Introduction
Ryan: Welcome everyone to the Tech Business Roundtable podcast show. This is a podcast show dedicated to shining a spotlight on tech innovators, entrepreneurs, founders, and the compelling narratives behind the movements they’ve established. I’m your host, Ryan Davies, and I’m hosting today’s discussion From Startup to Exit, Lessons in Tech Entrepreneurship with Alexey Sapozhnikov. Alexey, thank you so much for joining us here today.
Alexey: My pleasure. Thank you for having me.
Ryan: When we’re recording, we’re recording for Alexey on like a Friday evening, and he says to me, when we get started, I said, you know, thanks for joining. What time is it there? It’s Friday night. And he goes, oh, I’ve got like six more meetings after this. This is just the start of the day. I think if anything defines the life of an entrepreneur, that’s it, right? It’s Friday night. There’s no going out and having a great time. It’s like, oh, this is just another one of my meetings for the day, right? So, Alexey, I know with your busy schedule, I appreciate so much for you to be able to fit us in here. And for our audience, I want to kind of sing Alexey’s praises a little bit here because there are many praises to be sung. He is a serial entrepreneur with two exits that have raised over $35 million. He has a technology and vision executive with exceptional leadership track record. He builds highly capable organizations in tight deadlines, very focused on milestones, revenue, growth targets, all the key things that we’re going to talk about in controlling complex business operations. 20 years of launching and directing cutting edge, large scale technology production practices, delivering six, seven figure engagements. He is an author and a creator of the first Israeli generative AI enterprise grade product adopted by several Fortune 100 global companies. I mean, when you have that in your portfolio, I think that speaks to just how strong you are at scaling, building something with the market and the customer in mind. I think we could go on, you know, an author, co-author of several software patents, Frost and Sullivan 2018 Cloud Innovation Award winner. He’s co-founded several startups as a CTO and a board member. Again, we could go forever. I’m not going to sing much longer here because I think you could do a better job than I could, but give us a bit of a background. If there’s anything more to fill in there on your, that you like.
Alexey: No, no, no, no, no, no, no. In brief, that’s it.
Ryan: There we go. Then you know what, let’s jump right into it, Alexei. And I’d love to just get a little bit into the tech industry, the landscape, you know, ever evolving.
It is at a time now where we thought, you know, that in the early 2000s and the early nineties was this peak and peak. And now I think we’re at this rapid adoption with AI, generative AI, a lot going on. Maybe you can share a little bit about your journey as a tech entrepreneur and how you’ve been able to navigate, you know, all of those dynamic spikes in the tech business world.
Alexey: So, first of all, thank you. And you’re completely right. I think we are today in a kind of new cycle that is starting, you know, like you said, within the new AI hype and, you know, and the total adoption of generative AI across the globe. I think we are just in the beginning of this cycle. And I think that, you know, the majority of entrepreneurs and the startups and the products that I see today are kind, I will say they are all very advanced in the domain of providing AI infrastructure, which is very good and promising. But in using AI itself for the analytical, generative analytical purposes, I think we are still in the beginning. The AI technology itself is evolving and being improved, constantly improving by, you know, the fragments of the market, the pioneers of the market, like open AI and, you know, and the additional giants. But I think we are still in the very early days of this paradigm. And definitely many entrepreneurs that before would never have some experience with data analysis, with building AI models based on the data analysis are now droning, driving to this direction and trying to build some products, which is bringing you, you know, a new form of insights. Now you’re right. It’s not new. Like I think all of us, in the last 20 years, we actually were evidence to multiple peaks and cycles, for example, the internet and, you know, and multiple technologies based on it and, you know, and the mobile revolution, the iPhone, you know, the enterprise things. So, you know, we saw several types that are coming from various technological innovations and, but I think that today we are evident to something very big. And my opinion, my impression that this is, I’m very optimistic about the, you know, the future of AI. I think that it, you know, we hear various concerns, like maybe it can, I mean, there’s a job, maybe it can, you know, maybe it’s dangerous. So I’m very optimistic about it. And I think that progress, technological progress and the history of humanity eventually always, always lead to something better. So that’s my opinion.
