What the greatest technology investors say about the Pivot

Successful Entrepreneurs have these Qualities

Mark Suster Partner Upfront Ventures and former entrepreneur

 Suster believes successful entrepreneurs have these qualities:  “1. tenacity, the most important [].  2. street smarts []” including “[] know[ing] [] how customers buy and how to excite them [], [an ability to] spot opportunities that aren’t being met and [] design products to meet these needs. []”. “3. ability to pivot []” which “[] might just be a totally different business model.[]”  “4. resiliency  []. 5. inspiration [].  6. perspiration [].  7. willingness to accept risk []. 8. attention to detail [].  9.  competitiveness []. 10. decisiveness []. 11. domain experience []. 12. integrity  []”.    Mark Suster, Entrepreneur DNA, December 15, 2009;http://www.bothsidesofthetable.com/entrepreneur-dna/ What Makes an Entrepreneur (2/11) – Street Smarts December 16, 2009


What Makes an Entrepreneur (3/11) – Ability to Pivot December 17, 2009





Pivot to Real Market Need

Reid Hoffman angel investor, Co-Founder & Executive Chairman LinkedIn and Partner Greylock & Ben Casnocha entrepreneur

PayPal a leading online payments company was acquired by eBay for $1.5 billion in 2002.  Yet PayPal initially was very different than today.

In 1998 Max Levchin and Peter Thiel “[create[d] a “digital wallet”- an encryption platform [] that [] evolved to software [] [for securely moving digital cash via a Palm Pilot] [one] of several iterations []”. The company grappled with finding a mass-market use case as the public wasn’t used to wirelessly and electronically sending cash.  Meanwhile eBay was growing significantly despite its inability to efficiently handle payments, even though “growing numbers of eBay users [tried] us[ing] PayPal to handle payments”[].  As a result “[] PayPal ditched the Palm Pilot app [] and focused on eBay]. [] It stayed true to [its] initial encryption roots while shifting to capitalize on what appeared to be the real market need.”  PayPal became a huge success, overcoming many challenges, including new management and losses from fraud.   Reid Hoffman & Ben Casnocha, The Start-up of You (book), pg 64-66, 68-70

Smart Adapting & Pivoting

Reid Hoffman angel investor, Co-Founder & Executive Chairman LinkedIn and Partner Greylock & Ben Casnocha entrepreneur

Flickr is a popular photo-sharing website. Yet its founders Caterina Fake and Stewart Butterfield didn’t plan to start a photo-sharing site.

Begun in 2002 their original product was an online game played simultaneously by hundreds of players.  “[] the plan was to build [] less [of] a game and more [of] a “social space designed to facilitate and enable play”” with features to attract users, including photo-sharing.  When photo-sharing surpassed the game itself in popularity they had to decide whether to continue game development while expanding photo-sharing, or dedicate most of their resources to photo-sharing.  They pivoted from the original plan to focus solely on photo-sharing.  Its tremendous popularity resulted in Yahoo! acquiring it in 2005.  

“[] [its] evolution [] “is a case study in smart adapting: its founders [] tried many things to see what would work, and nimbly shifted their plans based on what they learned.”   Reid Hoffman & Ben Casnocha, The Start-up of You (book), pg 52-53  

What Great Silicon Valley Companies Have in Common

Reid Hoffman angel investor, Co-Founder & Executive Chairman LinkedIn and Partner Greylock & Ben Casnocha entrepreneur

 What great Silicon Valley companies like Intel, Apple, Google, YouTube, Twitter and LinkedIn  among others have in common: “[] Take intelligent and bold risks to accomplish something great.  Build a network of alliances to help [] with intelligence, resources and collective action.  Pivot to a breakout opportunity.”  Reid Hoffman & Ben Casnocha, The Start-up of You (book) pg 18-19

Red Flags: Signals Not to Invest

Rob Hayes Partner First Round Capital

Hayes discusses red flags, things that would make him not want to invest in a founder or entrepreneur. 

Red flag:  If he doesn’t have the best possible people as part of the initial team pre-funding.  “When someone comes to [him] who has already surrounded [himself] with people [] who have quit good jobs [to come and work with him] because they’re so passionate about [] working with this person but also what they’re working on, [] that’s a good indicator.”

Red flag: “[] [The founder] is so enamored with [the] product [to the exclusion of addressing other important business elements.] There have been very few products that have been so good that the world just beat a path to their door [like Google or Facebook]. [] If someone is so enamored with their product that they can’t think through how things might change or they’re focused on one particular slice of the market and they only know that piece of the market and not a much bigger market [], I would be concerned about [that].”

Red flag: “[The founder says] now [he] need[s] to hire a designer[]. [] [Hayes likes] a product with design built in from the very beginning. [] When [Hayes talks] about design [he’s] talking about UX [user experience], feel, everything []”.  Rob Hayes, Rob Hayes of First Round Capital - TWiST #249, (ThisWeekIn Start Ups with Jason Calacanis), Published Apr. 18, 2012 @ 25 min.; http://www.youtube.com/watch?v=GEPqy0ad0BU

Pivoting is One of the Most Critical Challenges

Kent Goldman Partner First Round Capital

“Pivoting is one of the most critical challenges a business can face. [] [Pivoting is] what you do when you’ve built everything according to plan and yet, the business and users aren’t materializing according to plan.[]

Pivoting is a good thing. It is the outcome of learning about your business and adjusting. The best run start-ups do this every day but they do it a little bit at a time. [] [They see smaller pivots] so often, they rarely realize that they are pivoting. Instead, they are simply operating.  It’s the more dramatic pivots which are more challenging, require greater commitment and longer runway.

[] Knowing when to pivot starts with knowing the milestones []. [We] believe the purpose of a seed stage investment is to prove / disprove / refine a thesis so we always work with [] founders to outline the milestones they want to achieve with their financing. This is a living document [not to be considered as] absolutes and deadlines, but [] provides markers against the original assumptions. As the progress against the milestones occurs, we look to understand both what is / what is not working and why[, revisit original] assumptions and ask what [was] learned. Together with the founders we ask, “Knowing what we know now, what would we do differently?” and “What can we do with the cash we have left?”

[] It’s critical to make a pivot when you still have runway [].  [] Plan your pivot with enough time to show genuine progress against [] new milestones.” Kent Goldman  This Just Ain’t Gonna Work Out, March 1, 2010http://thecornice.com/2010/03/01/this-just-aint-gonna-work-out/