take control of the board. Otherwise he says to keep going, and he agrees with Rachitsky that startups die only by running out of money.

Many survival tactics involve keeping people when you cannot pay them well. Levine says some startups diluted all shareholders to give employees about five times more equity, asking them to trust the mission and the recovery. If you tell people you will run out of cash next month, he says, you should be able to imagine that you have a further six months.

Leadership, in his view, is built through transparency, recognition and putting the team first, not in the crisis itself. In a crisis people value transparency most, and hiding information makes them leave. They expect you to say what must happen for the company to succeed, and what will happen if it does not.

On how far to go, he says not to sugarcoat. You need not share every investor response, but you can say that dozens of investors said no, or that a term sheet disappeared. Key metrics should be visible to everyone, for example in the office lobby, and if someone asks how many investors you met, give the exact number.

On acting fast, Levine gives the runway math. With six months of runway, halving burn today extends it to a year. If you wait three months, you burn at the old rate for three months and then at half for six, a total of nine. If you decide you need 12 months and do not act today, you will never have 12.

He says he does not know whether the longer runway makes success more likely, but that is the decision to make. Rachitsky sums up the algorithm: what is impacted, how long it will last, and how long you have before the money runs out.

On cuts, he says that if you need a 30% reduction you can lay off 30% of the staff or cut everyone's pay by 30%. Cohesive teams may prefer the second, while teams of individuals prefer the first. Management giving up pay is another option and a demonstration of leadership. About 70-75% of a startup budget is people, and cutting the office coffee only creates dissatisfaction.

Levine says to start by asking whether you are still relevant, and then whether, starting today, you would do this. A pivot means all underlying assumptions have failed, and is different from a failed feature or product, which is part of the normal journey of failure. You should ask whether you have assets for the new path: technology, a team or know-how. The alternatives are a pivot or shutting down, and for the latter you should ask whether you still have the energy.

His example is Pontera, started in 2012 as FeeX, which dealt with financial fees in Israel. It moved to the US, stopped the Israeli operation to focus, and found fit around Obama-era regulation in 2016 or 2017. When regulation changed it had to reinvent itself. The team offered the board either its money back or a new thesis.

Investors backed the new attempt, Levine says, because they invested to make an impact rather than to get their money back. The company, now 12 years old, has pivoted twice and helps Americans retire richer through financial advisors, but nearly died twice. He says every CEO has nearly died multiple times, and Rachitsky mentions that Shopify's founder said the same.

Levine returns to his core message: validate the problem before the solution. A problem acts as a north star, makes your story more compelling, and brings customers who want you to succeed. "I'm going to help you avoid traffic jams" interests people more than "I'm building an AI crowdsourced navigation system".

For a pivot, he proposes an order. Revalidate the value proposition, ask whether you have a significant advantage in team, technology or know-how, and ask whether you have the energy to restart from product-market fit through business model and growth. Then check that your team believes in the new path, since it may come from the people closest to customers and technology. Last, return to investors, because as a repeat entrepreneur you are more attractive than before.

He explains why passion comes after validation. When potential customers say they need it and ask if you can deliver tomorrow, your excitement grows. For consumers, if people say they know someone with the problem, don't follow it, but if they correct you and describe their own version, follow that. Rachitsky adds that the founders of procurement platform Zip pivoted six times and grew excited along the way.

Closing the Waze story, Levine says the company didn't pivot in 2010. It was still iterating on product-market fit and nearly ran out of cash, then got investments from Microsoft and Qualcomm. He says he told Qualcomm Ventures that it hadn't invested in Twitter at a $55 million valuation, which is where Waze was. Waze cut only management salaries, often without staff knowing, and raised money just before the cash ran out.

On avoiding crises, his answer is that you can't. There will be a next one, and you don't know its form, so the best preparation is plenty of cash, with the key being to analyse fast and act fast. His rule of thumb is around 18 months, though some of his CEOs prefer two to three years and risk takers survive on 12. Shorter runway forces constant fundraising rather than creating value.

He ends by describing a startup as a roller-coaster journey of failures, because founders try things nobody has done before. The longest part is reaching product-market fit, and he now adds a fourth dimension, that the path runs from one crisis to the next. He has started a little over ten companies, most of them successful in some form, and says he is there for the value creation, not the crisis.