#098 GeniusLabs | If You Don’t Quit, Someday You Will Find Product-Market Fit

Show Notes

The modern gaming industry is massive, almost as big as the movie industry. However, things are tough, as game developers have to compete with user-generated content platforms like TikTok and YouTube. To keep up, game developers need to be able to produce quality content faster than ever before. That’s exactly the service offered by Nadav Benoudiz and his startup GenieLabs, which is a smart content engine for gaming studios. It’s been quite a journey for Nadav and GenieLabs in trying to gain traction in the gaming industry.

Nadav recently sat down with startup coach Roland Siebelink on the Midstage Startup Momentum Podcast. He told Roland about the challenges and learnings he’s had on his long startup journey.

• How to get beyond the referral stage for acquiring new customers.

• The importance of picking an industry where you have a passion.

• The best way for early-stage founders to validate their idea.

• Why it’s hard for founders to solve market problems.

• The difference between being praised for a good idea and finding people who will pay for your product.

• When it’s time for a founder to pivot and change course.

Transcript

Nadav Benoudiz:
"If you don’t quit, someday you will ht and find your product-market-fit and create a product that give value. It will be very hard, sometimes depressing. But if you don’t quit and then you succeed, you will feel very, very good with yourself and you get more confidence."

Intro:
Welcome to the Midstage Startup Momentum podcast. Each week, we interview up-and-coming founders of some of the fastest-growing mid-stage startups across the world. Your host is Roland Siebelink, who will share some of his own experience helping startups scale from 10 to 1000 people in a few years. Here is Roland.

Roland Siebelink:
Hello and welcome to the MidStage Startup Momentum podcast. I am Roland Siebelink, and I'm a coach and ally to many of the fastest-growing startups around the world. Today's guest is very special. He's dialing in from Israel, and he's a founder who actually once raised 300Ks to build something in crypto, but then gave all the money back to his founders. What happened there? I want to hear that story. Today's special guest is Nadav Benoudiz. He's the CEO and founder of GenieLabs.

Hello, Nadav. Thank you for joining the Midstage Startup Momentum Podcast.

Nadav Benoudiz:
Hey, Roland, thank you very much. It's a pleasure to be here.

Roland Siebelink:
It is a pleasure to have you on the show for sure. Before we get into that story, Nadav, I just want to hear what you do with GenieLabs? What is the purpose of the company? What impact are you looking to make in the world? And how far are you?

Nadav Benoudiz:
Amazing. At GenieLabs, we are building a content engine for gaming studios, helping them to create content for different use cases that are needed in the game, which are the in-game content, the levels, the characters, all the core of the game, the live ops, which is how games monetize money from the the users and how they retain them as much as they can. Of course, for marketing needs, which is how the game studios acquire new users, new players, through creatives, through art. 

We help them automate those processes inside the game studios. But our vision is to help them understand not just to build an engine content that helps them to create content, but understand what content will bring more value, what content will convert more, how to measure the success of creative in marketing, and how to improve the creative for the live ops. This is what we are aiming for: to be a smart content engine for gaming studios.

Roland Siebelink:
For those listeners who do not understand the gaming ecosystem all that well, can you give us a quick introduction of what are the major players are, what are the pressures or the challenges that most of these players face?

Nadav Benoudiz:
Gaming is a huge industry. On one hand, it generates above $200 billion in revenue per year, and it's growing.

Roland Siebelink:
It's bigger than movies, right?

Nadav Benoudiz:
I'm not sure, but I think it's at least equal. It's a very innovative industry. People always try to improve and give a better experience to the player.

And GenieLabs is coming to help the studios. We are B2B, and we're helping them to support their players. And the challenges that we are solving are the content problems. At the end of the day, in the gaming industry, the content is the king. Without content, there is no game. We have the economy, and you have the mechanics, but you need to have a fun game, interactive game.

Usually, to do it, gaming uses characters that you are connected to. A story, everything has a story inside the game that pushes you forward as a player to be curious about what's next or to develop motivations to progress inside the game levels, and each game with a different style and different genre of what motivates the gamer to play. 

I think the problem that we are solving at GenieLabs is how do I create - in times when the content is very hard to produce, and is very expensive to produce, and people, especially Gen Z, I think they are spending a lot of time with the biggest competitor of the gaming industry, which is TikTok and Instagram and all of those social platform and other media.

