Rapid descent: Iddo Gino’s rise and fall
Rapid descent: Iddo Gino’s rise and fall
An inside look at the dizzying rollercoaster ridden over recent years by prodigy Iddo Gino and his unicorn Rapid, which he founded at the tender age of 17
Iddo Gino is an unusual story even in the high-tech industry, which admires the spirit of youth and relies on the brilliance of young entrepreneurs. He founded his startup, RapidAPI, in 2015, when he was 17 years old - still a minor who needed his father to sign documents for him. From there he continued to make the lists of "promising young people", moved to the United States, caught the attention - and money - of industry executives, from Dov Moran and Marius Nacht to Ben Horowitz, Peter Thiel and Masiyoshi Son of SoftBank. All of them became investors or mentors of the teen prodigy. Gino, for his part, fulfilled the promise. Last year, when he was only 24 years old and Rapid was just seven years old, the company became a unicorn, after raising another $150 million at a valuation of one billion dollars.
But the fall was even faster. On April 19, Rapid's board of directors unexpectedly removed Gino from the position of CEO of the company he founded and built in his image, and appointed him as a technological consultant. CFO Marc Friend, who was only recently recruited by Gino himself, replaced him at the head of the company. Friend did not waste time: less than a week after his appointment, he already wielded the ax and fired, in an unusual move, 100 employees. Two weeks later, the ax fell on another 70 employees, and only 42 people remained at the company - a quarter of the workforce one month earlier. Now the estimates are that Rapid will soon be sold for a much lower valuation than it received last year. Gino himself, forced to grow up all at once, went underground.
Rapid's rollercoaster began to accelerate at an alarming speed in January, when the company's employees gathered from San Francisco, Israel and Berlin for a lavish meetup that lasted five days in Marrakesh, Morocco, which was defined as a "kick-off" for 2023. This meetup began pleasantly: "We were about 160 employees out of 200, in a beautiful hotel, in an amazing atmosphere," says one of the employees. "Most of the time we worked, but it was really fun. Iddo walked around in a Rapid shirt, looked delighted, and really made an effort to get to know the workers."
But then, in one of the sessions with the employees, one of them chose to express concerns, and asked Gino if layoffs were expected in the company. "Iddo replied, 'There is no such expectation. We can survive for three years without a problem, since we hardly touched the money from the last round.'" Another employee says: "We came back from Morocco with a crazy drive, full of energy to push the product forward. If before Morocco I had the feeling that something wasteful or improper was going on, the speeches in Marrakesh, especially by Sasha the COO, convinced me that the company's values are not empty slogans.”
In retrospect, this optimism was exaggerated. During the meetings, the new CFO Friend, who had been hired a few weeks earlier and since then talked with Gino for an hour and a half every day, including weekends, hovered over the employees. Friend, a level-headed, quiet and approachable person, studied the company for the stressed investors, who wanted to get a return on their money. In the year leading up to the event, these investors saw Rapid recruiting nearly 100 employees and firing in all directions in an attempt to develop the market and create new markets - and meanwhile the money was being burned and profitability was nowhere in sight. Three months after the euphoria in Morocco, patience ran out: Gino was fired, Friend was appointed, and the dismissal letters piled up.
"When people are let go quickly and with a sense of urgency, it's usually before a sales transaction," explains a source who worked with Rapid. "This is done to allow the acquiring company to portray itself as the one saving the situation, instead of the one conducting the layoffs and being tarnished by it. An 80% reduction in the workforce looks like an attempt to keep only those who can assimilate the knowledge in the acquiring company, so the impression is that there is already a deal on the table. It won't be the deal of the century, in terms of the company's value, but it's better than closing down completely."
"It came in an instant," says an employee of Rapid. "The company ran forward quickly, recruited a lot of people, tried several directions at the same time - and suddenly everything came to a grinding halt. This does not correspond in any way to what the employees were told. Three months earlier, the company presented us with a crazy growth plan for 2023." Since then, he says, only a few have been able to contact Gino. Another senior executive says: "I asked how he was, and he said 'fine', but what would he say, 'I'm devastated? Rapid was his baby. He worked on it 24/7."
