Rethinking startup a pivotal experience

Changing direction can be painful for a founder, but it’s often necessary — and rewarding.

CHICAGO TRIBUNEJanuary 15, 2014 

It requires emotional detachment yet total passion. It might involve killing a business in order to save it. It’s by turns agonizing, rewarding, humbling and empowering. And everyone who’s done it seems to have a slightly different idea of what it is.

It’s the pivot.

An essential concept in the startup world, pivoting means doing something different, often under time constraints as cash and investor patience dwindle. A pivot could involve changing a product to reach the same target market, going after a different market with the same product, or preserving a small piece of existing technology to form an entirely different business.

Entrepreneurs and venture capitalists don’t always agree about when a tweak becomes a full pivot, or when a pivot becomes a do-over. But they do say that startups must be open to change.

“There’s a mistaken belief by a lot of entrepreneurs that ‘Hey, I spent three years building this thing; I’ve put in a lot of time and effort, so inherently it’s worth something,’ ” says Paul Lee, a partner at Chicago venture firm Lightbank. “But the market is telling you what it’s worth, and it’s not the work you put into it. … If you look at it clinically and take off the effort lens, it becomes a very easy decision.”

Startups certainly didn’t invent the idea of adapting to market forces. But it is a testament to Silicon Valley’s optimism and flair for salesmanship that it coined a euphemism for — as veteran tech writer Kara Swisher put it in a recent Vanity Fair profile of mobile photo-sharing service Instagram — “saying you’ve screwed up and are starting over.”

One famous pivot in recent history led to the discount website Groupon. It started out as The Point, a company focused on organizing collective social action. A campaign would be activated only if a minimum number of people pledged support. This tipping point model was later applied to negotiating discounted products and services with local merchants.

Lightbank’s founders, Eric Lefkofsky and Brad Keywell, were also Groupon’s earliest investors. The venture capital firm has guided many of its portfolio companies through pivots. The process must be data-driven and move quickly, says Lee, who believes entrepreneurs can typically gauge whether an idea is working within 90 days.

This was roughly the timeline that Brad Weisberg and CJ Przybyl encountered. Weisberg had realized a 10-year dream in 2011 by launching BodyShopBids, a company whose website and mobile application allowed car owners to upload photos of their damaged vehicles. Local body shops could submit quotes for repairs and customers could book their appointments through the app.

Just months after completing a $1 million fundraising round from investors, including Lightbank, the team realized the car owners were unlikely to become repeat customers because car repair is an infrequent need. This dynamic made their marketing costs high, and selling other services such as oil changes through the website didn’t fix the problem.

“That’s what we thought a pivot was … just deviations within the same model,” says Przybyl, whom Weisberg had brought on as co-founder after launching BodyShopBids. “We didn’t get traction until we pulled a real pivot. That was ripping up the company.”

With their funds running low, Weisberg and Przybyl started attending body shop and auto insurance conventions around the country in search of a new business model. In July, they launched a new startup, Snapsheet. The company builds branded mobile apps for auto insurance carriers. Drivers still take photos of their damaged vehicles using the app, and they can also use it to see their insurance company’s estimate.

“I had had this idea for BodyShopBids for 10 years, so it was not easy to let go of my vision,” says Weisberg, who initially funded the company with money saved from his bar mitzvah.

For Sharon Schneider, the pressure to find a winning business model was heightened last summer when she entered startup boot camp summer program Excelerate Labs, now called TechStars Chicago. Her subscription rental service for baby apparel, Good Karma Clothing for Kids, had won a business pitch competition and gotten good press. But it lacked paying customers.

Schneider decided in Excelerate’s third week to change. Knowing she would have to present her startup to a crowd of potential investors in less than three months, she kicked off a three-week process of converting the company into an online resale shop for upscale children’s clothing. The startup needed new e-commerce technology, new product inventory and even a new name.

Moxie Jean, the result of Schneider’s pivot, launched to friends and family in mid-July. By the end of August, the company had five times more customers than Good Karma had signed up in its lifetime.

“The data will tell you what’s not working, but it doesn’t tell you what to do instead,” Schneider says. “You still have to go out and figure out what’s the right answer, and that’s hard. … The weeks or the months before you pivot is the darkest, most miserable, most horrible time of your life because your business is failing and you don’t know why.”

wawong@tribune.com

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