And I remember the time I was reading a magazine article. and, and it said, you know, to be successful in business, you have to focus, right? And I said, you know, as a freelancer, I'm doing everything and anything. I'm doing content management systems a bit of e-commerce and some website, you know, stuff.

And I said, Okay, well if I have to focus, what am I going to focus on? And I started to do some thinking and I said, you know, I think I'm gonna focus on e-commerce. I feel like that's gonna be an industry. And we're talking about like 2001, 2002. So I think it's gonna be an industry that's going to, grow.

 And, And that's what I did and I picked up some open source tools. There was this other open source platform in the market back then, and this was the early days of Google ads. And I would literally put an ad for open source eCommerce services. mind you, it was just me at first and I would get enough business for six months, within 24 hours and close the ad because I could not scale fast enough. So that was, kind of a aha moment about, hey, there's actually demand for this. And I have a great, uh, opportunity to build an interesting services business. I didn't really know what I was doing. I'm smart now saying services, but at the end of the day, this was just freelance. I was a student, I was trying to make some money So that little freelance business turned into about 25 full-time people. Um, While it was at ucla,

 and I decided to leave with 10 weeks to go.

Oh my God.

Yeah, one, I had a quarter. And I said, This is blowing up and I need to go , and really spend time here and, and make sure this is not gonna, fall apart.

And it was great. And I, you know, was making good money and I was able to pay rent, which was the goal. And, you know, some point in time our customer base or merchant base became you know, bigger,

and every time we'd do a project, we'd have to fork the source code. And it was just messy and ugly, and it just didn't really allow us to scale. and I had this one brilliant engineer that was just getting bored And we just decided to, Hey, why don't we just think about what the next generation open source eCommerce platform, looks like. We could put this really brilliant guy on it and have him come, start the foundation and let's see what this turns out to be. And that's kind of really the genesis behind Magento

This is 2006 now. And you know, once, we saw some, inklings , , you know, of interest and really strong. Opportunity, And this was kind of the heyday too, of commercial open source. We needed really created business, you know, around it. We were bootstrapped, What does it mean to be sort of a commercial open source? Like how are you thinking about your business model and sort of what the different options were for a business model?

So look, When emerged in the early two thousands is the commercial open source model, which allows you to do a dual license strategy.

One is for a community open source, free version, and an enterprise version of the same open source product coupled. Perhaps additional capabilities and features coupled with perhaps hosting, so services coupled with warranties and indemnification and a set of protection mechanisms as well.

 Typically, what you see in an enterprise commercial licensing model Okay, so keep going. So you went from selling services to selling a product.

So it's hard to do that. It's hard because you now have a limited number of resources where you have to go spend time on non-billable hours. Right. So it's, it's kind of hard to, you know, to balance it to, I think what was. Lucky for us is that I understood that pretty early that you just can't split these resources across product and services.

It's just really hard to do. So to me, the only way to solve , for this was actually fire all of my customers and really put all the eggs in the Magento basket. So we eventually just let everybody go and just told them, Look, we're gonna be done servicing customers, We're gonna be focusing on building our product.

Which at the time never seemed as risky to me, But I was so convinced, and I think the team was so convinced that we had such a compelling offering that it never really occurred to me that there was any risk. I mean, I'll tell you what, you know, we also, before we, we did this at the time, we had a blog, um, e-commerce.

And We started to share a bit of information about the industry, about eCommerce, about tools, technologies, So I share wire frames and I would have a hundred comments, 200 comments on the blog of people from all over the world providing input, right? And giving us, uh, a lot of data around how eCommerce was done in their own ge. And recommendations and suggestions and best practices for us to consider. And I'd always wanted to build a product, and that was where my passion was, and we had a phenomenal team, and it just, all came.

Hmm. And so, you know, tell me about some of that scaling journey. , I said in my intro that it scaled to over a hundred billion in transactions annually. That's crazy. Huge.what were some of the big unlocks? What were the big moments in, history there?