Ryan: I think that’s a great, you know, great kind of background and crystal ball future look too. You tied everything together there beautifully for us there. And, you know, I think, again, we want to talk about, given your incredible experience, you’ve seen, you started up, you exited, you’ve seen kind of both ends of this. You’ve navigated tech ecosystems, but I guess let’s start with like that boundary building block. And you kind of touched on a little bit already of the unique challenges in founding a tech startup and all that exists, you know, when you’re doing it. And you’re right now, again, you’re in a, well, it’s not stealth anymore. You’re like a semi-stealth mode of where you are. Right.
Is that how you say it?
Alexey: Semi-stealth mode.
Ryan: There you go. You know, the key considerations and challenges you faced when founding these tech startups. And I guess in today’s, like you said, the environment’s changing rapidly. What does today’s space look like for founding and scaling a tech startup?
Alexey: So that’s, that’s a great point. And I think that, you know, the big and even I can define as a huge good news that we have today. If I’m comparing things like what it was like 10 years ago, 15 years ago, today, if you have the idea and you actually want to, to create the company, you want to build the product, you will, you know, not just the product you want to deliver to customers. You want to build a company, the price, the cost of doing it. It’s like 90% less than it was, let’s say in 2009. So why did it happen?
First of all, because of the cloud revolution. So today you have the infrastructure resources that only, you know, like 10, 11 years ago was very basic. So today everyone can rapidly create a needed infrastructure for delivering a scalable, you know, service in almost anything. And even, you know, on top of it, you have low code and no code automation. So the road, the journey to getting feedback from the customer, from your MVP is actually very fast. In addition to it, you know, just in the recent, in the previous year, we’ve had this Chat GPT revolution, which I think the main point, for example, for, for, I see it as a, you know, it is a great helper to a startup entrepreneurs is actually, is not to, you know, to connect your products to change your PT and use it because that’s, you know, that’s, you know, we are not doing it. All of our models are proprietary. You know, we are not sharing the customer data, not with change of PT, not with everything, but the ability of change of PT to help your programmers to generate the complex structures of the court is actually also very happy helping. And all that is actually bringing you to the situation. And if you want to deliver, you know, a technological product, it’s much, much, much faster. However, the idea of finding the right pain, the idea of finding the right problem that is worse for you to deal with is still the same position. Like it was 20 years ago, 15 years ago. And the rules here are always several. If you’re building a B2B product, the number one thing that should be done is not to start building some MVP or something like that. It is actually to talk and to interview your potential customers, to see how much the pain is big, and understand exactly where your idea should be. And by the way, you know, I can disclose, you know, at any case and you know, and every case that I have some idea and I started to talk with the potential customers, they pivoted me like thousand degrees, you know, around myself until I really understood where is a really big pain point that probably it was to check and was to deal with. So that part is actually the same. However, to, once you find it, once you find this sweet spot, this crystal ball, like you said, you know, to, to address the way to, to provide some MVP for this, for this crystal ball is like much more fast and much more powerful than we experienced at like 11 years ago.
Ryan: So when, when you were talking about that, I think, like you said, that’s, that’s a great point, right? You got to really focus on not just the market, but you got to have a customer centric approach. You got to understand what problem you’re trying to solve, right? Don’t try and solve all of the world’s problems in one product because you’re going to get drowned out, right? Like you want to solve a specific, what, you know, that same thing of what am I best at in the world? And that’s what I can bring to the table, right?
It’s got to be in that product thought, you know, or that that service thought that you’re bringing forward as well with that. Like you said, once it clicks, do you find it now, because it’s so fast with, again, like you said, the technologies that you can help with, with every part of your business, not just building products, but building HR teams or building, you know, leadership teams and things like that. How do you prepare for that really rapid scalability? Like once it clicks and you go, okay, it’s go time. We got to go now, right? You can’t just stay in that same mode. You, it accelerates fast, doesn’t it? And like, there’s got to be a good amount of preparation that needs to be done.