Roland Siebelink:
Competing for attention, right?

Nadav Benoudiz:
Exactly. Competing for the eyeballs. It's all about the eyeballs - where the user wants to spend his time. In those platforms, the UGC platform, like TikTok, for example, the content is created and changes in seconds. You will always have new content to see, new things that are interactive and customized and personalized to the users. Because there are a lot of creators who create the content. 

And in gaming, it's different. In gaming, you have 30 people, let's say artists, that are creating the next level, more interactive content, so it's limited. Actually, our job is to help them automate the process, and with the same 30 people who are creating art, are producing the content in the gaming studios, to be able to compete and create a lot of content to interact with the users. 

Especially in the mobile gaming industry, the live ops that I said before, which is a shortcut to live operations, it's how I keep my players engaged all the time. How I retain them. And how I monetize them. Because it's mobile gaming and players stay for a few months - usually the average paying users stay for a few months, maybe a year or two - the content needs to be always new, always refreshing.

Roland Siebelink:
Nadav, as in any startup, there's building the product side, which we just discussed, but then there's the go-to-market. How do you get in contact with your buyers? Who typically do you reach out to? What is your go-to-market strategy so far, and how successful have you been up to now?

Nadav Benoudiz:
It's a hard question. We are still an early-stage startup. We started from the Israeli hub. We love gaming. We know a lot of people here. We opened doors in different gaming companies for a starting point. Some of them didn't want to work with us. Some of them say, “Okay, it sounds like a good idea.” This is how we started, from word of mouth. We start with one game and then two games, three games, four games.

Roland Siebelink:
Did you just use introductions from investors or people you knew? How did it work for you? I'm always looking for the very concrete things that founders do to get their go-to-market going.

Nadav Benoudiz:
This was last year’s main go-to market: to go to existing customers and say, “You know how impactful this is for you, do you have any colleague in Israel, out of Israel, that you can connect us with, introduce us?” It works for me to proactively approach them, or just for gaming industry leaders.

Roland Siebelink:
Asking for referrals, right?

Nadav Benoudiz:
Exactly. And investors, as you said. I met with VCs that did not necessarily invest in me, but they see the product, they see the value, they see the pipeline, and the traction that we have, and they want to help their portfolio. But now we are developing another way of active outreach to different gaming companies through LinkedIn, through other channels. We are sponsoring conferences. For example, next month we are going to Gamescom in Germany. It's a good way to meet new people and to scale up your sales pipeline.

Roland Siebelink:
But then of course, any founder listening to this who's in an earlier stage will say, “Well, referrals are all good and fine, but how did you get your first customer?” Tell us that story.

Nadav Benoudiz:
It's a long story. But as you said, I raised 300K when I was a student, when I was 26, in crypto. We decided to do a pivot, so we closed the company, and we said to the investor, “Listen, first of all, we are not a good fit as founders. And second, we are pivoting, and we are not sure what to do. Until then, we don't want to burn in the industry, take the money back.” It's okay. It was our first interaction. And I said to those investors, “Listen, I'm very determined to create another startup. It was good for me to gain some experience, but I'm going forward and pushing to create something I love.” They gave me another 50K just to not quit, and I sat at the offices and started to think about my next phase.

Roland Siebelink:
Almost like what in Silicon Valley they would call an entrepreneur in residence.

Nadav Benoudiz:
Something like this. I just sat in their offices and spent hours - there was no ChatGPT then. On YouTube, what to do, endless research. But something that is really helpful is to choose an industry you love. I didn't have a background in anything, not in real estate, not in gaming, not in finance. I just picked gaming because that was something I love. And I knew that this was a pretty big market.

Roland Siebelink:
Even though you had dabbled in PropTech and some other industries. But in the end, you just chose an industry that you have a passion for already, right?

Nadav Benoudiz:
Yeah. Passion, and also like to be realistic, to see if there is enough gaming companies or companies in this field that I can approach. It is easier if they're in my local area and then to go out. This is what I was looking for.

Roland Siebelink:
Is the market big enough, but also do you have enough entry points in your local market, in your local community, to indeed find those first customers, right?

