Knowing when to pivot Video Lecture | How to Start-Up your own Company (Video Course) - Entrepreneurship

hey everybody its Jason Calacanis and
today on startup basics brought to you
by our friends at Wilson's Encino yes
that's right WS gr good which Rosati I
always have to remember to say the full
name and we are going to talk about God
one of the most difficult things to do
as a founder it's to know when to quit
when to pivot and this is hard because I
think giving us a little bit context
over it
entrepreneurs are generally confident
people who are driven who don't take no
for an answer who are stubborn and
resilient and so those are all great
qualities and a lot of times being
stubborn and resilient will let you
break through a wall a lot of times it
will let you run into a brick wall and
get knocked out cold and so that is the
fine art of when to persevere and went
to pivot there is no right answer but I
can give you the signals and I'm gonna
be the signals first of why it might be
time to pivot and I think some of them
are internal and some of them are
external if you as the founder are
having a hard time getting motivated by
your idea you don't want to go to work
in the morning you're dreading going to
the office now I'm not saying dreading
going to the office because it's hard
because somebody quit and you have to
hire somebody or somebody's being
difficult or money's running out you
lost a client or the product is crashing
or the servers are going down where you
you got hacked those are all you know
tiny moments when a start-up can just be
incredibly hard to run those are moments
in time they pass and any great
entrepreneur will let those moments pass
they'll be the rock in the stream the
water will go by and this too shall pass
what I'm talking about is just
consistently you just don't want to do
it anymore
you're like oh my god this is just
completely not interesting to me so when
you lose your interest as a founder oh
my god that's what kills most startups I
believe that the number one killer of
startups is running out of money the
number two killer is the founder running
out of energy and interest for the idea
if you find that happening you're gonna
have to face it yourself and say hey
either I have to extract myself from the
business and let somebody who's
interested in this vertical
take it on or you're gonna have to find
something you're personally interested
in yet and that leads to a second one
which is hey you are the folks on your
team interested in the idea or are they
phoning it in are people staying late
are people coming to you with ideas are
people vocal about their concerns about
the product if people are just quietly
coming to work and leaving a 5 o'clock
and you don't see that passion maybe
there's something wrong with the product
maybe the product is not that great now
you can have an efficient team doing a
great job and I'm not saying every day
has to end at 9:00 p.m. but if people
just don't seem to be engaged that's a
red flag - so there's your internal are
you engaged there's the external are
your team engaged and will people come
work for you I mean if the idea when you
tell it to people results in them saying
I want to come work for you more often
than not great but if you put our jobs
and you're like hey come work at my
startup we're gonna try to revolutionize
news on a mobile phone and it's inside
comm and people are not interested well
you've got a problem and if you're not
interesting when we get a problem them
back in this case I'm super interested
and I have a lot of people who are very
interested in the future of news and
mobile so we don't have that issue okay
not time to pivot now what would be also
another moment is also VCS now VCS are
not like the barometer of anything
necessarily other than greed or you know
a perceived opportunity and you know
they're going for returns in large part
there are some people who are in it for
the you know the thrill of the victory
in the game but generally it's it's a
return driven business and they're
investing other people's money so you
have to think if VCS don't want to be
involved they probably think that this
is not an opportunity for growth so if
your startup and it should if it is in
fact to start up you know desires growth
your team and desires growth and it's
not growing VCS are pretty good
indication of that because they look at
and say hey it's not growing why is it
not growing and they're pretty astute at
this actually because they see so many
companies they know it's not growing
because either it's a bad market you
picked a beach to surf on where there's
no waves you could be the greatest
surfer in the world if there's no waves
you're not gonna actually be able to do
anything awesome
and so that leads to the product is
there traction are people bubbling with
ideas do users ask you why certain
features are broken do they notice when
something breaks do they notice
something is added to the product if
they don't notice when things are broken
or added and they're not enthusiastic
well you've got a huge problem right so
if the customers are not enthusiastic
the VCS are not enthusiastic the team is
not able to say I think if you're not
enthusiastic these are all the warning
signs now that doe do not mistake a lack
of do that mistake a difficult day or