Alexey: So that is a superb question. And I think the main point, the true, you know, the true differentiator that we have as an experienced entrepreneur at this point is that, look, every founder, once he actually discovered this, this problem and he knows how to solve it and he knows what to do, the question that this person should ask is actually, do I want to view this company as a company who is VC backed? Or this should be a bootstrap business, a bootstrap startup, which today is growing right there. And again, you are talking to someone who raised money from VCs, you know, during the last 15 years before it, I had, like you said, I had a service company, which was completely bootstrapped. And today my product startup, our product startups that we are advising advancing in the field of security and cybersecurity and AI, we actually are bootstrapping this step. We invested ourselves, you know, but the startup has already profited.
So the question is, is what I want to do, you know, which one of those two directions should I take? Now the issue is that not every product can be bootstrapped and not every technology can be bootstrapped. So if you want to start very lean and, you know, and to arrive at some initial profitability and, you know, and grow it as a company, which is profitable and bootstrapped, this is one way. In this case, until you have this big growth of the personnel, and you really need to take care about the growth issues and, you know, and company culture and all this stuff, you know, you have time. And in this case you can build it slowly and you can actually address those issues gradually. In this case, when you are raising, you know, money from investors and you are starting from the point that you are building and growing very quickly, because that is your product, that is your business, that is your business model. This is a tremendous challenge for every entrepreneur. And, you know, putting in zero time, multiple people together, building a company culture. You know, I have a friend who is a great entrepreneur living now in San Francisco, also from Israel, moved to San Francisco, also in cybersecurity.
So he told me once that the company culture, Alexey, is like a tornado in this essence. So if you are close to the center of a tornado, if you are close to company culture, you are staying, you know, with the tornado. But if you are going out from there, if you are distancing from the center of the tornado, the tornado is like throwing you off.
So that is something that is very challenging. Once the company, you know, exactly in the beginning, had huge, you know, growth, because it’s like that, that effort should be done. And I think the number one challenge in this point is to build a company culture and to value company values. Because if everyone is actually aligned with the company culture and company values, that’s what promises that everything will, you know, sound like good music.
Ryan: That is, that is such an incredible point to talk about there. And I’m going to, I’m totally stealing that analogy because I love that idea of like you’re in the middle of, you know, you’re in the eye of the tornado or the eye of the hurricane, it’s calm. It’s blue skies.
It’s fine. And then you’re around it. You’re getting destroyed if you’re not, if you’re not a part of it. Right. So I think with that, you know, I want to ask a bit more about that because I think again, tech leadership, team dynamics, absolutely crucial. You know, we’re, we’re again, we’re in an area that you need to foster innovation. You need to foster collaboration within these teams and you have to build a really solid team around you again, as you scale, this is going to be a very key point. You’re going to have people who are with you from the long haul, but you’re going to have to attract new talent. That’s understood. That’s resilient. That wants to grow with you. So when you’re doing that, I’m going to ask you a really easy question. How is it, you know, like the hardest question, but it’s one word for me. So it’s easy. How, you know, you, what, what kind of qualities are crucial for these teams to lead successful organizations?
Alexey: So, that’s a super point. And I think that, you know, when we are building a startup, I think like to be, to be in the startup, you know, before I actually became an entrepreneur, I started my, you know, working journey as an employee in the, one of the greatest startups in Israel. I don’t know if people remember today, but it was a startup called Exact in,, I think in 97, 98, a great startup led by two super entrepreneurs.
And I, I was a young guy. It was, I think after the army. So I was like 24 years old.
So this, this feeling of moving things fast, doing great, you know, great technological things, being able to, you know, to handle serious projects. That’s what, you know, infected me and for my whole life. But let’s understand that this is a good start for a startup.
This is a wonderful benefit of being, you know, a person who is working for stuff. However, together with it, like in every society, together with benefits, we also have commitments and I can, I can be with you very honest. You know, when we had this, my previous company and I interviewed people, you know, for my technological department, many times I saw something that I define as a human tragedy. I see brilliant, you know, experts that cannot work in the startup world because of, you know, because of technologically, you know, engineering wise, they are superb. Okay. They’re great. But to be able to move fast, you know, if we’re working, let’s be honest. If we are talking about work-life balance, sometimes in a startup, you don’t have outs. You need to, and, and people probably have commitments, you know, outside of the work. So they cannot be, they cannot give their committed commitment to this. So, and because of it, they force it to stay in some, you know, legacy companies that are not, you know, providing their, to their careers, to their, to what they want to do, you know, and needed, you know, challenges. And this is what I called, you know, human tragedy this way. So that’s in essence, in one sentence, if you are choosing the right person for your teams at any level, okay. Senior members, the junior members, that’s what, you know, promise you that things will play together.