So it really took off on its own, you know, to be honest, I mean, we really you know, put out what was a great product at the time. , and really let the community sort of drive it. And you know, the great thing about about open source and the great thing about the product being free is that you kind of get really great adoption very quickly. Right. . So it's kind of a no brainer, right? But you know, when you give out a great product for free yeah, sure. A lot of people are gonna use it. And I think that's what happened

You know, it was absolutely crazy. Like, we get these calls from Fortune 500 companies that were telling us, Hey, we're using your product. we didn't even know this, right? we're using your product. We were driving, X billions of dollars through your product. We don't even know who you are.

and now that we do, we'd like some support, right? So, you know, it all came organically. ,, it was definitely a bottoms up approach to delivering software. And I think that's really the power of open source. We had an incredible following very early on. We struggled as a business very good 18 months after the product was released.

So it was kind of crazy to think about it where your product is really. Making a lot of headway in the market and it was the talk of the town in the eCommerce world and you know, we'd get invited to Magento events all over the world. Events that we wouldn't even put together. We would just be invited to and back home, I had like three months or six months of runway.

You right, because I was about, like, I just had no, no way to monetize early on until that dual license strategy, the commercial and enterprise strategy. Really began to take shape, which took us a good 18 months, two years, maybe even.

I have one listener who always tells me I need to ask about people's failures. Let me ask it this way though, like, were there any big mistakes, like looking back, like advice you'd give yourself or that you sort of have learned and now are giving to entrepreneurs you meet with?

 That's such a good question. Uh, there are so many mistakes, so many mistakes but, you know, hopefully more good things than bad things. Right? You know, look, I think that. know, we, came on the market , in sort of a pre-cloud time. And what was really, you know, happening in later years , was really the cloud evolution. And, you know, while we acted fairly quickly, so we, , we ultimately began to launch a cloud product. We never really materialized on that for a host of reasons, right? this is a whole separate session just on our lessons learned from that period of time.

You know, but ultimately the company was acquired right at the cusp of that. So if I had maybe another year, year and a half, you know, I think that's really the timeline that I needed to. Really transitioned the company to now a cloud company, a service company. And that was the path that I was on.

You know, we had a few of these pivot points in the company, right? Service is a product and then product to the cloud, right? And I knew that that was going to be the next big transition. Very difficult to do across the organization. You know, the way that I like to think about it is I'm moving away from giving a zip file to customers to now servicing them 24. That is a big change in a

business. Right? And to do that, you really need a very different DNA across the board, right? Organizationally we understood what we needed to do. But you know, when you're going through an acquisition process and your priorities change and you know, your team changes.

 was hard for us to do it at that moment in time. So we, we kind of, I think, lost out on that opportunity that was there. In hindsight, that was a big opportunity. Um, , but, we're happy with how things landed.

Mm-hmm. I mean, you know, Shopify is a big business, right? I wanna like bring up bad names if they're bad names. But what about any other lessons , from selling the company?

 I mean, look, I think , there's a lot of lessons. From really understanding the type of organization that you're coming into and I think the role that the business plays within the organization. Look, you know, we, came from a very entrepreneurial minded, you know, it was about 400 people when we sold.

But, you know, ultimately it was my, co-founder and I who are just product technology driven. Right. , I didn't care that, I mean, I, I, I'm gonna say it like I didn't really care about sales as. We needed that done. And I had great people there that drove it. But when I woke up in the morning, I woke up thinking about product, not thinking about revenues.

by the way, still to this day, right, , that's where my passion is building great products. And, you know, we came into an organization that, you know, had very different priorities,

right?

And

right? And eBay is kind of known as marketing heavy, marketing driven or

something. I.

that's, right. So I, you know, and it's, it's very interesting to think through, you know, at the time, look, this is also post 2008 and 2009. Like, we're traumatized from like the world almost ending, right? Financially. Probably not many people remember that, but , it was insane, right? Like, we didn't know if tomorrow was coming.

So, you know, I didn't really have, I think, the foresight to say, Look, is this the right product? Driven and technology driven organization that I'm selling the company into that really has alignment as far as just the thirst and the hunger to go build great products. You know, that's one lesson learned.

But look, I mean, You know, it's doing well. it's, it's with Adobe now. That's sort of the end game. Former gen, all the name's gone. But you know, that, was the end game. Uh, the product today is known as Adobe Commerce, but we felt like we could do a whole lot more. It felt like some chapters were just on red still.

