[MUSIC] Hello, We're visiting the company called Hola. Hola began as a start-up in 2008 with an idea. The idea was to use software to greatly improve our Internet experience. The co-founders were Ofer Vilenski and Derry Shribman. We are going to interview Arther Valinsky and ask him a lot of questions about the start up process. Ofer is very interesting person, he's a second generation entrepreneur. His father Dan Vilenski was a pioneer in bringing high tech industry to Israel. He's also a serial entrepreneur, he's begun several start ups in the past. And so can share a lot of experience with us. Ofer is going to tell us, among other things that the idea for the startup really isn't that crucial. What really matters, and what's really hard is implementing the idea, making it happen. And it took all of four years from the idea until it began providing products. In late 2012 the place we're visiting now employs 75 people and is quite successful and seeks to grow with a lot of bumps in the road along the way. And Ofer is going to tell us about climbing the mountain. How building a startup is like climbing a mountain and keeping your eye on that summit on the top of the mountain. So please join me as we talk to Ofer Vilenski. Our guest today is Ofer Vilenski. Ofer you are a co-founder of Hola together with Derry Shribman, your partner. First of all, thank you very much for agreeing to give us your valuable time, and I'd like to give you a copy of my book, our book. >> Thank you. >> Called Cracking the Creativity Code, but I'm rather embarrassed to do so because you not only had the idea which is of little importance, but you built this great company. And we'd like to tell our learners, and we call them our students, about how you did that and share your wisdom with them about how they can build a great startup. So Ofer, you're a second generation entrepreneur, your father Dan Vilenski, whom you resemble, both physically and personality. Your father was a pioneer in bringing high-tech companies to Israel. You know, there's a theory that talent shows itself early, in sport, in violin, in anything. You were an early entrepreneur in grade three, right? When you were nine or ten. So tell us about your TRS-80, which was a very early personal computer, and how you began as an entrepreneur in grade school. >> All right, so, the TRS-80 was more like a love that I discovered. When I got my first computer and I love programming, I mean I, for some reason, I wanted to start doing it, and I learned on my own and loved it. And there was a parallel thing with me, which was that I loved what I called making money, but it wasn't actually, I didn't understand that what I loved wasn't actually making money. because I kept trying to look for ways to make money. And I tried, I mowed lawns for neighbors. I cleared snow when I grew up in Philadelphia. I built some rubber band guns that I was selling in the neighborhood. So I kept always looking for ways to make money. When there was the energy crisis in 77, there were long lines- >> Gasoline. >> In gasoline stations so I opened up lemonade stands and always looking for that. And I actually did nothing with the money that I earned. So it wasn't about really making money is was more about how to do things. But I didn't understand that, I love building little things. So these two things just merged together. I had a love for computers and I had love for what I called at the time making money which was actually starting things. And it came together at around ninth grade, that's when I started programming for money or for, I started making projects which were related to computers. >> Right, and you have a number of siblings, brothers and sisters, they're all entrepreneurs, they started businesses. And you're a graduate of a famous university, a mutual one, called Kitchen University. Tell us about Kitchen University. >> So I would always listen to my Dad speak with his dinner guests or on the phone and ask a lot of questions about work. I have four sisters and all of us, all five kids, each has his own separate business in different areas. And I think, I guess statistically there is something there. Five kids are doing their own thing, maybe because, I don't know why. I mean, maybe because we get a sense of direction from my father. I don't know why that is. But he was always very interested to listen. I see my kids, that are very, very interested in listening to all these stories, like what's going on here in the company? So if they overhear me saying something about a problem we're having, they'll say what's the problem? Tell us exactly, why is this? So my ten-year old, last week, he was asking me so, more about stocks, and how does that work? And so, my kids, if you talk to them about options, about stocks, about markets, about raising money, they are very, it's they're very into it, they understand it. I'm not sure how important that is. >> It's very important I think. I recall when you spoke at Technion, our university and you brought two of your boys along. You have three boys. >> Yes. >> You brought two of them along and during the question and answer period they were in there. Raised their hands and asked really good questions. >> So one of my investors visited us for dinner, this was three, two or three years ago. And they asked exactly what is an investor, how does it work, how does he make decisions. And they asked me to do a sample conversation with them where they are the investors and I am from the startup. And ask me questions in advance of his coming so they would understand it better. >> Cool, so now, let's talk about your