Building Relationships
Ryan: Yeah. I, you know, I actually was talking with somebody before about this and they said, before you ever get started, you need to know, number one, what your passion is, is not what you’re going to be doing. Right. So if you’re like, I’m a developer, I’m an engineer, you’re not going to be a developer and engineer anymore. You’re going to do it to a certain point. And then you’re going to be running a business, right. And you’re hands off. You have to be comfortable with that because a lot of the time, I’m going to do what I love. Don’t, don’t start your own company then because you’re going to be doing stuff that you don’t, that you might not love. And number two, I love that point. You know, when you’re identifying the right people, when you’re talking to these people, they need to go. And you as a founder need to go, if you’ve got a family, if you’ve got a, you need to interview with them, you need to talk to them and go, here’s what we’re in for.
Right. Cause like you said, it takes a totally different level of commitment and balance. And again, here’s Alexey on a, on a Friday night going, yeah, I’m doing a podcast and I’m doing a whole bunch of meetings and you know, you know that that’s what it is. So you’ve got to understand that your life is flipped upside down, but the benefits can be amazing. And the personal fulfillment and the goal accomplishments is just a high that I don’t think you get from anything else except entrepreneurship. Right. So that’s incredible. And I love, you know, your take on that and building that leadership, finding the right people, things along that line, pivoting slightly here, kind of the same thing, I guess in some sense, but you know, tech ecosystems, especially today, you know, again, you’re not trying to solve the world’s problems. You’re trying to solve a pain point and really do it. That, as you mentioned, involves partnerships, collaborations, complex networks, growing that.Right. So for you, obviously something you’re incredibly strong at, how do you approach building and leveraging relationships within the tech industry?
Alexey: Listen from my perspective, the making a business and, you know, and building the, you know, and building the sales operations and then building the partnership operations. This is number one, you know, mission, you know, everything in, in, in, you know, everything and everything is actually based on the personal relationship and, you know, and to develop those personal slash business relationship is actually the number one, the mission for every, you know, CEO in the startup industry, what I’m trying to do and what I’m, you know, my, my way to do it. I love to, you know, volunteer to help young entrepreneurs. I’m mentor in several accelerators, you know, absolutely voluntary, have no strings attached, no equity, nothing, you know, just, I, I’m always glad to help to someone because what, what I think that if someone can learn from mistakes of, you know, other person, that’s, that’s, that’s a huge benefit. That’s a huge leverage because unfortunately in my journey, you know, many mistakes I did it on myself and, you know, not many, not many mentors could the time prevented, but if I can save someone from making some mistakes in business and some mistakes in the entrepreneurial journey, I think that’s a great benefit.
Scalability Challenges
Ryan: Yeah. I think, you know, and that’s, you can tell again, here you are giving me your time, you know, to do this, you’re giving our listeners your time to do this. So there’s a, there’s definitely a selflessness that, you know, great leaders have. And I think, you know, again, we can see it with you, Alexey, and I appreciate that. I want to kind of, you know, cover a couple more little things here before we go, because I think there’s so much to go through and we’re fast forwarding so fast, you know let’s talk about scalability. Can we, again, you’re in semi-stealth mode, so I don’t want to give up too much here, but at the same time, I know this was something you had touched on. We had our, you know, our lead into this was you’re really focused on this new project on the ability to scale and help that rapid scale because again, you hit this Mark where you’re like, okay, now what? I’m not an HR person. I’m not a cybersecurity expert. I’m not a, so you need, you need to be able to scale in, in pillars and in areas that you have little to almost no expertise in. So give me your take on that a little bit here and what, you know, again, if you want to talk a little bit about what you’re personally doing and why that’s great, but also your take on that ability to scale up in areas that you really just don’t know about.
Alexey: Oh, okay. So look, I sent you all the loaded questions, Alexey.
Ryan: I give you big, heavy ones.