Nadav Benoudiz:
Exactly. If most of your customers are, for example, in Germany, it's much harder to meet your first customer. That's exactly what I did. I just met with lots of gaming founders that I knew. I met with investors and told them, “Listen, I'm looking for gaming industry leaders to understand some problems, what are their pain points to learn about the industry.” 

And this was a pretty hard phase. I think it's a really must-have skill for a founder to know how to open doors. You don't have any experience in anything, especially for a first-time founder without even a degree, to open doors because people are busy, not everybody wants to help you. Most of them do not believe you. You need to convince them to open the door for you and help you. 

Fast forward, I met with a game studio called InPlay Labs, which is a startup that created the game Animals and Coins, which was our first customer. We were lucky; they were just acquired by Platika, which was another great logo to add to the slides. It was a great foot in the door in a big company. And they just said to us, “Listen, if you solve this problem, we have a lot of content that we produce. We have a lot of challenges to keep the live ops schedule of the content live ops on track. And we miss opportunities and we lose money because we don't do it at the right frequency and we don't have more budget. We don't want to spend more budget on it.”

Roland Siebelink:
This was real confirmation that there's an actual pain point there that you can help solve, right?

Nadav Benoudiz:
Yeah. And this is a tip that I give to new founders: if you want to validate the idea, don't listen to anybody that they're telling you, “Hey, this is a really cool project. I like it. It's a great vision. If you will do it, I will use it.” It's not strong enough. 

You need to validate with the persona. If he's going to pay up on this, how much is he going to pay on this? I told him: “I'm going to develop it next month. Next month, it’s in your pipeline; you will get access to the platform. Would you agree to sign a contract with me right now that if I create this for you, would you be able to sign it right now with me?” And he said, “Yes,” which was a strong validation. 

Roland Siebelink:
That's excellent, Nadav. I want to double-click a little bit on what you said; it's a crucial skill for founders to learn how to open doors. This goes into the realm of founder sales versus just hiring a salesperson. It sounds like you're definitely on the first side of that. You have to do founder sales, especially in the beginning, before you can even hope to scale your company. Would that be correct?

Nadav Benoudiz:
100% agree. If you don't know how to sell the product, nobody else would enter your company and sell it for you; it's super hard. It means that you don't know how to communicate the value. You don't understand the product-market fit if it has. And if you don't understand the problem, you can't communicate it to the customer. It's really hard to understand what to build next.

Roland Siebelink:
That's the crucial part of it as well. It's not just learning to open doors and to ultimately push a contract up somebody's nose, as you said. But also to learn from them - what sucks about my product right now? What do I need to do better? What is the problem that I'm trying to solve for them?

Nadav Benoudiz:
Another interesting point is that I met with this guy - I hope he will not hear it - but I met with this guy a year ago. I went back to his office and told him, “Listen, what are your problems?” And a year before I met with this guy again, he said to me, “Listen, I have this problem.” The same problem that he told me about after a year. “I have this problem. If you solve it, I will pay you.” 

And I didn't listen to him. I just raised some money. I raised $1 million back then - just to make the timeline clear. I returned the money to the investor. I got 50K from them. I found my new co-founder, Yotam, who is an algorithmic engineer. And we raised together $1 million to do something in the gaming industry. And we spent a year trying to find what to do. We know that AI can help in gaming studios. And we tried a few products, three products that we developed that weren't required by the customers. We didn't listen to them.

And that was a very wrong decision. I ignored many things like tips and actual pain points that the industry told me about during this year. And when I was tired from it, we decided, me and Yotam, to do something that the customer wanted and tried to listen. It's very hard. It sounds very easy on the podcast. You need to listen, and you need to validate the problem. The actual is very hard in the theoretical.

Roland Siebelink:
Nadav, can we double-click on that? Why is that so hard? Why do founders find it so hard to solve actual market problems?

Nadav Benoudiz:
You know, it's my first-ish venture that I'm doing, but I think it's very common with first-time founders, especially if they don't come from the industry. There is a reason that it is harder for them to raise money because they don't know the market and the problem, and it takes time to listen, to learn, to understand the customers, to understand the pain points. 

It's very hard. And when you raise money the first time and you work so hard on your deck, your pitch deck to the investor, and everyone says, “Wow, it's an amazing deck.” And it's very convenient and convincing to the investors. Everybody who hears it, even people from the industry, say, “Wow, that can change the market.”