startup. First of all, you served for years as a career officer and you're a pilot. >> Yeah. >> After that, you began a company with your co-founder, I believe. And the company was called K- >> KRFTech, yeah. Software development tools, something you're still interested in about how to improve the process of developing software. >> Yes, very interesting. >> And then you did a company called Jungle, which is about operating system- >> For routers. >> For home gateways. And you did an exit, the company was sold for a large amount. And that left you with enough money, and you really didn't have to go on and work long, long, long hours to do another startup. So you're not only a second generation entrepreneur, you are a serial entrepreneur. Where did you get the idea for your current company? >> Yeah, so I think that ideas don't matter that much. I think it's way more important to say, when you look at, I call it a mountain, a challenge, right? So, let's just take an example. I think the whole health market right now needs to change. I mean it's, you know there's so many ways to find out if we're sick, besides going to the doctor to check something very specific. Something has to change. So that's easy for everyone to believe right now. So health needs to change. So that's a big mountain. >> Clear need. >> That's it. I mean, is there room to change the whole health market with the technology we have today? Sure. All right. That's a good, great, huge mountain, right, let's climb it. That's it. That's a start up. And idea would say, I'm going to put, you know, the Apple watch on you and check your heart rate, and according to fluctuations, according to big data, I'm going to find a physical. That's an idea, which is much less important than a mountain. So if you and I said, let's start a company, let's conquer this huge health mountain, right? And we'll start with small steps. We'll try, we'll make a lot of mistakes, we'll try this thing and it doesn't work, we'll try that thing and we'll climb up. Sometimes you even change mountain on the way. So the mountain is more important than the idea I think. Most of us, all of us, suffer from slow internet. So you identified a need, and found a way to speed up our use of the internet, using something called a virtual private network. This is the idea behind Hola. Tell us about the idea, but more important how you implemented the idea. Okay, so the idea for Hola, started when we sold our previous company and we left the acquiring company, and set it home. And me and my co-founder spoke about the Internet, and how it would make sense to implement in a different way. >> Just a, sorry to interrupt you, but just a this is really important >> You really had no need to start another company. >> Yeah, we didn't plan to. >> But the point is that from the early age, you mentioned that you really loved doing things, making things, and creating value. In my experience with an entrepreneur this is the driving force. The process of creating value for many people. >> That's right. That's right, but I was in denial, because I thought that I would never work again after I did my previous company, because it's very tough. And even today it's super tough. Like it doesn't get any easier. >> You work long hours. >> Well, it's not just work long hours, it's more the fact that a lot of the time, most of the time you're failing. So 95% of the things you do you're actually failing them. And you keep going until you find something that works. And that's very rare. Like we do a ton of things, we keep failing, we do something that works, that's great. You should celebrate what works, push it forward and do more things. So it's very tough, a lot of times say why am I doing this, you know, but so anyway. After Jenga I said I'm not going to do it again. So we were talking, me and Dari about the internet, and he had this idea of taking the internet and putting it on top of peer to peer network, so making the internet peer to peer the way it works. And I kept pushing it off, we're not going to do it, we're not going to do it, but ultimately saying that's a huge mountain, like making the internet better. In many ways, not only speed >> That's a big idea. We talked about this about the mountain. I don't care how we do it. In fact, the idea that he had, is not ultimately what we did, because it failed, but it doesn't matter because the mountain was interesting. So, would you like me to talk about the past? In a moment. One of the points we make in our course, is that If you're going to do something, like making the Internet faster, you can't make it ten percent faster, as a startup. You have to make it, I remember talking to you years ago. >> Yeah. >> You were going to make it 50 times faster. >> That's what we wanted to do. >> Faster. >> We failed at that, by the way, but yeah. So we sort of understood our mission to make the Internet better, in many ways. Faster is one way. >> Right. >> And there's other ways that I'll talk about, but. >> No you can't do ten percent. You have to do something dramatically different. >> Right. And another key point that you make here, which is important. One of the tools in this course is called, Real Options. Financial options is a huge market in the world. It's the right to buy or sell a piece of paper. >> Right. >> But a start-up is really an option. It's an option in the sense that you start something that doesn't work, you learn, you try something else. >> Yeah. >> And you go through a series of doors and windows. >> Mm-hm. >> And that was your process, I believe with Hola. >> Yeah, it's sort of counter-intuitive to