week or issue and a frustrating fight
and a debate with a lack of enthusiasm
in fact it's the opposite if people are
fighting over which direction the
startup should go in and people are
cantankerous and there's meetings and
people like hey we should be doing this
we should be business to business not
business to consumer know we should do
enterprise know we should do consumer we
should be going after this market
something we should be doing advertising
know we should be doing subscription
when people are having those fervent
debates that's good that means there's
something there there's life when
there's no debate and everyone's quietly
checking and checking out and keeping
their head down man you're effed and
that means it's probably time to think
about doing something else to pivot and
what is pivot now just pivot mean you
change your idea as well it comes from
pivot foot right like in basketball it
means you're kind of keeping one foot in
one place and moving the other foot so
you're building on one move right so
you're sort of starting another move but
it's got its basis in a previous one
you're shifting but you're not
completely reinventing and there's a lot
of different ways to do this and there's
been a lot written on it
but what I think are some of the main
things to keep in mind is if you have a
great team it's much easier to have a
great team with a bad idea because
they'll figure out how to make it great
than to have like a great idea and give
it to a bad team because they'll
certainly screw it up I don't know the
first person to say this I've heard a
bunch of VCS say this and other people
say it ideas can be iterated on and you
can kind of sniff your way along and
that's what really pivoting is and so
there's like kind of major pivots and
minor pivots a minor pivot is hey we
thought we were gonna you know build
this software that we're building for
accountants but it actually turns out
that ad agencies like it's like it's
like just like sort of a different
consumer segment wants to use the
product and the one you thought that's a
minor pivot right a major pivot is like
what Groupon did they made a message
board for people who wanted to create
like
petitions and then they made a little
wordpress blog for to get coupons for a
pizza discount it turned out more people
were interested in the pizza discount
then you know whatever getting New York
is freed from SeaWorld so it turned out
the point became Groupon Groupon soared
because I mean one idea is better than
any other idea just means one might grow
faster right so like the point might
have been a wonderful idea it just
wasn't a high-growth idea and when
Andrew Mason was on the program he told
the story on this winged seraphs of how
hey everybody in the company just wanted
to work on what was working they wanted
to be successful people want to be
successful remember we talked before
about people being quiet and maybe not
engaged well if the products working
they get engaged trust me when Mahalo
was going down and we couldn't get the
SEO problems fixed people got disengaged
when insite started coming up and
started growing it was like hey wow this
is fun there's a higher quality product
people liked it better and just
naturally even me the leader I was like
wow I'm more engaged and so don't be
afraid of pivoting love it embrace it
another technique is maybe going more
focused or becoming you know a bigger
wider focus so some people start and say
hey I'm gonna build you know a content
management system that's specifically
for people in fashion and then they say
well you know what anybody can use this
so why don't we just pull back a little
bit let anybody use it for anything they
want right so that's a sort of I'm gonna
go with a tool or a community for a
specific vertical - I'm gonna be a
platform and I see that all the time hey
we can't get the people who we built
this to use it so we're gonna let
anybody use it and see what happens that
usually results in great great things
now technology is one of the best things
to pivot on when we started Mahalo com
which had become very large
15 million uniques but then got killed
the mobile phone was nascent I mean we
remember the launch of the iPhone when
we were ther and it was really the
iPhone coming out that led us to say hey
human curation could be done on a phone
and it's better to do it there because
people have less screen real estate so
it actually matters rewriting the
headlines and doing a more efficient
experience for news consumption works
better
over here on mobile phones and so the
whole world changed because of mobile
it's a giant pivot for everybody and
there's many of things like that now the
business model could also change
consumers have changed the idea that
consumers would pay in advance for
something that had net that was not
built also known as crowdfunding is a
completely revolutionary new way to do
commerce I'm gonna give you money
because you gave me a pitch for
something that's just so awesome that I
want to see it exist in the world or
crowdfunding in the sense of hey you're
a great artist I want to just give you
money every month as a reoccurring
donation like this really changed things
and people started applying it to
everything local businesses movies
hardware and nobody ever thought that