When you say, “Okay, now you can pay on it,” he said, “Let me see, let me check. I'm not sure this is the right time for us.” This is the validation that it's not a good idea and you need to change it. But still, there is a feeling when you get $1 million, two, 10, first time, it's hard, at least for me, it was hard to listen to the market and not stick to my plan that I showed everyone that I committed to everyone. 

I think for me, it was the learning of being agile, to develop the ability to make pivots. It's hard to take your company and change it. To see many companies, at least in Israel, that raise a lot of money, even too much money, to build something big. And it's not working for them. They don't earn any dollars for three years. And now it's very hard for the founders to do a pivot, to tell it to the board, to maybe fire people in your company, to change the business model, to change everything.

Roland Siebelink:
How do you distinguish between the strength of your vision and then, at some point in time, also having to admit this isn't working? Where's that point where you know, now I do need to pivot?

Nadav Benoudiz:
For me, it was when I tried to raise money again. I tried to raise money around one and a half years ago. It was the last pivot we did in GenieLabs before the content engine that I told. I was worried because we spent a lot of money, and the product ARR was around 10K. Not really, but something like 10K. 

I said, “Okay, we must raise money. Let's build something, let's create something very visionary. We have a POC or some talks with Roblox. And we said, “Okay, let's do it.” But we didn't understand that this is not 2021. Now it’s much harder; people look at revenues and not partnerships or some LOIs, which do not exist anymore. I tried to raise money. To be honest, it was one of the hardest times I had in the startup to meet with more than 45 investors, I think. I went to the US to meet at least 30 and another 15 in Israel.

And I didn't raise money. It was very hard because I knew deep inside there is no ARR. Nobody wants to invest. Probably 45 investors do understand something; it's not attractive. Maybe one of them will be a believer and optimistic and will eventually put some money.

Roland Siebelink:
And even then, if they're just a believer, they may save us, but it's probably not good enough for us to have a sustainable business. We can't build a business on believers only, right?

Nadav Benoudiz:
Yeah, exactly. And I said to myself, “I know how to pitch, I know how to sell it to investors. But still, it's not making sense for people to put three, four, or $5 million on this venture. I went back to Israel and spoke with my co-founder. I told him, “Listen, we need to pivot because with no ARR, we can just close the company.

Roland Siebelink:
Ultimately, it's investor traction that makes you feel like we need to pivot. 

You already hinted at this a little bit, but all founders also try to help other founders that come after them. What are some other pieces of advice you would give the other founders that would listen to you? If they listen to you, of course.

Nadav Benoudiz:
If you decide to listen to me, I think the key takeaway from my journey was to not break as a founder, just to not stop. Don’t enter a loop of sadness and say, “Okay, it's too hard for me,” and quit. 

If you don't quit, someday you will hit and find your product-market fit and find the real need, and will be able to create a product that gives value to the industry that you are working with. Because there were many times for me, many points in my timeline that I say, “Maybe it's not for me.” 

It was very hard, sometimes depressing. But if you don't quit and then you succeed, you feel very good with yourself and you get more confident that the next time you have hard times, you will be able to get out of those hard times. It's building your personality as a founder, and it's a crucial part to not win every time, especially in the first year, just to lose and lose and lose, and keep yourself moving on. And again, don't break, keep believing. Change your thinking every time. Get out of the box. Try to speak with people. Open doors and create new opportunities until you find something that works.

Roland Siebelink:
Excellent. Persistence, some humility as well, and an open mind is what you're saying, right? 

Nadav Benoudiz:
Yeah, definitely.

Roland Siebelink:
That's excellent. Well, thank you so much, Nadav Benoudiz, the founder and CEO of GenieLabs, for coming onto the Mid-Stage Startup Momentum podcast. This has been a great conversation. And for the audience, we will have another episode for you next week.

Nadav Benoudiz:
Thank you, Roland. I'm excited and looking forward to hearing it.

Roland Siebelink:
Nadav, if anyone wants to hear more about GenieLabs, where do they go?

Nadav Benoudiz:
Next month, we will have a new website so you can search for us on Google. But right now, you can hit GenieLabs through LinkedIn and send me a DM, and I will answer you.

Roland Siebelink:
Excellent. If anyone wants an introduction to Nadav, of course, I'm happy to oblige as well. Thank you, my dear audience, and thank you, Nadav, for joining us.

Outro:
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