Often it pays to pivot and start over
When Quibi announced he was closing his doors recently after raising $ 1.75 billion, this raised an obvious question: if the original idea didn’t work, why not adjust her model or do something completely different while she still had capital? It wouldn’t have been the first company to change gears. Perhaps due to the unusually large amount of money he spent in just six months of public operation, the Pivot wasn’t an option for Quibi, but it was for countless other companies. prosperous over the years. Sometimes an original idea just doesn’t work, a market gets too crowded, or the founders of a business stumble upon something they’ve built that is actually a better business than the original idea.
There are many examples:
These examples – and many more – show that when your first approach doesn’t work, pivoting may be the only logical solution, but it takes courage from founders and patience from investors.
We spoke to several Founders and VCs who have been through this to find out how Pivots occur and how all parties involved are adjusting to changing priorities.
Sometimes it’s a long winding road
A big part of building a business is having a vision. You have to believe in your idea of course, but that doesn’t mean it’s the right way to go. Sometimes it pays to move on. The King of Pivots may be the aptly named Pivot, which changed management several times and even changed ownership before going public and being acquired, all in the span of about 20 years. Ed Sim, co-founder of boldstart ventures, was part of Dawntreader Ventures in the late ’90s when his company invested in an early version of the company called Metapa. Sim was at the forefront of every twist in the company’s long and complex history.
“Green plum, that was sold to EMC and eventually became Pivotal Software, originally called Metapa. Metapa was in the Akamai space and as markets collapsed in 2001 to fund infrastructure projects, Scott Yara (the company’s founder) and his team bought a small business called Didera and transformed it. in Greenplum, the first petabyte-scale data warehouse built on -source technology, ”Sim told TechCrunch. It didn’t end there though, as Sim continued, “Again, years later Scott enlisted his replacement CEO Bill Cook and they teamed up to sell Greenplum to EMC and ultimately pull out and take over the business. public as hub software.“
It should be noted that Pivotal eventually ran into financial problems when his stock collapsed last year, but another member of the Dell / EMC family, VMware, saved the day by buying it for $ 2.7 billion.
Sometimes you stumble upon an idea
Segment, the customer data platform company that was recently sold to Twilio for $ 3.2 billion was originally an academic conference sentiment platform, according to CEO and co-founder Peter Reinhardt. “Our first idea was a classroom tool, ClassMetric, that gave students a button they could press in class to let teachers know, in real time, that they were confused. I like to think of it as a pulse monitor for class confusion, ”Reinhardt told TechCrunch.
This idea quickly fell through when the professors who tested it found that asking students to open their laptops to test their feeling had simply caused them to start playing Solitaire or checking out Facebook. The teachers weren’t thrilled and moved on. The founders, who were students of MIT at the time, decided they wanted to create an analytics tool instead, but it turned out that the competition from Google Analytics and Mixpanel at the time turned out to be. too strong.
“We spent a year developing, but it was a crowded market and we struggled to carve out our own niche. We were quickly running out of capital and the pressure was on to find something new, ”he said. In fact, they were just planning to integrate it, but they had developed a small open source tool called analytics.js, which they were using to integrate data into their failed analytics product. At this point, desperate for an idea, one of the founders suggested posting the open source tool to Hacker News.