The speed with which things happened can be learned from a podcast interview Gino gave just two weeks before his dismissal. When asked about the challenges that keep him awake at night, he replied: "Building the team. We are recruiting employees at a fast pace." When asked about his plans for the future, he said: "The opportunity here is huge. I would love to go public and continue to grow the company."
“Gino believed all the success was due to him - and rightly so”
Gino grew up in Haifa, the son of Sharon, a doctor, and Micha, an electrical engineer. When he was 10 years old, the family moved for two years to Christchurch, New Zealand. In 2011, when a strong earthquake caused extensive damage to the city, including to the Gino home, the family returned to Israel. Gino himself was caught by the earthquake on the school's rugby field, "which turned into a pile of bubbling mud," as he told childhood friends. But from those two years he returned with a gift for life: the ability to conduct himself comfortably in English, which later turned out to be critical in meetings with investors from Silicon Valley.
When they returned to Israel, Gino became interested in computers and taught himself to write code and create Flash animations. At the age of 13, he was already programming games and selling them, as he told the media, for hundreds of dollars. He later began studying at the Reali School in Haifa, and his parents, who recognized that he was an exceptional child, supported his desire to enroll in programming courses at the Open University and the Technion. Gino soon became active in organizing hackathons with the help of sponsorships from tech giants such as Google, Microsoft and Facebook. The graduates of the group he was a part of say that they lived from one hackathon to the next, where they wrote code for 24 hours and slept on mattresses smelling of pizza; and celebrated birthdays in a villa with a pool in the north. This script may sound familiar from other high-tech legends or from the Israeli TV comedy-drama series of 2007-2009 "Mesudarim" about four friends who sell their startup for millions. But the fast pace was dizzying: you have to remember that the hero of the story is not an American college student, but a high school student from Haifa.
The event that put this high school student on the fast track occurred when Gino was 15 and a half years old, when he participated in a youth startup competition and presented a "digital wallet for kids". One of the judges in the competition was the high-tech entrepreneur Dov Moran, the inventor of the disk-on-key, who was enthusiastic about the determined teen. "He gave an amazing performance there," Moran told the "30 Minutes or Less" podcast in 2021. "I said, 'You're amazing, come see me on Friday, we'll talk for a bit.' I was then living in Moshav Yarkona, near Hod Hasharon; he took buses from the north and came to me." Moran, an old and experienced high-tech lion who has already seen many young and exciting entrepreneurs, fell for the boy's charm.
In the meetings, Gino described to Moran another idea he had: an API marketplace, "application programming interfaces" — libraries of ready-made applications, which companies purchase to streamline and speed up their code development using the "copy and paste" method. A courier company, for example, can thus purchase a map application and a payment application, instead of developing them from scratch itself.
Moran liked the idea. "We met a few times, and then I asked, 'Why isn't it moving forward?'" he would ask. "Iddo said, 'I am in high school, at the Technion and The Open University, and besides, I have to write the code, it's all on me.' I said, 'Get two guys to help you write code.' He said, 'I don't have money.' So, I asked, ‘How much do you need?'. He said, '$60,000.' I said, Here, take it.' I invested $60,000 at a value of $180,000 before the money. He was then too young to sign an agreement, so his father came to sign for him."
And so, Rapid was founded in 2015 by Gino and two of his hackathon group members, Daniel Chernenkov and Mickey Haslavsky. Although Gino was the youngest of the group (only 17 years old, while his partners were "already" 20), he was the living spirit behind the startup, largely thanks to his recruiting skills and the special relationship with Moran. Chernenkov, by the way, retired after only one year, and Haslavsky left in 2018 (but remained a shareholder in the company). A person who knew the partners is sure that these are not accidental separations: "I feel that Iddo saw that the money was starting to flow and attributed it to himself. He started to believe all the success is due to me, the company is me, so why grow with partners?'. But the truth is that he really was the one who knew how to sell the company to investors and raise huge amounts of money."
