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Success Story with Scott D. Clary
Gilad Uziely - Serial Entrepreneur & Startup Advisor | The Brutal Truth About Why 90% of Startups Fail
01:06:57
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- [00:00]
Gilad Uzieli
I just don't have the motivation. Working for someone else. I can't find the drive to do it and to do it well. And if I don't do it well, I prefer not to do it. When you have an idea and you start building, you slowly, slowly or sometimes quickly fall in love with what you are building. Instead of falling in love with the problem, you're moving away from the truth, which is the only important thing that you need to chase as a founder. And this is the most dangerous thing that can happen.
- [00:20]
Narrator/Host
Gilad Uzieli. He left Jerusalem with a suitcase full of ideas, built a travel startup in.
- [00:24]
Interviewer/Podcast Host
Italy, ran the innovation lab for one.
- [00:26]
Narrator/Host
Of the world's fastest growing tech hubs, and then he went broke, burned through years of savings, all to chase one problem. Why do solo entrepreneurs struggle to control their own money? That obsession led to sequence of financial operating system for creators, freelancers and anyone with more than one bank account. It sounds simple, but what they're building, it could rewrite the rules of money management.
- [00:45]
Interviewer/Podcast Host
And what he shares in this episode.
- [00:47]
Narrator/Host
Might just change how you manage your money forever.
- [00:49]
Gilad Uzieli
If you're focused on the right metrics, opinions doesn't play part anymore. You need to know what you are tracking. You need to know how success looks like you don't have to nail from day zero. Sometimes it takes time. I have all my life tried to build communities and my take is that community product fit is much char and product market fit. And if you have a community and you see like your early signs of community being created, you have to do whatever you can in order to cultivate it. And that's what we've done very successfully. The most important resource that we have obviously is our time. You have a limited time here. Make sure that you're putting your efforts and your energy in a place that makes sense.
- [01:32]
Interviewer/Podcast Host
Glad I'm very excited to chat. This is going to be a really honest and brutal startup story and I just want to frame it for the listeners. So we're going to be mostly speaking about sequence today, but your last company, Lance, So you raised 8 million, you grew to 30,000 users. You realized you were essentially lighting money on fire with every customer due to fraud. And instead of sugarcoating it, you spoke to your investors and there's a story there, a really important story for entrepreneurs. So explain to me the good and the bad of entrepreneurship because I think we speak about the good too often. But you've experienced some not so great experiences.
- [02:15]
Gilad Uzieli
Yeah, I mean, everybody celebrates, you know, the huge successes, the massive exits, the IPOs and somebody like, you know, just watching from the sidelines, it seems like everything is smooth. But the truth is that it's a mess. For all people that I know, and I assume most entrepreneurs, there's a lot of pain involved in the OR along the journey. Sometimes as founders, we sometimes found ourselves very lonely and shit hits the fan, you know, and when the shit hits the fan, you know, you are left many times alone and just trying to figure stuff out. You have employees, you have partners and co founders, you have investors, you have clients, people that are actually using something that maybe you've built. So it's a very hard place to be.
- [03:07]
Interviewer/Podcast Host
I think that we over glorify entrepreneurship and we make it seem like it's all fun and all good and it's hard work. But I don't think we really dive into what happens if it goes wrong. And also to your point, it's very lonely. So if it does go wrong, which everybody who I know who's built something significant, there's been a point where it's gone very wrong. How do you deal with it? Because a lot of people don't understand what you're going through. So let's even back up because I want to understand why you chose to be an entrepreneur. What kind of delusion made you want to go build something? Because that's also interesting. And I don't believe that 99% of people on this planet should be entrepreneurs because it does take a certain way of thinking and it takes somebody who maybe is a little bit delusional. But back me way up. Was Lance your first company ever?
- [03:58]
Gilad Uzieli
No, no, no. I've. I'm almost 45 now and I had like a W2 for maybe two years of my life. And I've always built stuff and not necessarily startups. And I've started actually in my first steps as an entrepreneur, as an adult. As an adult, we've built a tour operator, we've dealt with tourism, we've done a few cool stuff there. But I just, I, to be honest, I don't have the motivation working for someone else. I can't find the drive to do it and to do it well. And if I don't do it well, I prefer not to do it.
- [04:32]
Interviewer/Podcast Host
So this startup story with Lance. So why was this story. So Lance wasn't your first company, it wasn't your land, your last. Excuse me? I mean, like now you're building sequence, but with Lance, what was the thing that went wrong? I think this is like a great lesson for people Well, a few things.
- [04:49]
Gilad Uzieli
Went wrong, but I think that the core problem with Lance was the fact that we've made a few core assumptions that were just wrong. So the basis of the business were not built for success. And in our specific case, what we've done with, we've tried to build a finance company or a financial company using embedded finance tools. And what happens is when I say embedded finance tools. So banking is a service, right? So you are not actually the bank, but you are acting as a bank. So if you were like, if you started really early or have a lot of resources, so companies like Chime, right, they did obviously very well. But for somebody who came in the second, third or even fourth round of NEO banking, the unit economics just never added up because you can't operate like a bank, you can't lend against your balance sheet, and you can't really make money like banks. And on the other side, you get all the downside of fraud, chargebacks, disputes. And by far the biggest problem for us was fraud, right? So at a certain point in time, we've just looked at the numbers and we've understood that with every customer that you bring on, you're basically shortening the life of your company. Because what happened is you would get like a cohort, like a past cohort, and you thought that your customer acquisition cost was like $100 or whatever. And then as time goes by, you start to understand that, you know, 20, 30, 40% of those customers are accounts that you actually have to close. So the CAC is not 100 anymore. It goes up and sometimes for certain costs, it even doubled itself. So you're sitting here, CAC is going up, the payback period or the tri keeps getting like longer and longer. And you basically understand that the traject that you know, that you're, that you're, you're diving to, you know, off a cliff, basically.
- [06:41]
Interviewer/Podcast Host
So this is something that makes sense to me. But for somebody who's first starting out, this is a little bit scary because I think the lesson here is that it doesn't matter how many times you do this. It's not like the next time is guaranteed success. And I think that sometimes, I think that sometimes investors even think that we can talk about that as well. That's sort of the other side of entrepreneurship. They always bet on people that have had past successes or serial entrepreneurs, as opposed to the first time entrepreneur, because they think, well, if they've done it before, then they can do it again. Again. But explain to me, how does a serial entrepreneur who's done this many times? How do you get some of these core business assumptions wrong? What was the blinder that stopped you from seeing this when you started, Lance?