Mm Well, okay. It's a good pivot though, into what you're doing now. , I said you're writing half a million to million and a half dollar checks at R squared. I mean, are you still looking at this space? Is it still exciting? Like, are you still thinking about what do merchants need and what tools are they gonna use?

Is that still thesis area?

Yeah, for sure. No, it is. I mean, look, that's a, you know, it's been an area of interest for me for now, 20 years. My partner and I started our squared. My partner Roy Aris was phenomenal. He and I connected when I invested in his company. He pitched me in 2012, a company called Loop Commerce, which ultimately sold , to Synchrony, So he finally had more time for me and then we started doing investing together, and that led to our squared.

 so what I wanted to say by, by sharing that is we're both long term eCommerce guys, right? And we care about the space, we're passionate about it.

I think I come with a bit of skepticism, which is, which is maybe healthy. , because I've seen the ups and downs now having seen this for 20 years. So I, I'm probably a bit more skeptical than most, and we've done only maybe, of the 30 investments we've done over the last 18 months We have uh, done maybe only a handful of things in the, I would say pure sort of eCommerce space, but I continuously look at opportunities and ways to innovate, you know, thinking through what the future looks like.

Do you have things that you can share when you think about how the future is looking you know, are people gonna be. And selling very differently in five years.

 So there's, , there's a couple big themes that I, think through, right? So, you know, one is, the way that we consume content is largely driven one by mobile and two by. If we think about how much of our time we spend on feeds, right? Whether it's Facebook or Instagram or, or TikTok, I mean, everything's kind of scrolling down, right?

In the commerce world, we still , drill down on taxonomies, like how crazy is that? Right? And for me, I think there may be opportunities for new design language for a new paradigm around how we discover search source. Information in the eCommerce space.

There's nothing like that. I would say that like immediate, like, Hey, here's, here's the solve. But it's just an intuition that we're consuming content differently. Yet eCommerce has not largely evolved

So will it be part of existing feeds? You think it'll be some new feed altogether or?

I, I don't, That's a really good question. I don't know. Right. , you know, I'm obviously very interested to see what, Instagram's doing on its, , commerce side of things. And I've had, you know, conversations, , with them, about that TikTok as well, know, are these platforms going to really be the new commerce platforms? I'm skeptical, but, maybe you know, we haven't seen, I think quite the momentum there as I maybe would've expected to see over the last couple years. Could it be, something new, you know, potentially as well.

but again, I, I don't think I have to solve, but I'm, I'm, you know, when a team comes and. Pitches me something on this front. My ear is, definitely, you know, open and I wanna be challenged and really think through with them about what those opportunities look like.

The next thing that really is top of mind data. Which is not that surprising, but we're all in a data with. Right? I mean, how much more data can we capture, analyze, segment? It's like so overwhelming for everyone. But when you look at a merchant's life, it's even just more so because you have all these apps that promise you another percent uplift here and another half a percent uplift there.

It's like endless, right? The permutations , and the, the products you need. To bring together a, cohesive experience that performs well.

This has to be streamlined, right? I think the ability for merchants to select a LA card and to trial and error and all of this stuff creates a lot of friction and a lot of noise.

And I think the way that we use, I think, data , to acquire customers and move them through the funnel. then post, you know, of course as well will also, I think over time move into the types of tools and technologies that we use to really acquire that type of funnel. So lemme give you, you know, an example which in, the Shopify ecosystem, which apps do we use, right? I don't think that there's a data driven story there yet as far as, hey, use these.

For this particular merchant that is really acquiring this, particular user

base So almost like an automated data driven system that will inform you and test with you as a merchant, the permutations that really drive to a bigger outcome.

So what you talked about though is, is that's data that informs like what apps I might wanna use as a merchant. What is data driven commerce actually mean?

I think it's end to end, right? I think it's almost, you know, letting the engine, the AI engine run this for you. Right. , I don't think we're, in a position given the data overload. The question is how do you as a merchant, continue learning from even bigger amounts of data sets?

