To Pivot or Re-start your Startup
I’ve got a scar in my back I don’t want other entrepreneurs to have. Many, actually, but let’s focus on Pivoting. With the rise of lean startup, more early companies rightly embraced change to find product-market fit. Often when helping entrepreneurs, they come back with an entirely new story to every meeting. Pivoting, or moving from one business to another, has been mythologized leading to widespread misunderstanding.
When Evan Williams was a co-founder of Pyra, web-based task management for the enterprise, the market timing wasn’t right and the business was failing. They created a simple weblog product for use internally with their team, and noticed they used it more than their flagship product. They released it as a simple web publishing solution (something of personal interest to Ev for some time before). It too almost died, but he went on to sell Blogger to Google and it sparked the Web 2.0 movement.
Ev later founded ODEO, a consumer podcasting pioneer. It too was failing perhaps because of timing and distribution. He turned to the team to come up with new ideas and Jack Dorsey proposed Twittr. The rest has made a mark on history.
Stewart Butterfield was a co-founder of Ludicorp, developing a MMOG called Game Neverending. Before launching it was clear the game was ending. They pivoted to create Flickr for social photo sharing which was later sold to Yahoo.
Stewart later founded Tiny Speck, creating another game called Glitch and raised $17.5M. It failed to gain adoption. Like the Pyra story, they had developed an internal alternative to IRC that showed promise. They executed a pivot to Slack, which is making a mark on enterprise history.
The thing about these four stories is they glamorize the Pivot. Entrepreneurs are a little crazy, and this is an attractive idea. If your first contrarian idea doesn’t work, you can try another one in a flash of brilliance and grit to go on.
The four stories above aren’t actually pivots, they are restarts.
A pivot involved keeping your pivot foot on the ground as you move your body. Your pivot foot has to be the same, you can’t have any arbitrary aspect of success.” — Mike Maples in conversation with Andy Rachleff.
Mike and Andy succinctly point out that a pivot isn’t changing your product, it’s changing your market and/or business model. At the core of your startup is your unique insight. Creating a new product for a new product and a new business model is a different insight.
If you’ve had some success as an entrepreneur, you have more room to operate. It’s easier to have support from existing investors and to gain new ones before the current startup has proven much because you’ve got the first asset of team.
When you pivot or re-start, you are carrying the past with you. If it’s not an asset, it can be like rocks in your pocket, weighing you down on a long journey. That rock could be your investors and cap-structure, team members, customers, partners or product. If it’s not an asset on the next journey, dropping it will be hard, but the sooner you do so the better.
The big rock is your cap structure. If you’ve raised and mostly spent funds, and have stock allocated to investors and employees, that has vested over time, you’ll likely need a re-cap to have a chance to succeed. This is not only hard and seems expensive, but you’ll feel that if you prove something with the pivot first it will get easier. But it’s better to get buy-in on the plan
Of course, a true pivot has less rocks to carry forward. If you have a fundamental insight that’s led you to create an asset you can pivot with, it’s not a rock in your pocket, its a stepping stone.
Photo by Kaleidico on Unsplash and icon by Freepik on Flaticon