- [07:23]
Gilad Uzieli
Well, I think that, you know, when you. When you have an idea and you start building, you slowly, slowly or sometimes quickly fall in love with what you are building instead of falling in love with the problem, right? You've built something you. And you start telling yourself stories. You start. You start basically lying to yourself, right? You say, if only we've built this and this is the only thing that is missing. And something, maybe one parameter looks really good because we go fast. We've opened a lot of accounts. Like, we are like tens of thousands of accounts. So you say this is working, and then you start to ignore the. The. The bad stuff, and you start lying to yourself. And I mean, like, it's like your baby, right? And everybody thinks that his baby is like the most beautiful and perfect thing in the world, but there are babies that are not perfect, right? And then you start lying to yourself. You're moving away from the truth, which is the only important thing that you need to chase as a. As a founder. And it's something very natural, right? It's like it's a difference mechanism that we all have. And this is the most dangerous thing that can happen. It can happen to anyone.
- [08:27]
Interviewer/Podcast Host
We'll talk about how you navigate it, because this, I mean, this is something that you have to deal with.
- [08:32]
Narrator/Host
You brought.
- [08:32]
Interviewer/Podcast Host
You raise investors. But how do you. How do you remove yourself and remove your emotion and ego and attachment to the company so that you can make objectively good decisions? And it's. What's. What's difficult about Lance is because you had like, unit economics and economic issues and fraud. It's not about, like a pivot. Sometimes I think it's a Kevin o' Leary line, right, where you have to take it out behind the barn and shoot it. And I think that that's a very difficult thing for entrepreneurs to do, especially when they've raised money. So how do you. How did you, in Lance sort of say, okay, this is really not working. I need to find a way to have really hard conversations and kill this business. What was the thing that woke you up?
- [09:22]
Gilad Uzieli
Just the numbers. Just the numbers. If you're focused on the right metrics, it doesn't. It opinions doesn't play play part anymore. You need to know what you are tracking. You need to know what you are measuring. You need to know how success looks like. And sometimes it will take a little bit longer. And sometimes, and you just need to see that you are, you don't have to, you don't have to nail it from day zero.
- [09:45]
Interviewer/Host's Colleague
Right.
- [09:46]
Gilad Uzieli
Sometimes it takes time. Usually it takes time, but you need to see that you are tracking towards what the important things. And with lens, the problem that we should, we should have killed it a year before we, before we have. That's, that's the truth.
- [10:04]
Interviewer/Podcast Host
Was there, I mean, just curious. I mean like hindsight's 20 20, but technically, do you think that if you had found a way to mitigate the fraud and explain to me like what fraud is in like the banking sense for people that are listening, like, fraud is not, Fraud is not like somebody on your team committing fraud. Fraud is like the customers are committing fraud. But was there, if you had found a way to mitigate that, would, would it have been a successful business model or is that just a hypothetical? There's no point in even figuring that piece out.
- [10:35]
Gilad Uzieli
So, so that, that's first of all, figuring that out would have been huge and could have created a huge company that has nothing to do with, with the Neobank because fraud is a problem across the board. So to your first question, that the fraud came from customers, not from employees at all. And it was anything that you can imagine, anything from money laundering to people topping up their account with 20k, going to Vegas for a crazy weekend and calling on Monday saying that their car was stolen, my wallet was stolen, it wasn't me. So even if you can prove that it was them, you still have to pay heavy fees to Visa and the other providers. People that are just using your platform to get referral fees and stuff like that, which is not actually fraud. That's not why we. You've built a product and they are just like customers, right? You can't make money off those kind of customers. So it was across the board. We were called to the sheriff office in New York, like all, anything from like crazy money laundering chains to just like people trying to, to, you know, to steal 5K or something.
- [11:40]
Interviewer/Podcast Host
Okay, so it's not working. You raised money for this company. So you raised, did you raise 8 million or how much did you raise for this?
- [11:47]
Gilad Uzieli
The standard million?
- [11:48]
Interviewer/Podcast Host
Yeah, you raised 8 million. Okay, so then what happens when you realize that the company is not working?
- [11:53]
Gilad Uzieli
So to be honest, it's very stressful. Like we, remember me, my co founder was going into a room and saying like, we don't, we don't know, we don't know how to save this. We have obviously fiduciary responsibility to our, to our investors. And we understood that with, with every new client, we are basically, you know, like, it's, you know, it's like we had to stop and it wasn't, it wasn't responsible on our side to continue. And we said, okay, first let's stop bringing on new customers. We still had thousands of people using the product. So it's like, you know, it's a banking app. You can't, you can't just close it one day, right? So we continued supporting them. We offboarded them and sold the customers that were, you know, that other companies were interested in and went back and then we said, okay, what are we doing now? Like, we either give money back to our investors or we think of a pivot. At this point, I'm still not talking to my investors. It was like, you know, it was a few days later, you're just having.
- [12:57]
Interviewer/Podcast Host
A conversation with your co founder thinking like, what the hell are we doing?
- [13:00]
Gilad Uzieli
Yes, yes, we understood that we had to stop so to stop onboarding new customers. And we did that. And then we went into a room and said, okay, what can we do here? We either close or we pivot. And we decided to try and pivot to save the company. That was, that's what we wanted to do when we started, you know, like throwing ideas around. But then after like a few days, we said, okay, guys, we've just proved that our ideas are not that great. It was just proven. So we said, instead of thinking about, about ideas, let's think about core principles that will guide our pivot. And it came down to two things, really. One, we were all over 40 and we want to make sure that we are investing the next 10, 15, even 20 years of our life in something meaningful with chances of succeeding. And for that we wanted to get to conviction. So the first important thing was get to high, high, high conviction. That was the first thing. And the second thing was that after trying to build a bank and competing with bank of America, Chase, all those huge players, we said, no more red oceans. We are looking for a place for a blue ocean, low competition. And that's very, very important. And that's when we started working with the framework that I actually really like because it's very simple and, and it's like you need to look for stuff that are non consensus and right. And basically it's very simple, like consensus, non consensus, right and wrong. If you are wrong, you are wrong. Nothing you can do about that. If you are right and consensus, that's lens right. Everyone that I Talked to, told me, yes, of course freelancers and the self employed needs a better banking experience. But there you meet the banks of America, right? They also, they also have a bank, right? And when you find something that is non consensus, right, that's when you have a vision into the future, right? That's where you can build something that is truly unique. And it's very hard because then when you go to talk to people, many will tell you, dude, I don't understand what you're even talking about. Why would anyone use it? You are stupid. Basically.
