How intuition led Shahar Nechmad to build a cutting-edge tech startup

Shahar Nechmad

Entrepreneurship wasn’t an ambition for Shahar Nechmad, it was an intuition. “I remember looking at pictures of people like Steve Jobs and Bill Gates and thinking that I also wanted to build something big, something will make a change, that will touch people’s lives all around the world,” he says. “Maybe the word ‘thinking’ is not the right one. ‘Knowing’ is more accurate. It’s this internal feeling that you simply can’t ignore.”

This feeling came to him at age 15, but he didn’t act on it until four years ago. It was around the time that user-generated content was picking up steam, and it gave him an idea. “In traditional media, newspapers pay salaries to hundreds of reporters to write them the content, while on Blogger, YouTube, etc, people create all this content for free and Google and others take the money,” he says. “So I thought why not do a cool UGC content site which also knows to compensate users on their contribution?” His company started as a back end system that understood the concept of contribution – that it wasn’t just about page views, but a combination of all the different activities on the site. “I think at that moment we understood that the back end we were working on was the real startup and NuConomy was born.” But Nechmad says that the idea was more luck than brain – the founders knew the Enterprise space but didn’t come from an analytics or advertising background, and he remembers looking up CPM on Wikipedia.

He didn’t know anyone in the Internet or startups arena, and didn’t really know anything about how to actually build a startup, raise money, or any of the other facets involved with starting a business. “Learning all these things and finding the right people to mentor us was a big obstacle at first,” he says. Startup life was a big adjustment from his days at Microsoft, especially since they worked for eight months without raising any money. “Going from a life where I earned a big salary, travelled around the world, slept in nice hotels, etc. to a life in which I was checking which pasta is cheaper at the grocery store was, well, not easy.” The only time he ate outside of his home in those eight months was at a friend’s wedding. It was also a challenge trying to pave the way in a new field – he remembers sitting with VCs who had no idea what he was talking about when he explained new concepts like engagement measurement, the death of page views and advanced behavioral targeting. “It took another year before all these concepts became the next big buzz words in the web.”

Though the co-founders didn’t raise money for eight months, they eventually raised a $300k seed round in 2007 from investors including Yossi Vardi, and then raised Series A funding in 2008. Nechmad says the biggest lesson they learned from raising money was from the round they didn’t end up raising. They were trying to raise money right after the economy crashed – it wasn’t the ideal time and they felt the pressure and the fear that it was going to be a long and hard process. “We met with many firms and partners. Many of them liked us and each one of them wanted to see us moving in a different direction. As we were scared of not raising the money, we tried to please everyone. We tried to adopt our product and vision to what the VCs told us, to what they wanted,” he says. “Looking back, this was a big mistake. You will always hear people tell you what you should do. Many VCs will tell you one thing while others will want to see you going in a completely different direction. Even if you do what they say, it doesn’t mean you will then get investment.” He says they wasted valuable time trying to please everyone instead of focusing on their vision and what they believed was the right thing to do. He says if you believe in something you should go with it all the way and give it your best shot, and then find someone who shares that vision with you. His other big lesson is to raise money when you don’t need it. “We had a time when everyone went after us,” he says. “We were the hot company and we were getting requests all the time. But as we had money in the bank and we felt good in our business, we thought it would be better to wait and build up our valuation.” Just a few months after that the economy crashed and the market changed.

NuConomy was acquired in January 2010, and Nechmad learned a lot from the process. For any other entrepreneurs going through an exit he recommends having a local champion, someone on the other side who really wants the deal to happen and is willing to fight for it. He also recommends getting a great law firm on your side as early as possible. “You need someone you trust, someone who will work hard and will care about you and the outcome,” he says. He says the most time-consuming part isn’t the negotiation on price or vesting but when the lawyers start to tackle each other on every small thing in the term sheet. And he says entrepreneurs should be transparent with their employees so they know what’s going on and where they’re heading.

While Nechmad has a successful exit under his belt, he’s the first to admit that with NuConomy he made almost every single mistake possible. Because of that he has a lot of advice to offer new entrepreneurs. His biggest piece of advice is to actually start working on an idea. “Almost every startup ends up doing something very different from the initial idea it started with,” he says. “So when you want to start something, don’t get stuck on finding the perfect idea or the perfect idea or the perfect business model. The moment you do it, the idea will get a life of its own and will evolve every day.” He says the idea must be something that an entrepreneur is really passionate about, and it must be in a big enough market to allow for changes. And like many other successful entrepreneurs, Nechmad highlights the importance of the team. “Get the best co-founder, employees and advisors,” he says. “A startup is all about the people and the right ones will be worth much more to you than any equity you can give them.”

Now that he’s well-versed in the startup world, Nechmad says there’s no turning back. “For me there is no way out. I have the startup virus and there is no cure for it.” He says he’s playing with a few ideas and wants to go back to doing consumer-facing apps. Since NuConomy is based in Israel he also wants to spend time helping and building the Israeli startup scene. But most of all he wants to work on building products that will touche people’s lives and make them happier – a lofty goal, but one that Nechmad seems to be accomplishing already.