Alexey: So look, you’re, you’re, you’re, you’re absolutely right. So, you know, you said that we are in a semi-stealth concept. That’s right. We still didn’t make any, you know, big announcements, but we, we actually, we are a startup after 10 months of running and already have big customers and states in Canada, in Europe, in the domain of cyber and domain of compliance, compliance and privacy in the domain of HR. So, you know, my way to build those things is actually based on two things, one, two, two principles. First of all, I’m trying to build, you know, the whole organization correctly from the very beginning.
So once I need to scale, this basically should be an organic growth of the organization and not rebuilding and restructuring and, you know, changing the roles and all this stuff. So that’s one. Number two, and this is really a challenging question is a question like, when should I like delegate, you know, a position and, you know, and in the, in the life of a bootstrap company, it’s makes it, when we should, you know, invest our money and hire a specialist for this position, you know, promoting an internal person to this position for, for actually providing the needed expertise and where we are done without, without expertise on this. So for example, in HR, what I’m doing, once we have like 15, one, five, 15 employees, that is a, that is a very concrete number that we need an HR person. Okay. So, you know, I know about some, some people that are bringing HR person, you know, after this number and before this number, that’s, that’s my number that I feel that this is a number that requires an HR person and the management, you know, one founder, two founders cannot, cannot handle by themselves. The same, the same issue is about, for example, customer success, you know you need to bring a figure, you know, for this, for this position, you know, the support, also the questions of growth. So in some numbers you, you should delegate, even if you feel that you are okay, you should delegate.
Alexey’s View On Exits
Ryan: I like that. Yeah. And I think it’s so, so important, right? You can’t, eventually you have to let go. Right. And that’s the hard part is letting go of entrusting somebody else.
But as you mentioned, when you’re talking about building a team, if you do it right, you focus on the right parts of it. You do it in the right sensible order, you know, don’t just delegate off the stuff you don’t like to do. I mean, it’s important, but if there’s bigger things to do, you know, get those people in place first and do it in the right order and things like that. Let’s just, you know, it’s in the title. I know we’re running, we’re starting to run low. I warned you I was going to take time here and I was going to go over time.
And here we are, we’re probably starting to go over time. It’s in the title from startup to exit. And I know startups, it’s the whole thing. Exit is its whole series of podcast episodes on its own. So there’s acquisitions, there’s IPOs, there’s all sorts of different forms and everything else. I don’t want to dive too far into those, but maybe just some advice you would give to tech founders who are strategically planning for exits in today’s market around again, what does that strategy and timing look like? And when do you start that planning process? Does that start when you go, okay, now I want to start the exit or is it like when you’re founding and you’re going up, you go, okay, here’s where I’m going to start considering it and start putting all the pieces in a row for it. What’s your, what’s your strategy?
Alexey: So my strategy, you know, my personal view of this is that anyone who’s planning for exit, this is not a good way to process. Okay. I think that the best way to plan things is to build a sustainable business flow, a sustainable company that has a profitability that all can go at any moment of profitability. You know, the company that is really solving the problem, the founder PMF, the product market feed, you know, this is not an easy task. And I think that the whole deal about the exit offers and, you know, and the proposition to acquire as a company, proposition to, you know, to make something together is inevitably coming if you are touching, if you are achieving those goals. So it’s, you know, it’s not the trends, that is, you know, it’s not the tail that should move the duck, but it’s the duck that should move the tail. So that’s, I think it’s a point.
So if you’re as a founder, if you’re concentrating on your journey on delivering the best quality product to your customers, you know, maybe I’m wrong, but I think for 100%, you will get the exit offers and you should not chase after.
Ryan: I love it. That’s fantastic advice. I really like that strategy, that thought process. Again, you know, don’t start with the end in mind necessarily all the time, right? The end will present itself to you because you don’t know what that end could be depending on how you’re growing, how you’re scaling, how you pivot, right? Again, as you find that product market fit, it’s different from day one. So that’s wonderful advice from that. I got a couple more for you and then I promise I’m gonna all end this and wrap it up, but I’m enjoying this way too much, Alexey. So that’s why I wanna get a little bit more here, but let’s kind of, as we’re closing off here, the future of tech entrepreneurship is filled with challenges. And I think they’re around, there’s numerous, but right, talent acquisition is challenging because again, it’s getting, people are very competitive in this. Market saturation, because again, people can go to market so much faster now. What wasn’t there yesterday is there today. Where are you at? Where did that come from, right? Regulatory changes are coming into effect more and more and more, especially in AI and stuff like that. How do you, as a tech founder, proactively address these challenges and get prepared? And I know there’s a lot of different challenges there, so we don’t have to get granular, but just kind of some of those thought processes that go through your mind to be adaptable and ready.