- [15:24]
Interviewer/Podcast Host
Explain to me. Because you spoke about sort of first principles thinking, but you also spoke about non consensus, but correct. So how can you figure out which first principles apply to a non consensus but correct idea? Because this is what you've really done with Sequence.
- [15:40]
Gilad Uzieli
So we've used that framework to hit what was important for us. And that's a blue ocean.
- [15:45]
Interviewer/Podcast Host
Understood.
- [15:46]
Gilad Uzieli
That's how we looked at it. And then to find the non consensus and right idea, my best suggestion is be lucky. That's, that's a, you know, that's the, that's the most important thing.
- [16:03]
Interviewer/Podcast Host
If you think about, if you think about the most important narrative or principle that you had to change when you started Lance, I mean there's probably many, but what was the main one that allowed Sequence to be successful when Lance wasn't? And you've danced around it with, with again, non consensus, but still correct. But there was, there was one main idea that you would have had to have changed.
- [16:28]
Gilad Uzieli
I think that a few things, I think that first, and maybe the most important one is that we've really shifted from talking to our customers or our potential customers to listening to them. And there's a huge difference there, right? So before actually starting Lance, if we were not just talking to customers but also listening to them, we maybe have built Sequence, I don't know, four years ago. Because before Lens we've built a bunch of like just tools for freelancers and self employed to just see all their money and their tax status and everything. And they told us, wow, this is great, I love this dashboard. And that was like kind of like a Mint experience or Monarch money experience. And they said, I really like it, I want to touch the screen and move money around. And then if we were smart back then, or we were just actually like digging in and understanding what those people want, maybe would have built Sequence Gan and not lands. But then we said, okay, they want to move the money, we need to be a bank. And there's a very famous saying by Bill Gates, who said, the world doesn't need more banks, it needs better banking. You know, so listen to big mates. That's another tip. You know, he knows what he's talking about.
- [17:40]
Interviewer/Podcast Host
So dealing with investors is not easy. I know that you had how many investors total because you raised 8 million. But it wasn't from just a, a small group. There was 83 total investors.
- [17:52]
Gilad Uzieli
Yeah, we had to collect 83 signatures from anyone who employees, accelerators and programs we went through and then everyone who ever wrote a check into sequence. And we've raised a bunch of money from, you know, friends and family. So small checks and those guys, those guys were never the problem.
- [18:13]
Interviewer/Podcast Host
So it's like, it kind of sounds like, to be honest, like startup hell, like going through, because this is so now. Okay, so just to fr. For people, if, if Lance isn't working, you have hard conversation with your co founder, okay, we got to go in a different direction. You got to get 83 signatures. It took you eight months to get 83 signatures. I know that there was some people that were problems or at least they gave you a hard time. So during that time, I mean, you're stressed out. I don't think that you're really, you're not making a ton of money yourself personally, and life still goes on as well. So you have to figure out what you're going to do in terms of like, you know, I don't know your whole financial situation. But when this is happen, you're not drawing massive salaries while you're telling your investors that there's a chance that they've lost their money and you have to renegotiate exactly what you're going to build. So talk to me about this restructure because dealing with investors, I even sometimes recommend that if founders, there's reasons for raising money and there's reasons for not raising money. Obviously, if you want to grow fast, you can raise equity. You can also raise debt. Doesn't have to be equity. There's different ways to raise money. But what you went through is probably one of the most difficult things that somebody would ever have to go through if they are raising money outside of literally just telling your investors, I'm sorry, we've, you know, we've lit your money on fire. You're not getting it back. So you have this. So tell the story. You've had this conversation with your co founder. What's the next step?
- [19:37]
Gilad Uzieli
We, we went into it. If I, I didn't know what I was walking into. I didn't know how painful it's going to be. And what we did was we were in the room and said, okay, let's save the company. Like, we still think that we have something that we can do. Let's try. And with the two core principles of pivoting, we went and started talking to Lens's good users and we asked them, guys, what are you doing here? And it was very like, I don't want to say unanimous, but it was very common for them to tell us, I really love this mini zapier experience. For my money, I wish I could connect my. And then everybody like my husband account, my wife account, my business partner, my 401k, my student loan, my credit cards, my mortgage. So they wanted like a bunch of stuff. And then Oren, my co founder and the CTO came back and said, like, I think that what these guys are actually looking for is actually a router for their money. They need a better way to route their money between all those different accounts. And then we start, we said, okay, that's interesting. But again, we just took a massive beating. So we wanted to optimize for conviction. So then we went and started talking to people who never heard about Lance, not necessarily freelancers, anyone who was willing to talk to us. And we came to them and said, hey, we're going to build this router for money. It's exactly for money. And then out of every 10 people that we talk to, six, seven would go like, you guys are idiots, I don't understand what you're even talking about. And three, four would go, where have you been all my life? Look at what I've built. Check out my Excel sheet. You know, so it was this is, this, this is non consensus right or wrong? We don't know yet. But it was definitely non consensus and very confusing, right? You don't know what to think. And then we said, okay, optimizing for conviction. Let's be brave, let's build a landing page and let's charge. And let's charge a relatively high amount for just for the concept. And we've built a bunch of landing pages and we've built actually one landing page and a bunch of ads. And just describing the product, we call it money route or out money. It's like a shitty name. And we told people, if you want to get a lifetime access for this product, pay 200 today. And I told my co founders, you guys are crazy. Nobody's going to give you that, that amount of money. So but we launched it and I was extremely happy to be wrong because in five days. Hundred people paid the $200 for the lifetime access. We didn't have the product, obviously, and started talking about it all over the Internet. So they opened the Discord server for us. They started talking about it on Reddit, and people came knocking on the door. And then we already said, okay, like, the $200 is off the table. This offer is off the table. But if I still remember exactly the wording, we told them, if you want, you can lock in a discounted subscription for life. And we actually had people paying subscription for a product that not only wasn't ready, we haven't even started building. And that's conviction, right? And then with that, and we've started creating like a waiting list. So it like, we had like a very, very initial traction and we've actually, like, already like, you know, got like, I don't know, around 20k or even more before even writing one line of code. And this is very rare. Many people can