And the money flowed in amounts that would have confused even more experienced entrepreneurs. Moran's co-founder of Grove Ventures, Lotan Levkowitz, sat with Gino and taught him how to raise money, what angels and investment funds are, what stocks and options are. Moran, the first investor and mentor, was joined by other Israeli investors, including Marius Nacht and venture capital funds. "The company seemed super interesting to us and was a world leader in a very hot field," one of them told Calcalist. But he also does not deny the fascination with Gino's incredible story. "You can count on the fingers of two hands the number of entrepreneurs in the world who founded such companies at such an age. I don't think there is anyone else in Israel who founded a company at such a young age that became a unicorn."
Gino's young age became an attraction in its own right. "When they wanted to sign for offices at WeWork, a question arose as to whether Iddo was allowed to sign, because there are beer taps there and he was not yet 18," says a member of the hackathon group. "The atmosphere was 'Is this what will prevent the next genius from renting offices?'"
Startup basic training in Silicon Valley
The big breakthrough came with the move to San Francisco in 2017, which "put Iddo on a rocket," as a person who worked with him at the time says. Gino, who suffers from celiac disease, did not enlist in the IDF, and instead of being accepted into 8200, was accepted into two prestigious programs in Silicon Valley: the first was a scholarship from the billionaire high-tech entrepreneur Peter Thiel (one of the founders of PayPal), which annually awards $100,000 to 20 people under to the age of 20, to prove that it is possible to start a company even without academic studies. The second program was a startup accelerator in Silicon Valley called 500 Global, within which Gino received another $150,000.
"Iddo realized that he should be in Silicon Valley," says an acquaintance of his. "He understood that everything happens there: endless money, everyone is within touching distance, everyone talks to everyone, in one second you see the most senior people in the world. He understood that there is growth and that the Israeli side is less relevant, so he left Mickey to babysit the business in Israel, and at the age of 18 and two weeks he went to San Francisco."
"500 Global is one of the biggest accelerators in the world, only 40 are accepted, and he was the youngest there," says another acquaintance. "You see there 30-year-olds, 45-year-olds, guys who studied at Stanford and Harvard - and suddenly a skinny 18-year-old boy comes along, with employees who are older than him in the company he founded, and wants to change the world. Everyone drinks beer, and only he orders Diet Coke. Everyone said, 'What a cute boy', then they saw what Rapid built and stopped and said 'okay'.
"He is a hard-working guy with high self-discipline, goal-oriented, one who really knows what he wants. On flights to the United States, when everyone is tired, he used to go over contracts, write notes. If the whole team thinks one thing and he thinks another, he will drag everyone to his side. He is a soloist, in the best sense of the word. A guy who wants to move forward and knows how to filter out background noise."
Behind the scenes, Moran continued to push Gino and matched him with Andreessen Horowitz, one of the largest venture capital funds in the world. "Dov said, 'I have a friend who is an expert in fundraising in Silicon Valley.' After two hours I got an email, 'Iddo, meet Ben Horowitz,'" Gino said on The Human Founder podcast. To prepare for the meeting, he read Horowitz's book "The Hard Thing About Hard Things" several times and came with questions. "The next day I received a call from an executive at the company, 'Ben really enjoyed the conversation, we would be happy if you came to present in front of the other partners,'" he said.
At the meeting, Gino recounted on another occasion, he did not stop shaking and spoke with a dry throat, but it was all worth it as he ended up receiving a $3.5 million investment from Andreessen Horowitz - and also an invitation to a barbecue at Horowitz's house, where he met Mark Zuckerberg and Serena Williams, figures he admired. After that funding round, Gino went out to celebrate with one of the fund's executives; The executive ordered them both wine, but since in the United States it is illegal to sell alcohol to minors under the age of 21, Gino refused. Since then, his Slack status is "turning Diet Coke into code."