Sure. Amazon can do it. Right. The big guys can do it, but when we think about the long tail and the long tail doesn't have to be small mom and pops, right? But the long tail is the mid-market, let's say

These guys I think need help because it's really complex to build these data engines. and I don't think that there's quite a solve for that and I think that it could be greatly optimized.

Hmm. And do you think that the base is still Shopify or the base is still Amazon, or do you think it's a different

 I mean, if history, the indication of. Of the future. Then this is cyclical and at some point there's new entrance and there's evolution happening, right? I mean, I've, I've done this for 20 years. I don't think we're still talking about the platforms that I was competing against back in the Magento days.

 do you wanna riff at all take a moment to sort of riff on what a new platform would have to look like or do? I mean, it, it has to solve what you just talked about, right?

you know, I think it's more than just tech, right? great tech infrastructure is, , one thing, right? But, you know, it solves a lot of the data issues and stories that we're talking about here. What that looks like. I wish I had a crystal ball but , I'm searching for it. So if, you're out. Trying to solve for this. , please call me

and mi and mini too

right, ? Um, I would co-invest with you in this space any day. Um, , do you think there's other interesting things looking at other countries that are going on that really excite you, that you think might become big trends here in the US Nothing top of mind right now. You know, I've seen, , crazy models of things like, try before you buy. For example, you know, in home you know, this is for clothing and apparel.

Literally a carrier brings products and waits outside for you to try it.

Hmm. I do that.

I probably wouldn't , but yeah, I, I, I was just skeptical that a guy's gonna stand outside your door and you're gonna feel comfortable that, you

know, but there's a guy out there, or, or, or a gal. But you know, there's like an Uber guy, right?

Standing outside or, um, , it's just like, let's go, come on. You know, the clock's ticking. Um, but it's hard to say that scale,

I've seen so many things over the years, just, you know, being part of Magento, we had so many companies come to us over the years Um, do you wanna talk about other, Are there, because you guys don't just do commerce, right? What else should we know about r.

Yep. So we're an early stage fund. Uh, we invest in seed and precede. Rounds. , it's a relatively small fund. It's a 32 million fund that we're investing out of. It's our second fund. uh, our first fund was raised last year. , we don't lead rounds. We don't take board seats, we don't write term sheets.

We follow. you know, with some great investors, what we invested in is fin. That's a big category for us i's say it's the biggest category of what we invest in. So FinTech, commerce, marketplaces, and then we'll do sas. you know, a lot of what we invest in, about 50% originates from Israel, where I am originally from, and my partner as well.

 Do you think there's big differences in founders coming out of Israel , or the VC ecosystem? Like, what do you see the differences between the markets?

I think the biggest difference is that it's such a close knit small community. We all know each other.

and it's really phenomenal. I mean, it's almost impossible for us to meet a new team that, you know, if we don't know them somehow, Then we can get to them in three minutes. Right. Just by , our network.

It's very concentrated in Tel Aviv. And you're sitting in this coffee shop and it's like Everybody around you , you know, is looking because they're all either competitors.

or colleagues and it's, it's actually so much fun when, this vibrant ecosystem is so close physically to one another, it's phenomenal. We, we love it. We really enjoy it. And so you didn't, was Roy Eras, he went to the military, you didn't?

 we both did. , I lived here in LA as a child. My parents migrated when I was a child. And I graduated high school here in LA and I volunteered. I went back to the military. I went back and served three years as a volunteer. Not in Israel.

What do you think you took away from back and being in the military for three years?

Yeah, so life changing for me. Uh, I came in as a child when I was 18. I came out as an adult in 21. Right. I developed leadership skills, that I think would be hard to really get a , comparable in any other scenario. But I came out, I think as a, you know, fully mature adult, , leader that is, you know, seen some, you know, uncomfortable things that had to lead,, peers , in some, you know, , crazy situations.

That I think matured me very, very,

I keep on telling entrepreneurs, you know, my life was like, you know, wake up in the morning with a smile. You know, by midday you're thinking your company's done and you're closing. Right? And how are you ever gonna get to the end of the. Just the ups and downs are insane. But I think coming out of the military, you know, I came in much more levelheaded and understood that, you know, you need to take a deep breath and you look at the long game I mean, I love both of those, like the, take a deep breath and think about the long game. But when you're working with entrepreneurs who haven't been through that experience and you're trying to support founders, you know, how do you think about what you're providing support wise?