say that that's what they want to do, but they actually do it. It's much harder. And, you know, it's like start. It's like a Lean Startup 101. But it's much easier said than done. And at this stage, I went back to Lance's investors. We had like Iran, I think $2 million in the, in the bank. And I told them, there's something here, there's something here. Let's give us some more money. At this stage, we've done one price round and two saves, one on top of the other, which is also a huge mistake. And we can, we can, you know, talk about it if you want. And it was just, it was like 2022 when nobody was doing anything. It was just after Covid, it was the shittiest market. And all my investors told me, we are not investing. And so I went and started pitching to everyone who was willing to talk to me, anyone from VCs to angels to, like, anyone. And I've pitched. I counted. I think it's around 160 investors, which is crazy. It's not, it's not a smart thing to do. But I was like, you know, I had nothing, nothing else to do. Most of them told me no. Some of them took the time to explain to me why what I'm building doesn't make sense. A few looked at it seriously, but then saw the cap table and, like, were like, I'm not touching this. It's too, it's too much. And I got two term sheets. And when you're building something that is non consensus right or non consensus list. It's hard to find investors because all of them, like most investors, we are investing in the outliers. We are looking for something different. But actually very few do that. And I was lucky to get term sheets from Aleph, which is one of the top Israeli VCs and Imerd which is another awesome great VC. And they eventually Aleph led the round and emerged participated and they did the round. But before the round happened there was seven to eight months of restructuring because the term sheet, the term sheet which was at the end a good thing but again I had no idea what I was walking into. They required US to collect 95% of the signatures in order to start a new company to buy assets from the old company for equity in the new.
- [25:12]
Narrator/Host
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- [27:19]
Interviewer/Podcast Host
What would be the advice that you'd tell a founder who's going through something similar right now? Like, how did you. Okay, so this is obviously on the, on the, on the very opposite end of the spectrum. But like, I know founders that go through really bad business situations and some like, I mean, there's been stories of founders like committing suicide and like, just very, very depressed or, you know, getting sick or destroying the relationships or like a variety of different things because of business stress. So what's the advice on how to navigate something like this and keep your head and keep your relationships and keep your health?
- [27:54]
Gilad Uzieli
So now I'm gonna, you know, like, do as I say, not as I do because I, I did a pretty like, lousy job in managing my own mental health at that point. And I think that if I had someone that I could talk to, either a professional or maybe like sometimes the people who understand you the most are founders that are, you know, like two or three steps ahead of you in the journey. So I have this net. So now I'm even like building it even further and deeper. But my personal feeling, I'm not sure how really it was right, but that was my feeling. I felt alone. And, you know, I have like an amazing wife and a lot of friends and I have great team and co founders. But I think that I put myself in a situation in which I could have done a better job. I didn't take care of myself and I'm still paying the price even though it finished like 18 months ago. And by the way, if somebody is going through this kind of like pay to play restructuring, I'm happy to talk. I always have time to talk to people who are going through that and this is the kind of difficulty that I felt. So I'm happy to share my experience and so somebody like, like people can feel free to like, you know, to. We can leave my email.
- [29:19]
Interviewer/Podcast Host
Yeah, yeah, no, I appreciate, because I think that these are so tough conversations. You know, it's so cliche, but it's very true. Like everything you Want is on the other side of a tough conversation. And these are all, these are all pretty standard motivational ideas. And if you listen to enough podcasts or read enough books, you're going to hear these. But when you're actually going through it, it doesn't matter what you know or what you've read or what you've heard or even what you've been advised to do by your friend or your peer or your mentor. It's just very difficult. Like, sometimes it's just. And you have to, you have to build the courage to have difficult conversations. Now, you were somewhat forced to, but I think that, you know, even to your point, you probably could have had these conversations earlier and it probably would have made things a little bit easier. You probably could have had a tough conversation with your co founder, and I'm just making assumptions, but you probably could have a tough conversation with the co founder, which would have led to tough conversations with your investors even earlier, which would have ironically made it a little bit easier. But the longer you draw it out, the more difficult it's going to get.
- [30:21]
Gilad Uzieli
Yeah, I think this is a good advice for almost anything. Don't sit on things. For me, the conversation with my co founders wasn't tough. The situation was tough for all of us. And I mean, our first reaction was like, let's save the company. So the Lance's investors were not willing to continue to do their role in venture building, which is to invest. That lead to a lot of friction and a lot of pain for everybody. I also understand how they felt going through this experience.
- [30:57]
Interviewer/Podcast Host
What would be the advice that you give when it comes to how to raise money that maybe you would have done differently, knowing that, say, this is a potential, not ideal, but potential outcome.
- [31:08]
Gilad Uzieli
So this is a, this is a, again, a place where, you know, like, it's much easier said than done. And people tell you find the right investor for you, it's like finding like a wife or husband or whatever. Like you need, you need to, you need to see the world in the same way. But when, when things aren't amazing and you still believe in what you're doing and you are like, you know, you have like this conviction you'll take money from whoever is willing to give it to you. And I think that thing, I think that going back, we've raised money from all kinds of people. Some of them turn out to be amazing, like the best, and sometimes will be not that amazing. But if you take me back, if I wouldn't take that money, I wouldn't Be able to find the opportunity and to learn about the, you know, the amazing opportunity that we now have with sequence. So if you can take the best investors, you know, but sometimes you can't, you know, it's like. So my real advice here is to talk to people who raise money from those people and the companies didn't succeed and then maybe you will be able to learn. Would you take a different decision? I. To be honest, I don't know because you just said, okay, I just need this 500k and then I can start building, move forward. So it's really easy to say and very hard to do.
- [32:22]
Interviewer/Podcast Host
I was more curious to take it a step deeper, even more technically, because you mentioned you raised two safes. Why was that a bad idea? Like from a, from a raising perspective?
- [32:32]
Gilad Uzieli
Because when, when you have to do a down round or when you have to do, when there's like a pay to play or when you have to do restructuring, then the people with the safes have much better terms than all other investors. That create inequality between the investors and also towards the founders. Because basically with a safe or with a convertible note, you owe them.