be a good entrepreneur is counter-intuitive, because the way we educate our kids >> Is we say, if you said something, stick to it, which is really wrong. You know, if you said something, that's the best thing you thought at that moment and as you learn more, you should change your mind, right? So today, and there's more I'll talk about it, but today, in some ways, I surprise people like they say, what do you mean this is what you think? Last year you think think the opposite. I don't care, I don't care. Last year, this is what I knew. I learned since. Only a donkey would stick to his ideas over time. So, that's one thing. Don't stick to your ideas. The same thing is, don't stick to your direction. Because maybe it's bad. If you find you walk into a brick wall, you should change direction very quickly, and walk into something better, right? So, these things which are counter intuitive, where this is, Investor I can say if you promise something, deliver. As an entrepreneur, you shouldn't promise which path you're taking. You should promise that you're going to give great returns, and you're going to do your best on that. >> So the problem here, though, and I've found this in some startups, and that is the problem of rampant opportunism. Anything comes along, yes, we can do that. We can sell to you. How do you avoid that with your flexibility? >> That's a great, great point. It's because you gotta keep your eye on the top of the mountain. And so if we identified, before we took an example of identifying, well, the health market, or making the Internet better, right. It's a big, big, big, opportunity, and if you're able to crack the health market, able to crack, make it better Internet, you've got a multi-billion dollar business. So keep looking at the top of the mountain, and then some opportunity comes on and says you can go here. I don't understand how it gets me over there. It'll give you an extra $50,000 income, but how does it help us get over there? It doesn't, so forget it. Sometimes you need 50,000 so take it, but most the time you should. >> Got it. So, I've watched some of your talks and presentations, and one of the point you make. >> Goes against something I've been teaching, and probably you're absolutely right. Just bring value. Don't worry about the business model or the business design. And you made that work with Hola. What do you mean just bring value? First of all its true for, its not true for every business, but its true for a business where you have zero cost of group sold. Which is maybe that why we have a difference of opinion because typically until I don't know ten years ago, everything had a cost of good sold, now things don't or almost don't right? >> Right. >> And so when you have no cost. >> All you want to do is bring value in scale. And then when you bring on the business model, you've already got something to build on. So I think the biggest problem for startups, is to bring value to people. And whenever you ask a person from a startup, why did you fail? Which most of them do, right, most of the startups fail. Why did you fail? We ran out of money. That's not true. You failed probably because you were not able to bring a lot of value to a lot of people. If you were able to, you would find a way to continue. But that's a big, big, big problem, for us, too. >> So, the economics here is really interesting. In economics, we teach something called marginal cost pricing. You look at the cost of the last unit and you price your product roughly according to your cost. But what if your marginal cost is zero because you have an Internet based business which is infrastructure business? So you're using something called the freemium model. You can use Hola for free part of the day for a limited amount. But if you want to use it all the time and expand your usage, you have to pay. >> Well, that's one way to monetize something. But I sort of look at it differently. So, my life is easy in a sense that I don't have a cost of good sold. But now, I want to bring as much value as I can, as much value as I can, how do I monetize the value? We can think of probably a thousand ways to monetize. One way is freemium. I like other models more, which I can talk about. I can say that once our product became viral, in Hola, then we started trying to monetize. And we tried different things, which didn't work, until we came to the right thing. So it's not like everything's going to work. We tried advertising and it was terrible. It didn't fit our kind of product. The customers hated it. We tried other things that didn't work, but ultimately we found something which made the company very profitable. And I like it because it's orthogonal. So it means we're actually not really a freemium, in the sense you can use Hola as much as you want for free on PC. On mobile it does cost money. But then we sell the same kind of service to businesses. And they actually are the ones that pay for it. And it's sort of built on the consumer network. >> Got it, got it. So this reminds me of a story of Jack Ma and Alibaba because he built Alibaba based on the free model. For three years, everything was free, and then the marketplace told him how to monetize it. Because the people who are selling on Alibaba, business to business, came to him and said, we'll pay you a lot of money. Just move us up a little bit in the listing so that we can get more customers. And the market told him how to monetize the product. >> Right, I didn't know that story, but it sounds like he found a good way to make a market. And that's very valuable and then you could monetize it in different ways. >> One