 Look, I think that this is where Roy and I come in oftentimes, right? Because we have both been operators, we have both been sort of the front lines, you know, across. the military, but also I think business. Right? So I think about patience. I think it's about you know, not getting, too far ahead.

Understanding that, you know, you may, may lose a battle or two, but you're really in this for the long run. You know, how do you compete? , how do you retain talent, right? How do you build highly performing teams? These are things that we know how to do very well. Um, how about your own experience? I think you said something like you pushed the business aggressively. Um, what does that mean to you? What do you expect from entrepreneurs who are pushing their business?

Yeah. You know, we look, everyone has their own cadence and their own pace. you know, ultimately, but for me, I've always felt like , I just, I can't lose. It is very interesting. By the way, I've got this very weird side of me. If you wanna get a bit psychological

here when I'll play a sports game, I'll play like pick up basketball or whatever with some friends.

I don't care about winning. I just care about actually burning calories. That's the only thing I care about . , but it's always been like that, you know, even when I was younger, I, I was never very competitive in sports. I never cared.

Right? But you put me on a business, oh my god, right? I will not lose. Right. I'm gonna give it everything I got. Right. , I don't know what, the difference is, but I try really hard. I'm gonna say I'm aggressive. Sure. you know, it comes from a desire to compete effect.

and do the best we can to win. We're not always gonna win, but do the best we can to win. And I think that also the background that I have coming from the military is that you know, that you are an example to others and you lead the best, foot forward. And I knew that, the team was always looking at me.

It's not just my team, it's my partners, it's our customers. They were always looking at. As you know, to see if there's any blinking, right? If there's any concerns and you have to put a game face on every single day, it's hard to do that as a leader, but it's something that I, knew that I needed to do, right?

And always stand in front and have the confidence so that the team you know, is equipped with, everything they need to go to. And my approach was always to just give them what they need, , you know, from tooling to confidence and soft skills. Everything they need to be able to do their job.

Hm. just a couple more questions. Here's when I ask everyone, how do your friends describe you?

Um, Wow. I don't know. you know, I'd say. probably you know, a good friend, one that will be there for them no matter what. The second thing is um, I think I'm pretty humble. I think that's what they would say. I don't need much. I mean, I, I drive an F-150 right? And just the way that we, I think, go about life is, is very simple.

and it's because, you know, we came from simple backgrounds, right? You know, this new reality for us is, is new and I feel like you'll always be new because we just did not grow up in an environment like this. And you know, we always have an open house and,

we used to have, you know, 20 friends over every single weekend and, host our friends just walk in. So that's the way we like to conduct our life.

That's great. it's been really fun to get a better view of you. Do you get a chance though, to look back and just feel proud of what you built?You know, you've shaped commerce.

It's kind of crazy now, like, you know Of course I do. And thank you. That's that's very kind. look, I think looking. This was such an incredibly organic story and it came out of nowhere, right? I never woke up and said, I have an opportunity to change con. That's never, never even crossed my mind. It started with building a really great product and listening to the ecosystem, So, yeah, I, you know, looking back it, yeah, I'm proud that we built a great product. I'm proud that a lot of people were able to build their life on top of it and build a livelihood on top of it. I still get emails to this day, even got one this week that basically said, you know, thank you, you guys have really changed my life.

, and you know, I don't take any credit for this because I think it was the team and, you know, The product that we built and everything else, but, but Magenta really impacted a lot of lives around the world.

 So now you're a vc. Do you think of yourself now as a vc? Are you,

Absolutely not, no. Um, look, we're angels. You know, we do this both Roy and I because we, you know, we love spending time with, with young teams that have big dreams and that we can help, you know, we're doing this because of our passion for building great products into ecology, If a team is looking for exclusively a capital partner, do not call us. Well Roy, it sounds like you have so much to add to early stage founders and an amazing career. So excited to get to know you better and thanks for coming on the pod.

You got it. Thank you, man. It's been a lot of fun.[/toggle]

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