- [32:51]
Interviewer/Host's Colleague
Right?
- [32:52]
Gilad Uzieli
They are like debit of the company. So I'm not saying don't do safes at all, but try to avoid them as much as you can, especially if you've already done one price round. Because then you're basically, you're basically putting the new investors in a much better conditions or a much more favorable down round in position when the down round comes. And you really need a great, experienced, patience and smart lawyer. Yeah, of course, they've been through a couple of those. Don't use your friend's cousin or your neighbor's daughter. Find somebody, find somebody who, who's done that and be ready to pay. But it's worth it because without our lawyer, I don't think that we could have done that.
- [33:47]
Interviewer/Podcast Host
Those people that made that were making your life miserable because they didn't want to accept the new terms, what was the, the final strategy you mentioned? You're not a good negotiator, but you got the deal done. So what eventually moved them over the finish line?
- [34:03]
Gilad Uzieli
I think that they got to a point in which they understood that this is the best outcome. There is no better outcome here. They almost killed the deal. They made the lead investor very anxious and nervous even. I talked about it before in previous podcasts, but he pulled the term sheet. I woke up one day and the investor who's the like super smart and an amazing investor, I wake up, I See, like, I'm sorry, but I see that your current investors are not, are not thinking of the best, best interest of the company and I'm pulling the term sheet. And I was like, that's it, we're, there's no investor, nobody's doing anything. But he actually did it because he wanted to help me and unfortunately he didn't tell me.
- [34:51]
Interviewer/Podcast Host
Oh, I understand. So he was saying that if we, if, if he pulls the term sheet then that means that those investors are shit out of luck, they have nothing going forward and they're going to lose their money. But he didn't tell you this, but he knew in his head this was like a psychological negotiating strategy.
- [35:06]
Gilad Uzieli
He said, he said, I'm pulling the term sheet, the term sheet is pulled. And, and then I went, and obviously I like, you know, I just remember like waking up in the morning seeing this email and they're like, what I'm going to tell my co founders. That was the first thing that I was like, that I was like. But then we went back to the. I just took a screenshot sent to, to the investors and told them, I think that I can still save this but you have to play along or else we are, or else we are all getting zero.
- [35:34]
Interviewer/Podcast Host
That's smart. It's smart on his part.
- [35:39]
Gilad Uzieli
He almost killed me, he almost killed me in the process, but it was, it was smart.
- [35:43]
Interviewer/Podcast Host
So things move forward. You have this non consensus but correct idea with sequence. So talk to me about, just frame the problem. But how did you validate, how did you, how did you get, what was the word? Like radical conviction? That sequence was a correct non consensus problem that actually could turn into a business.
- [36:06]
Gilad Uzieli
I mean the, we try to come to this and it's something that is sometimes very hard for men to do, but we try to come as humble as possible. We came with one of the important things that we told ourselves. We know nothing. Let's see how people are actually reacting to what we are building. So it started with the landing page and the ads and ended up with 100 or 100 and a few more that paid only. Once we got to that point, we started building because we've had a lot of experience with Lens and we started building fairly quickly. We knew exactly what we were doing in terms of, you know, the infrastructure and everything. Very quickly, very quickly we've launched. You can't really call it an MVP because like in fintech when you move money around, you can't have something not working and you also need to get approved from the bank so you have to have the FDIC in place, you know, so everybody needs to give you like the stamp so you can't call it an mvp. But it was our first a product to the market and it was closed just for the people who paid $200. And that was mid. Oh yeah, like maybe Q3, Q4 of 2023 when we launched the very first version, then we said, okay, we know nothing, so let's. Once we felt ready that the product was stable enough, we said, let's open to anyone who was willing to pay. And then we moved from optimizing to conviction to optimizing to learning. And also optimizing for learning means that you need to increase friction. So we said no free tier, no free trial, no free nothing. You want to use sequence, you pay. And it's still the case today. Taking a few steps back in Lens, when we asked people to pay for what we were doing, nobody was willing to pay. We said, okay, let's drop, let's give it for free. And that's because, you know, it's like a bank. Nobody's willing to pay for banks, so let's give it for free. Which is always the wrong thing to do because basically what they told us is we don't see value in what you've built, so we are not willing to pay. So we've learned a lesson. And for seconds we said, you have to pay. And we opened as wide as we could. We got anyone from, you know, POW2s all the way to like small but like, you know, like medium sized businesses and anything in between. Startups, micro businesses, freelancers, gig workers, side hustlers, anyone that was willing to Pay, we've spent Q1, Q2 just like, you know, getting people on board. And once we've hit like around 5 or 600 paying customers, which was exactly mid 2024, we started looking at the data and it was very, very clear that the by far best users are small business owners. And when I say small, I mean like one to ten employees. We still didn't really understand why, but we saw, we saw the data and then we shifted our marketing and really zoomed in on those, on those people. And then we went from like $200,000 in ARR to we've seven hexed it in like eight or nine months in the market.
- [39:23]
Interviewer/Podcast Host
Mint, is that the main competitor or I guess like sort of like comparable. Because Mint, they have millions of users but they've never figured out how to really make money move automatically. And that's what Sequence is doing so it's interesting. What is the actual problem that people have that you're solving that for example, Mint doesn't solve? Because Mint again like millions and millions. So that would be like the incumbent that you're trying to displace to a degree.
- [39:51]
Gilad Uzieli
Well no, there are a bunch of like PFMs, personal finance management tools like Rocket Money, Wineb Tin. Mint is obviously the biggest and most famous one which they closed it but we actually start where they finish. I am not into financial planning, I'm into execution. We see people take those tools, bring them to sequence and execute.
- [40:17]
Interviewer/Host's Colleague
Right.
- [40:19]
Gilad Uzieli
So I'm actually not competing with them because budgeting is again, I don't know how to 10x anything there. We've built something that is different and sits in a different place. We are an execution tool. I like to think of Sequence as like a fitness app that goes to the gym for you.
- [40:38]
Interviewer/Host's Colleague
Right.
- [40:38]
Gilad Uzieli
You set it up and we do the execution. We always put you in control. You know what's going on, you know where the money is going. You see how you build whatever it is that you want to build either, you know, either repaying that. Start saving, start investing.