hardware would be the place that it
would really take off to be honest they
thought it was gonna be movies and local
restaurants it turns out hardware has
been totally revolutionized from the
pebble to the Ouya and now this cooler
on Kickstarter became the largest thing
ever so that's an example of the
business model allowing you to pivot
technology could let you pivot the
client base could allow you to pivot and
so can the business model another thing
that is one of the most frequent is to
go from consumer net enterprise why
consumer leads to a lack of scale in
most cases most consumer services fail
they fail at an extraordinary rate it's
one of the most difficult things to do
so if I do inside and I can't get past
ten thousand people a day I could say
and if you can't get past ten thousand
people a day you can't make any money
but if I went to IBM and said hey I'll
make inside.com for your hundred
thousand employees and give me you know
$10 a year per employee give me a
million dollars and I'll make content
for your company so you're a hundred
thousand people for ten dollars a year
are really up on the content of what's
going on and inside of IBM and inside of
the technology industry and all the
markets they'd like sure here's a
million bucks ago we want that service
I'm not saying I'm gonna do that but
that has been pitched internally that's
the good internal debate like should we
go Enterprise we're not going to but it
is an interesting play you could do it
it would work I'm not interested in it I
still think we're growing but actually
if I did hit the wall I might hang you
know we got to keep the company going me
well pivot to that and consumer needs a
lot of times consumers will tell you
just explicitly like hey dumbass
you are giving me this I don't care but
I do love this that has happened so many
times in technology where people think
you know people are gonna use this
device I'm holding on my iPhone to make
phone calls and it's gonna be wonderful
and then it's like well no it's actually
kind of like SMS messaging and apps and
playing clash of clans I mean who knew
that the iPad and the phone were just
the humble phone would become a gaming
device like that really wasn't the
intention but a technology enabled that
which was the technology of video
graphics processors getting so small and
then the App Store created monetization
right so there's two enabling moments
there arguably three the creation of the
smartphone then to the creation of the
app store for monetization purposes and
app purchases was another one while it's
almost like a mini enabler inside of
that that people could pivot to because
that's really what made clash of clans
and those kind of games work was the
in-app purchases micro payments $1 as
opposed to buying a game for $60 it kind
of like they boil the Frog you you spend
$1 every day or $3.00 every day I didn't
think I would go back to putting
quarters into us asteroids machine at
the age of 40 but I started playing
bejeweled and I was like yeah you know
what I don't want to save up all these
coins and have to like then get the
prizes just I'll give you guys $10 a
week to play my stupid game then I
realized oh my god I mean ten week
sentence I get 100 bucks for a game that
shouldn't cost that much anyway point is
little things can enable big changes in
your business and you'd be foolish to
not watch them so listen to your team
listen to your partners listen to your
customers listen to the VCS listen to
the press I mean that's another one that
if the press is not interested in
meeting with you it's because you're
boring and what you're doing is not
important and I don't mean that to be
harsh but in a lot of cases if the VCS
don't want to meet with you if the press
doesn't want to meet with you and people
don't want to work for you
it's like red flag red flag red flag I
mean are you going to persist when the
entire world tells you that they are not
interested in some cases I guess one in
a million one in a thousand one in a
hundred perhaps you should persevere but
almost universally some group of people
5 10 20 % will
fall in love with your product and that
tends to be the sweet spot when Twitter
had 5% of the population in the United
States kind of interested in at 1 to 3
percent of the techies and then it
became 5 10 percent and then Ashton
Kutcher and other people got involved
and it became super populist those were
amazing moments I think but they had to
persevere in that small percentage of
population using the product to get to
the big one all right listen thank you
to our friends that wsg our they have
been so great during the startup basics
series with us and people are going
crazy for the series because let's face
it you know startups are hard and
there's some very basic things that
people need an answer for and you're
busy I'm busy if we can just do a little
bit of research and thanks to the team
for doing this research today not all
this is my ideas a lot of this is sort
of researched and discussed by our
editorial team here at launch and this
weekend startups you can save a lot of
time so we put you know a bunch of hours
of work into this my experience my
team's experience and Wilson Sonsini
thank you so much ws gr for supporting
this great series all right we'll see
you next time on startup basics