of the principles that you teach in your lectures, and I'm impressed by it, you say, define the narrowest offering that brings value. >> Yeah. >> Sometimes startups try to define a very broad offering, and your point is, find us something and get it to market and get out there. >> So let's talk about the mountain again. We want to get a mountain, climb a mountain like the healthcare mountain, or the better Internet mountain. You can try to build a super big, big, big machine, but you'll probably get 95% of it wrong. So try a path to climb the mountain, probably it's not going to work, try a different path, a different path, until you find a good one. And then from there it'll be easier to continue. >> Right. I really like the mountain metaphor. I had an adventure with my son, we climbed Kilimanjaro, which is a pretty high mountain. And you climb the last part of it just before sunset. And you get to the top and then the sun rises and you see this beautiful view. In some ways a startup is like that, you go through- >> Except you almost never see the sun. Like in climbing Mount Kilimanjaro, most of the climb you didn't see the sun, which is discouraging. >> Yes. >> But it brings me to a point which is product market fit. So you're trying all these different things, right. Nothing's working. So what you end up doing is like the fifth thing you try, you're already saying well four things haven't worked, this has to work, and then you sort of force it to work. And then some people say, it's a nice product. So you say great, that's working, we have fit, we found our direction. But really finding your direction is like the sun in Kilimanjaro, when you see it, you know it. So you probably took different paths, you went up and you say there's more light over here, we found the sun. No, when you see the sun, it's so bright that you know it. So when there's a product fit, you're like flying off your chair it's so good and it almost never happens. But when it happens, you know it, and that's when you should run. >> In one of the interviews I did with an American entrepreneur, I mentioned to him this principle, you shouldn't fall in love with your idea too quickly. And he looked at me and said you never ever fall in love with your idea, even when it's very, very successful, you need that objectivity to keep making the right decisions. So, we need to talk about culture. When you do a startup, the focus, of course, is on creating value on the product, but it's also on hiring the right people, you call it building a very small A-team and creating a culture. A culture is shared values, how did you do that here? >> So first I'll answer the thing about falling in love and then about the culture. So you actually do end up falling in love a lot of times with your products, because it's not so much that you're in love, but you're hopeful. And you're so hopeful that you sort of want it to happen. But me and Derry are sort of pretty analytical people so it's easier for us not to fall in love with an idea. And when we started our first company, we left Checkpoint which was very successful, which we didn't start the company. We left Checkpoint and we spoke with my father about the fact we want to do a new company. And we said, what are our chances of succeeding? And he said, probably 2% or 3%, because it's just that's the numbers. And so we understood that we are going to fail. But we're going to do it anyway because we want to try it. And we understood so well that we are going to fail that when we thought of the name of the company, one of Derry's friends just closed a company called KRF Tech, which was the acronym for their last names, and we saved $70 on the domain name and we took that as our name. So that's how much we knew we were going to fail, we're not even going to spend $70. >> You saved 70 bucks. >> We did, and so that's how our mindset was so immediately you're not in love with it you're like, okay, we're going to fail, every idea is not going to work except maybe one. And so you're more prepared for that. But still I wasn't prepared enough. And most of the things I did I failed and I was devastated how much I'm failing. Until I understood that's part of the business. And you keep failing until you find something that works. And that's okay. Now if you understand that, then it means you have to embrace evolution. You understand that business is about evolution until you find the perfect being that you're trying to make. And, even then, you need to continue the evolution. So the culture you need to create is a culture that is a great pool for evolution. So you sort of need the right minerals in the pool and you need very quick selection. Very quick selection. And that's it. So it's true about the people you work with, it's true about the ideas you work with, it's about the tools you work with. Everything needs to have very, very quick results and very quick selection. Saying, this doesn't work or this person doesn't work here, right? And move very, very fast and cut everything and move to the next thing so that you keep getting better. >> Got it. So you've given us two powerful metaphors. One is the mountain and keeping your eye on the top of the mountain that you're climbing and the other is evolution. In nature, evolution is wonderful and creates amazing things and it takes millions of years. So you need a very fast evolution process in a startup- >> Well, in nature, it doesn't always take many years. For instance, with. With germs, they do very, very quickly. >> They do. >> They multiply so fast, they even find solutions for against medicine, right? Because basically, a