- [40:58]
Interviewer/Podcast Host
Yeah. So explain, I guess explain, just explain in super layman's terms like how the automations actually work. Because I was, I was listening to some of your past content and you said that the average American has 15 different financial accounts. So like super fragmented. So what is the actual problem? Like what is the workflow that. I mean obviously different customers, different workflows, but when somebody, the average pick. The average pick, the, the, the, the, the, the most common customer, what are they actually doing with this?
- [41:25]
Gilad Uzieli
So maybe maybe just, just the, the, the opportunity is a great question. I mean what, what, what we came to understand through working with our audience is that our financial stack, both as consumers and smaller micro business owners went through a massive unbundling.
- [41:39]
Interviewer/Host's Colleague
Right.
- [41:40]
Gilad Uzieli
The average American holds 15 different. Holds money in 15 different places. And if you're a small business owner, it's even more than that. And it's very hard to follow where all that money is. It's even harder to manage and it's almost impossible to make smart financial decisions in context. And it's getting worse. The gap between the consumers and small business owners and all the different places in which their money lives keeps going because of open banking, banking as a service, embedded finance, all of that. There are more and more services, more and more products, more and more apps which are all great. And what we do, our strategy is to lean into the fragmentation we don't bundle and we don't unbundle. We just make sense of it all. We bring everything into one place. We help our users harness all those amazing offerings. I mean you can really build wealth through that. But we also bring everything to one place and we put them in control. The combination of just a little bit of intent, some guidance and a lot of automation can change the trajectory of your life. Seriously. We are seeing that.
- [42:45]
Interviewer/Podcast Host
I think that, I think this is very useful because I even noticed like sometimes I'll find, and I don't know, this is like the perfect example, but I'll find like a, a PayPal account over here that has a couple thousand dollars that I forgot even existed or is other. I mean, you know, like maybe I'm also Canadian too. So I have, I have Canadian accounts and I have American accounts and I have investment accounts in Canada and I'm investment accounts in the US And I have a, a Canadian crypto account and a US crypto account and I have two Canadian, two Canadian banks, two America. It's like it's all over the place. It's actually chaotic. It's absolutely chaotic. So this is, this is the solution for all of this?
- [43:23]
Gilad Uzieli
Absolutely. It's not only the solution to not lose 2K on PayPal, but it's actually a way for you to make sure that every dollar that you have is put to the best use.
- [43:34]
Interviewer/Host's Colleague
Right.
- [43:35]
Gilad Uzieli
And it helps you achieve your goals on autopilot. I mean we are seeing people that are, I mean one of the things that I'm really passionate about is helping people get out of debt. Something that many, many of our users do. That doesn't mean that you are, you know, that you are, I don't know that you don't have money at all. Some people that are, that are high earners will still have student loans and a bunch of things like that and so, or credit card or stuff like that. We, we help them to automate and optimize the debt repayment which means that very quickly they're moving from rep debt into saving to what's important for them or investing and making sure that they're, making sure that they are, you know, that they are taking care of their kids, future of whatever, whatever, whatever is important for them. Their older parents, you know, or just living a life that, the life that they want to live. And that is very, our company is very mission driven. Something that we really, really, really like believe that we can. As I said before, we are changing the trajectory of people's lives.
- [44:33]
Narrator/Host
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- [46:33]
Interviewer/Podcast Host
Walk me through Give me Tell me a story about a customer and what sequence or automation they set as so people can start to realize like how this could actually impact somebody's life.
- [46:45]
Gilad Uzieli
So I think a good example would be we have a I think that maybe the best example will start with describing our ICP or our ideal customer. So Our ideal customer is a small business owner, right? And I say small business owners are not a small business because those people, they wear many hats, right? They manage both their business finances and their personal finances. On Sequence, we have a guy that has an amazing business of short term rentals and he has a family, three kids. And that's, and that's his business. That's, that's, you know, that's, that's his like family business. His wife is working with him as well. They manage between 30 and 40 apartments. They register the apartments on all platforms from booking to Airbnb. Those apartments are not theirs.
- [47:34]
Interviewer/Host's Colleague
Right.
- [47:34]
Gilad Uzieli
Most apartments belong to other people and.
- [47:36]
Interviewer/Podcast Host
They'Re the ones who just.
- [47:37]
Gilad Uzieli
Yeah, yeah, there's a lot of money. Movement is coming from different platforms for different departments for different owners. There's the cleaners, the security deposits. They need to make sure that they are saving enough money, putting stuff into marketing and paying themselves and taking care of their kids future and saving towards the vacation. So it's not rocket science, Right. But there's a lot of money moving and you need to be, you can't, you know, you can't not pay an owner, right. So before Sequence, they used Excel sheets. And I think that the guy told us that he was spending between three to five days a month just making sure that all the money is moving into the right place. The right owners coming from the right, from the right platforms, putting aside for security deposits, paying back the security deposits, you know, so it's a mess, right? And with Sequence, we brought it down to like an hour, which is, which is, which is amazing because it gives him more time to take on more apartments, grow his business. He's taking care of, you know, all of his, like, you know, it's like, like the 529. For his kids. He started investing and we're actually now working on a series of, of case studies that we're gonna, that we're gonna share soon. But it's pretty amazing to hear the stories and what people are actually achieving.
- [48:59]
Interviewer/Podcast Host
Yeah, no, it brings, it gives your life back. And as a, as an entrepreneur myself, finance is one of the most annoying parts of a business. It's, it's just, I mean, I'm not like a. Everybody's a numbers person to some extent, but not most people don't enjoy it. I think there's a certain kind of crazy person who enjoys numbers and they all become accountants, but the rest of the world hates it. It's boring, it's tedious. This, it's not fun, right?
- [49:22]
Gilad Uzieli
And, and a lot of people feel nervous about it. You know, it makes you nervous. Yeah. Just the other day I spoke with a guy who has like, he has like, like a franchise business and he, he has like a few like smoothies, stalls, like, you know, like, I don't know, like six or seven. And he said like, like you guys save me so much time and, and give me so much peace of mind because I know that I'm always paying my employees on time, that I have enough money in each sub account. And it's just for me as one of the people who build this product, it just makes you happy. You know, you wake up in the morning and you're, you're saying I'm building something that has a positive impact on the world. And that's, and that's, that's, that's what I always wanted to build all my life.