The launch into the world of adults forced Gino to try to disguise himself as an adult: "He joked about his age, but you didn't see him rolling with laughter," says one of the employees who knew him at the time. He began wearing button-down shirts, and tried so hard to project a calculated solidity that one of the managers he hired at the time thought he was a dry and boring man. That manager later became one of his closest friends. But it wasn't just a facade: managing the company required him to function in situations that would be difficult even for older people. In one memorable event, the American VP of Development died during a meeting of the company's senior executives, which Gino was present at. Gino convened the entire company on Zoom and updated the employees, to prevent the spread of disinformation.
"It's like ChatGPT: sounds good, but not necessarily accurate"
Even as the rollercoaster on which Gino rode gained momentum on its way from investor to investor, Rapid remained a company trying to create a market. Its first product, in line with the vision Gino outlined in Moran's backyard, was a marketplace where developers sold APIs they had developed, and Rapid cut a 20% commission on each transaction. The company boasted the world's largest database of more than 40,000 APIs, but was unable to make it profitable. "In the first two years there was no business model," says one of the first employees. "It was, 'Let's bring in programmers, all of whom will be registered with us, and we'll become the Amazon of the API.' At that point, what interested the company was how many programmers signed up each day. Only when funds were raised did the question arise of how to build a business model around this."
This question became central with the entry of Andreessen Horowitz. The fund demanded that a responsible adult be brought in to Rapid, and they recommended Sasha Pesic, an experienced graduate of the industry, who was recruited as Chief Operating Officer. Over time, Pesic became close to Gino, even though he is a year older than his father. Together, they added to Rapid's portfolio an API product for organizations, for internal use by employees and customers. In 2021, Rapid acquired an Estonian company and launched another product that allows you to design, develop, test and monitor an API.
While the company continued to develop, Gino continued to gather investors from the cream of the crop of venture capital. Along with Dov Moran's Grove and Andreessen Horowitz, names such as M12 (Microsoft's investment fund), Viola Growth and Green Bay entered the company. "Gino is insanely charismatic, brilliant, smart, captivating and young, and people fall in love with him," says a person who worked opposite him about the magic that mesmerized investors. "He's like ChatGPT: what you say doesn't necessarily have to be exact, it's enough that you say it the right way, and that's what he knows how to do."
Another person also remembers his ability to paint everything in optimistic colors: "At this age, when you are required to sugarcoat reality, you don't attach too much importance to it. I remember a pitch in front of investors, in which there was no blatant lie, but there was a sugar coating of reality. When Gino was asked about a certain feature, he said it was working smoothly and that the customers were happy, even though the feature wasn't working at the time. After the meeting, he made sure that this feature was activated quickly. On the other hand, the whole industry is like this, 'fake it until you make it'."
The sugar coating worked well: in total, Gino raised $270 million. The most significant funding round took place in March 2022, when market optimism peaked. Rapid raised in a Series D an amount of $150 million, according to a valuation of $1 billion, which made it a unicorn. Among others, Qumra Capital and Citi Ventures also became investors in the company, but the VC which led the round was the Japanese tech investment giant SoftBank, headed by founder Masayoshi Son.
This was not the first time Son got into business with a long-haired Israeli youngster after previously also falling for Adam Neumann of WeWork (Gino, by the way, met him "and was very enthusiastic," according to sources who were close to him). The story of WeWork presented a grim prophecy for Rapid: at the time, Son's approach was to push SoftBank's portfolio companies to grow at a wild pace and take over their markets, and to feed this fire, he was willing to pour huge sums into the companies. Neumann responded to this call, but when the market realized that the figures at which the company was being valued lost touch with reality, he personally paid for it and was expelled from the company. This pattern, which began with a cash-rich honeymoon and ended with the ouster of a founding CEO and a change in strategy, repeated itself with Gino and Rapid. The rollercoaster slammed on the breaks, and the wonder boy flew off.