medicine kills a billion of the germs, but keeps one alive, which is sort of immune or two, and then it creates new germs that are already immune to the medicine. So there are places in nature where evolution happens very, very, very fast. And that's what you need imitate in your startup. >> Got it. So when we came in to Hola, we noticed a lovely kitchen and kind of a dining room. And this seems to be part of Hola's culture. Tell us about your dining room and your 1 PM lunch time event. >> Well, it's sort of also evolved. We didn't think about it or plan it. What happened was that we kept ordering food from the outside from when we were ten people, and it's pretty terrible food, and it's not so much on time and it's not very healthy, and one of the engineers started cutting himself a salad. And so people kept saying, you know what? Cut for me, for me, for me. And within a while, we found him working for half an hour cutting salad, which is not a great use of his time. So you quickly evolve and you bring someone in to cut salad. And then you evolve and say, why not someone who can also cook one or two things, right? And then you move very quickly and then you start seeing the light and saying, wow, this is super efficient. At 1 o'clock we're all eating together, we're speaking about these things. So it's not like we thought about it in advance. It has tons of benefits, but we didn't think about them, we just sort of evolved very, very quickly. And then today at 1 PM, there's two cooks here now, 75 people working here. At 1 PM, everybody comes in, it's a buffet. Within two minutes, we've got your great lunch, you're eating it, you're talking to other people, you're sitting around and laughing and talking, whatever. And after half an hour, you're back at your desk with a relaxing and nice lunch and very healthy, and it's great. So there's ton of benefits but we didn't think of them in advance. >> That's a brilliant idea. [COUGH] And of course, there's no substitute, even in the Internet age and in the age of smartphone, there's no substitute for talking to people face to face over lunch. >> Right. >> Cool. I'd like to talk about something we don't often mention in startups, and that is the spouse. One of the most crucial decisions you make in a startup company is who you hire. You make a key point that you start with a very small, very, very carefully picked A-team. But of course, now Hola has 75 people working here. So we know that globally there's a shortage of talent, there's a shortage of talent in our country and all over the world. How do you find talent, how do you choose the right talent? How do you do that? >> So, unfortunately, or fortunately, the talent is not all in Israel. There's a lot of talent here, but of course there's way more town outside. And so we're basically not limiting ourselves to working with just people here in Israel. And for technical talent, we're looking for people that can show their talent by contributing to open source, etc. And we look for these kind of people and we actually go and offer them to work here. So we've got people from all over the world that are working from home as our employees and they come here quite often. >> Cool. >> And so we're looking for engineers, the best talented engineers, for product managers, etc. Yeah, so- >> Did I remember that you did a little competition? >> Yes, we also did a competition, a worldwide competition with a coding sample on our site. And we chose the best people there, gave them a prize, and also interviewed them for working here. And we got a few employees out of Israel from that, and within Israel. >> Cool, last question. >> Yes. >> There are always black swan events when you start a startup company. A black swan is something you couldn't expect, never expected. It's very challenging, it's very threatening. You've recently run into that sort of a black swan, people attacking the nature of your product. How did you, tell us about that and how you dealt with it. >> You should focus on a great project that brings tremendous value to users and you should focus on not being malicious. You should have the best intent and bring the best value to users. You'll make mistakes, there'll be security issues, it'll be terrible. We had a very tough time. You fix the problems. You keep bringing value, and people are generally happy with the product and it keeps going. >> Got it. So to sum up, Ofer, and this has been very educational, enlightening. We have thousands of young people and older people watching, taking this course, learners. What key advice can you give them when they think about possibly starting their own business? >> That's tough. Just be prepared to fail all the time, and sort of embrace it. >> Embrace the failure. >> Embrace it. I mean, say, the fact that I'm able to take this failure so with ease, and move on to the next thing means that I'll probably get to my target. So if you're going to try something, you're going to get hit by a slap in the face, say, okay, nothing happened, next idea. And then you should be proud of yourself. Great, I moved on, moved on, move on, move on. And eventually you'll hit the elephant, and that'll be where you're going. That will be your success. >> I think this is really crucial and it deals with self awareness, knowing who you are, and being secure in who you are, which helps you get through the failure. Because the failure doesn't mean you're inadequate, it means you've tried something worthy and it just didn't work. Maybe the next time it will. >> Yes, I agree. >> Ofer, thank you very much. >> Okay, [FOREIGN] Thank you. >> Thank you.