- [50:06]
Interviewer/Podcast Host
Now the very obvious question, I think that if somebody's listening to this, it's important that you answer this because you're, you're moving people's money around based on an algorithm. So what's the safeguard so that something doesn't go off or something doesn't get transferred? Because then if it's all automatic, if, if somebody is using this properly, that means that they are trusting sort of their financial management completely. And that's stressful. I mean I'm sure you have these conversations all the time.
- [50:34]
Gilad Uzieli
Yes. So first of all the, for many years people talked about the, the self driving money. And I can tell you that people like with 100% confidence, people don't want self driving money, they want help, they want some automation. But they really are not, they are not ready to hand you everything and say I'm not going to look at it. And there was a famous saying that the three most important things for people is their health, their family and their money. But it's not necessarily in that order. We are saying that people, but even when everything moves 100% without them having to do anything, they come back two or three times a week to see what's going on.
- [51:16]
Interviewer/Host's Colleague
Right.
- [51:17]
Gilad Uzieli
So you can configure the system in a way that some things you have to do manually so it won't go like automatically. You just need to press a button until you get more and more confident. Besides that, again, we have a custodial bank that is FDIC insured and regulated. We are regulated by proxy.
- [51:37]
Interviewer/Host's Colleague
Right.
- [51:38]
Gilad Uzieli
So everything is like 100% legit. The way that it works is that we as sequence, we are not a bank. So we can't touch the money. The money is in Fred bank, our partner or custodial bank that they have. They are heavily regulated like any other bank, so money can't get lost. And then when people are building the rules, there are a lot of ways to make sure that stuff like that nothing that you don't want will happen. So you can build the guardrails in the software so you can say, I want to always pay the full outstanding credit card balance, but never pay more than a thousand dollars or ten thousand over ten. So you can always build those guardrails. If somebody is interested in seeing how Sequence works, so obviously YouTube, but we have a crazy active community of amazing people on Discord. Any question? Some people in the community knows the product better than I do, to be honest. Some of them are extremely smart and just great people that we feel lucky to build with and for.
- [52:52]
Interviewer/Podcast Host
That's a smart play as a founder too. Building a community that's very smart. That's such an underrated. That's such an underrated asset that you've built. I think that more founders should try to do that. And I mean like, we always talk about audience, right? We talk about audience build audience, not build community.
- [53:05]
Gilad Uzieli
I can go on and on and on about it. It's one of the things that I'm most passionate about. I have all my life tried to build communities around things. I was like, had some, a few like minor successes here with Sequence. That was the very first thing that I com that I immediately understood that can be like, like, can become like a moat. It can become like a moat around the business. And my take is that community product fit is much harder than product market fit. And if you have a community and you see like early signs of community being created, you have to do whatever you can in order to cultivate it. And that's what we've done very successfully.
- [53:46]
Interviewer/Podcast Host
If we look at, if we look at Sequence and already what it's enabling, but we look at the future of bookkeeping and finance, I'm assuming that you're already understanding how AI is going to impact this and how AI is going to of. So like, realistically, how far are we away from bookkeepers not being relevant anymore. CFOs, I mean CFOs to a certain degree. I mean CFOs can play a bigger role. If you're like going public or at that later stage, maybe people want the experience, but say like a very tactical CFO or very tactical bookkeeper or an accountant with Sequence. Plus, I'm Assuming AI that you will eventually roll out, what is the future of finance? Bookkeeping, small business finance look like.
- [54:32]
Gilad Uzieli
So bookkeeping I think is, I mean the more like hand, like, you know, like tedious work that you need to do, the easier it is to replace you.
- [54:45]
Interviewer/Host's Colleague
Right.
- [54:46]
Gilad Uzieli
So bookkeepers would definitely be worried. And I think that it's a matter of like we are not far from there. CPAs and accountants and CFOs can become strategic.
- [54:58]
Interviewer/Host's Colleague
Right.
- [54:59]
Gilad Uzieli
So that's a different story. It depends what kind of an accountant or CFO you are. And because those people can become very strategic and that's far from replacing them, but they will be able to do way more with much smaller teams.
- [55:12]
Interviewer/Host's Colleague
Right.
- [55:13]
Gilad Uzieli
Because all the like, you know, like putting numbers in and making sure that you reconcile stuff that's going to be solved very soon.
- [55:22]
Interviewer/Podcast Host
You've actually already almost solved it even without AI to a degree.
- [55:28]
Gilad Uzieli
Yes, yes. The problem there is with the long tail. Right. So you need AI and you need good AI to understand what was that payment, where that money went, where to categorize it. So we are not, it's get. It's very close, but it's not one, it's not bulletproof yet. But again, if I don't know, 10 years ago you needed a team of 10 people, now one person can do it.
- [55:50]
Interviewer/Host's Colleague
Right?
- [55:53]
Gilad Uzieli
Yeah. So that's that. And I think that our place in the world, or sequence's place in the world is to become the connective tissue of all those things. We don't want to replace no player and we don't want to give loans, we don't want to give credit cards, we don't want to compete on interest rates. We are the connective tissue. We are connecting our users to the best offer for them. And we are using AI already now to analyze the customers to be able to give them the best offer specifically for them. I can tell you, hey Scott, I see that you have this MX card. If you move to Discover, you can, you will be able to pay less or vice versa, you know, and so really always on our mission to improve people's life through their financial well being and there's a lot to be done there and there's also a lot of money that you can make.
- [56:49]
Interviewer/Podcast Host
Of course. Well, because, okay, so I was going to say like, so we have open banking, embedded finance banking as a service. There's all this unbundling, you're doing, the rebundling you're doing, you're. You're being the connective network of all of these.
- [57:03]
Gilad Uzieli
So I, but I'm not bundling.
- [57:04]
Interviewer/Podcast Host
Right, sorry, you're connecting different. Yes, correct.
- [57:08]
Gilad Uzieli
There's the famous, like you can either bundle or unbundle. We disagree. We think that there's now or at least where we play, we are leaning into the fragmentation, we are leaning into the hand bundling, but we make sense of it all. I don't want. Bundling means that I will give you the cards, I will give you the, the loans, I will give you the insurance. I don't want to give you anything. I want, want to make sure that you are getting the best offer out there. Because for me to compete against, I don't know, again, like Chase, it doesn't make sense.