3 View gallery
WeWork's Adam Neumann (left) and Rapid's Iddo Gino
(Photos::Damian Marhefka, Reuters)
"It's not that they took the baby from him. The baby just needs to grow up"
Why did it happen now? It seems that the investors, headed by SoftBank, have lost their appetite for risk and the patience to wait for profitability. "In times of economic difficulties and falling market value, investors think in terms of 'show me the money', and that is the price," says a source in one of the funds. It is difficult to point to a clear business failure since the company is private, but clues can be found in the words of the new CEO Friend, who said in a conversation with the employees that Rapid had lost its focus and that it should be brought back to its realistic size.
Another person close to the company elaborates: "The company did all kinds of experiments: bought a product for designing APIs, for testing APIs, sold in all territories across the world, did everything from everything. The cutbacks got rid of the experimental things that didn't work. Beyond that, as soon as you switch to a conservative format, there are suddenly positions that are not needed. The Rapid recruitment team alone numbered 20 people. If we change direction, we no longer need it."
What changed between the trip to Morocco in January and the dismissal of 80% of the company in April-May?
"The macroeconomic environment changed. Interest rates are rising, companies are spending less, hiring is down, and there are layoffs. This requires a shift from focusing on growth to checking what works and cutting what doesn't. Two years ago investors were talking about growth, now everyone wants profitability. To focus your business you need a more professional CEO. This happens in many companies."
"At the conference in Morocco they said that this year the company will recruit a lot of sales people and will work to increase the market for its corporate product," says another employee who was fired. "This was also the reason for the latest funding round led by SoftBank: the investors and the company believed that the current period created an opportunity, and that Rapid's product would allow companies to become more technologically efficient. But in practice, companies reduced the expenses of external services, and did not rush to purchase an internal Rapid system to manage the organization's API. The recruited salespeople were unable to bring in enough corporate customers." Still, he adds, "Without the rising interest rate crisis, Rapid could have continued to grow. So, in my opinion, the story is not the investors' disappointment with the results, but their preference to save money. This is a completely cold consideration, which led to the decision to convert the company to cash."
"Gino is a bright guy, quick to understand, full of self-confidence, and a man of action," concludes a source in one of the funds that invested in Rapid. "The minus is that he is a child. He has never worked in another workplace, and certainly has not managed another company."
Gino, who became identified with the aggressive growth at any cost approach, quickly accepted the board's new approach, and even recognized its necessity. "It got to the point where Dov Moran opposed his removal, while Iddo himself convinced him that it was the right step," says a former executive. "There are things he believed in, and which no longer hold true in the current reality, no matter how painful it is. He understands that in order to reach a sale, we must do this aggressive cutback."
A source familiar with Gino says he accepted his exit with understanding. "Even in the big funding round, he did not sell shares in the secondary. He thought, and still thinks, that in the long run the value of Rapid is greater than its current value. That's why even now he doesn't see it as 'they took away my baby' but as the maturing of the business and a transition from a startup to a company. He believes that Rapid will be sold or go public, and when that happens he will be one of the biggest beneficiaries."
"Iddo won't forget these leassons"
This is not the last chapter in Gino's story, says an acquaintance of his. "What happened will not burn him. He is not Adam Neumann, who is mainly a visionary who knows how to sell. Iddo is a little Steve Jobs: when he talks about technology, he lights up like a child talking about a toy." Another acquaintance heard him toying with the idea of connecting an API with artificial intelligence, and estimates that his next venture will be in these sectors: "He cataloged and made APIs more accessible. In his eyes, the connection with AI could be a step forward." In any case, Gino will stay in San Francisco and will not return to Israel. Recently he even adopted a dog.
Those who spoke with Gino in recent days heard a lot of inevitable managerial soul-searching from him, but without regret. "The investors simply changed direction and want profitability, not growth at all cost. For Iddo, this is the first time he raised funds, managed, built a product and sold it. What he learned, he learned the hard way, and these are lessons he will not forget."
And what about his reputation as a prodigy?
"This is perhaps his main insight. 'Prodigy' is a tool that can get you to a certain point, but when used excessively it exhausts itself. Investors can be enthusiastic, but in the end you arrive a board meeting, where you don't get discounts for being a prodigy. He will start the next chapter of his career not as a child prodigy, but as an ordinary person."
First published: 19:16, 11.05.23