Adapting to Challenges
Alexey: So that is superb, those are superb questions. And I would say that the most important part is, okay, the question that I’m asking is, okay, how big is my market, okay? Because if my market is big enough, the competition is coming, maybe it’s a good thing, okay? So, you know, that’s, so even if the speed of someone new who is appealing in this market is fast, okay? Maybe, I don’t think this is a bad idea that there will be some competitor to your company and you will be, you know, you will compete with someone. So I don’t think this is a problem. But the real problem is that, what is the size of the market? What’s the TAM? Total Addressable Market in this specific domain. Because if TAM is not big, then the problem, you know, actually starts. So this is a question that I’m always thinking about. Now, regarding the thing about bringing the talent and, you know, and retaining the talent and, you know, and additional things, I think if you are building something which is appealing, to have the great atmosphere, that you’re providing a benefit, you know, one thing you cannot do, you cannot compete with the big giants with the salaries of people. That’s what you cannot do, okay? So you cannot, you know, compete with Amazon or with Google, with the salaries that you are paying. The only thing that you can actually compete with is to give to people more freedom, more like, more potential for their self-development, self, you know, self-representation in this technology, in marketing, in sales, and all this stuff. So that is your key competitive advantage in this job. That is my answer.
Ryan: I think that’s incredible. With that, Alexey, we’re gonna kind of wind down here. So I wanna give you one last chance here as well. I’m sure our audience is just waiting for, you know, anything more, but a piece of advice for aspiring tech founders, or based on your experience, any final reflections or insights that you wanna share as we transition out of this episode.
Alexey: Thank you, Ryan. And I will say, you know, one thing that I would advise, if anyone needs advice, you know, I would advise tech entrepreneurs is be, not pessimistically, but be realistically, brutally honest with yourself about where you are, okay? About what’s going on, about where your key strengths are, about where your product’s key strengths are, about where your company consists, what doesn’t work, what, yes, work, like, don’t be calm. Don’t be, you know, self-calming. Be brutally honest at the end of each day about what, how you are advancing, if you are not advancing, if you are yes advancing, like improving the points that should be improved.
Ryan: That is an unbelievable piece of advice to take away and a great kind of last summary piece here, right? When we’re talking from startup to exit, that is the key. You gotta know where you are and you gotta be comfortable with beating yourself up a little bit. Don’t be, like you said, don’t be pessimistic. Don’t go doomsday on yourself, but be realistic. Really take a good look at what you have, you know, and track that growth or lack of growth so that you can make those changes that are critical, right? So Alexey, I gotta thank you so much for this episode. This was absolutely incredible. And I’m hoping we’re gonna be able to have many more of these to come because I think you’re just a wealth of knowledge. Based on that, you know, you did mention, I’m putting you on the spot here a little bit. You know, you did mention that you are a resource to people as well, for people that wanna follow your journey, people that wanna get connected to you. Alexey, what’s the way to do that for them, for our listeners?
Alexey: My Twitter, I think it’s the best way, you know, people can write to me on LinkedIn or Twitter. I think that’s the best way.
Ryan: Perfect, excellent. We will get that into the show notes here so that people are able to connect with Alexey. And I wanna thank you again, Alexey, for your time today. Thank you, Ryan. For this episode, this was an incredible, incredible episode. There was so much to take away here. Let’s do this again. Don’t be a stranger.
Alexey: No, no, no, for sure. Any time, any time, Ryan. Wonderful.
Ryan: Well, with that, I’ll take this final minute to thank Alexey Sapozhnikov for this amazing podcast from Startup to Exit, Lessons in Tech Entrepreneurship. And I wanna thank our listeners. We can’t do what we do without you.And until we meet again with another amazing TBR episode, I’m your host, Ryan Davies. Thank you and take care, everybody.