- [57:40]
Interviewer/Podcast Host
You said that Starbucks is one of the biggest banks in America because of stored value cards. So what does this really tell us about where the future of banking is heading?
- [57:50]
Gilad Uzieli
I think that bank accounts as, as an infrastructure is already a commodity and we are building on top of that. That's where all the fintechs come in. So I think that it will be, I mean again, like people have their money in Starbucks.
- [58:07]
Interviewer/Host's Colleague
Right.
- [58:07]
Gilad Uzieli
It's a bank by definition. And that's just one example. I mean there are like so many more and, and Uber is giving loans and like, you know, so, so we are starting to see more and more and more companies that their core offering isn't financial services, offering financial services. And it's something that we don't, not only that, we can't stop, we don't want to stop.
- [58:32]
Interviewer/Host's Colleague
Right.
- [58:33]
Gilad Uzieli
It's great. People have way more opportunities, more options. Competition is good.
- [58:38]
Interviewer/Host's Colleague
Right.
- [58:39]
Gilad Uzieli
But there needs to be this connective tissue and that's what we are building.
- [58:43]
Interviewer/Podcast Host
If you look 10 years out, what do you think the future holds for finance and banking, traditional banks, all these other sort of unbundled products, where you are in all of this?
- [58:55]
Gilad Uzieli
I think that the big banks are not going anywhere. They have a brand and brand is one of the strongest things that you can have. I think that they will need to find ways to give better service. I think that the small and medium banks should be more worried and there we need to think of like strategies in order to stay relevant into the future. Yeah. And I think that the problem of this massive fragmentation is going to grow. And again it's an opportunity, but also it also has its challenges. So, so that's why I think that there's a huge opportunity here. We are very well positioned to take advantage of it. But maybe there will be other players.
- [59:48]
Interviewer/Podcast Host
That will come in if people want to connect with you. If they want to learn more about sequence, where should they go?
- [59:55]
Gilad Uzieli
So I'm most active on LinkedIn. My LinkedIn profile is fairly active and getsequence IO perfect. That's our website. You can see everything there. I'm happy also to share our link to our Discord community, which is, again, very active. You want to ask questions about sequence, talk to people that are using it, you are more than welcome. So we can share the link to that too.
- [60:18]
Interviewer/Podcast Host
So just a couple questions because again, serial entrepreneur, you failed publicly and then you succeeded, but what is your framework or how do you think through extracting the maximum amount of learning from your failure. So really thinking about what went wrong without letting it paralyze you?
- [60:40]
Gilad Uzieli
That's. That's actually a great question. For me, the more pressure, the more fear and the more anxiety makes me do stuff. And I feel best when I have a plan and I know what I'm going to do. And so for me, being paradise was never an option. And I think that just get out there and do stuff, try stuff, build stuff. And even if you, even if you think that, you know, if you live in, if you're really stressed and in a bad place with yourself, just get out and do stuff, do stuff, that's the, that's the best thing that, that you can do.
- [61:17]
Interviewer/Podcast Host
A lot of startup culture, it celebrates a lot of optimism, which I don't hate, but you really advocate for brutal honesty and truth and almost like removing a lot of the delusion about how successful you really are, because that's what led to all the stressful times you had with Lance Sense. So how do you maintain even your team's morale in this world of brutal honesty and truth and not optimism?
- [61:41]
Gilad Uzieli
Well, I don't think that you can. It's one or the other, right? I mean, you need to be, you need to, you need to get close to the truth as much as possible. Sometimes the truth is that you are doing good and sometimes that things are, you know, I'm going like, you know, like down the drain.
- [61:55]
Interviewer/Host's Colleague
Right?
- [61:55]
Gilad Uzieli
And the, the important thing, the. The most important resource that we have, obviously, is our time. And if you are lying to yourself or faking stuff, then you know you're lying to yourself. You're wasting your most important resource. So try to think about it. Not like sugar coating and all that, just like you have a limited time here. Make sure that you're putting your efforts and your energy in a place that makes sense. Fake it till you make it is one of the things that I Hate the most.
- [62:25]
Interviewer/Podcast Host
Why do you hate it so much? Why is that wrong?
- [62:28]
Gilad Uzieli
Because it takes people into a journey in which they are 90% of the time faking it. There's a mental toll that they are paying. And when I say faking it, I don't mean like, if a customer asks you, do you have that feature? And then you say yes, and you go and build it and ship it next week. That's not faking it, that's making it.
- [62:48]
Interviewer/Podcast Host
That's true.
- [62:49]
Gilad Uzieli
But if somebody asks you how things are going, we are crashing it. It's amazing when you're obviously not or when you are. And when you are just like, you say, I have 5,000 customers, but you actually have five. And that's very dangerous. And that's where things can become like, so don't fake it.
- [63:08]
Interviewer/Host's Colleague
Right?
- [63:08]
Interviewer/Podcast Host
And I think that also, for an entrepreneur, I hate, I also don't like, fake it till you make it. But for some reason, that seems to be a prevalent idea in entrepreneurship. And I think that having that lack of alignment between where you are, what you publicly state you are, like how well you're doing publicly versus how well you know you're doing in your head, I think that just destroys people. Especially if you do it for a long time.
- [63:37]
Gilad Uzieli
I agree. I agree. I agree. That's why I don't like it. And also like you. I mean, if you're gonna tell bullshit at the end, people will know it, right? You can't hide everything all the time, right?
- [63:49]
Interviewer/Podcast Host
If you think about some of the best advice, because I'm sure you've had many mentors and just friends over the course of your career and many of your companies, what would be some of the best advice that you've ever received?
- [64:01]
Gilad Uzieli
Take money. Charge. If not, if no one is paying, you're not building something valuable. I think this is key.
- [64:09]
Interviewer/Podcast Host
And then I would say that the last thing that I love to ask, because you have two daughters and obviously you want to leave them with the best possible advice and set them up for success in the future. So if you could take all the life lessons and wisdom that you've experienced over your life and you could only pass on one lesson to them, what would that lesson be?
- [64:27]
Gilad Uzieli
Don't be afraid. Don't be afraid. Even if you think that something happened at the end of the world, it's not. It's going to be way less worse than you can imagine. So don't be afraid. Go for it. Point.