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Embark on a journey to success with the Startup Founder Roadmap, your go-to guide for navigating the challenging yet rewarding world of startups. Whether you're a seasoned entrepreneur or just launching your first venture, this podcast is your compass for building, growing, and leading a thriving startup company.
Join us for insightful solo episodes where we break down essential startup concepts in our "Startup Definitions" series. From understanding the nuances of Minimum Viable Products to mastering the art of the perfect Pitch Deck, we've got you covered. Learn the language of startups and gain the knowledge needed to make informed decisions on your entrepreneurial journey.
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00:00 - Speaker 1
What's up, founders? Welcome back to the Startup Founder Roadmap. I'm your host, chris. You are listening to the Startup Definition Series. Today's startup definition is pivot. This is a big one for early stage founders because sometimes we fall in love with our ideas and we're just so heavy, we're just so deep into creating what we want to see exist in the world that we don't know when to quit and not even quit. But that's why it's pivot. You just kind of change direction, right. So the definition is when a startup breaks with its core focus and changes direction in a fundamental way. So essentially, that means that if you're trying to solve one problem and it's not working, then you probably pivot to another problem to solve that problem. And I got some great examples for you today, man, like some of the best that you probably will ever hear.
00:50
So the first question is when should your startup pivot? Like, when should you pivot and switch directions and start doing things differently? I think you should pivot once you are really getting deep into the weeds, right? When you are in that stage where you're trying to market and you feel like you're solving a problem and you're just not reaching the industry. Nobody's really responding to what you're putting out there. I think you got to change directions right. If you've been at it for two, three years and you're not getting the results, I think it might be time to go and solve a different problem. I think understanding that pivoting isn't quitting is kind of the main thing here. That's the main thing. Pivoting is just going in the direction to solve a different problem. You're not giving up or saying I quit, or tearing a company down all the time. Sometimes pivoting literally is just oh, instead of being this kind of company serving this kind of customer, we're going to serve the same industry but a different customer.
01:47
For example, for my podcast agency, I was struggling for years. Granted, I had clients and I was always making money, but it was never the kind of money that I was happy with. So I made a pivot and I decided to work with higher level clients, different industries, and it completely changed my life. For about two years I actually wasn't doing any podcast production, any editing, no consulting, nothing. I got away from it all completely and that was kind of good for me because when I came back to it it was clear that I had to go a different direction. And it was easy to go in that other direction because I wasn't so focused on doing it that one way. So I'll come back to more of my own examples and all that stuff.
02:31
But let's get into some of the other examples that are out there in the world. One of the first ones is slack, and people don't know this, but slack started off as a game. The owner was Stuart Butterfield, and this guy pivotedickr from a game into a photo app. Right, like, think about that. Flickr was supposed to be some kind of game. Now it's Flickr as we know it, where you can go and get stock photos. And that's kind of amazing to me that a company starts off at one thing where it's just in this crazy one direction kind of way, and then it's switched to something that's completely different and it's unrecognizable. That's why launches don't really matter that much, because in the beginning you might launch in one specific way, in one specific direction, solving one problem, but then in a year that might not be what you're doing anymore. It might be something completely different. I don't think that's. I think that's a good thing. I think if you're doing that, that means that you're listening to the market and not trying to fight the current. All right, that's a big deal.
03:35
So Butterfield and a few others that he worked with on his team created a game called Glitch, and Glitch just wasn't working. It wasn't getting the results that they wanted to get. So that's when they made it into Slack and it was actually already a part of their gaming platform and they decided to okay, let's go ahead and change this thing up, right, let's switch this thing up from what it is and try to do something different. And what really helps Slack is, first of all, they start out with a freemium model, and right now, you can create a slack account and everything and it's free, right, you don't have to pay. And again, from the last episode, you know I'm a big fan of premium, of freemium. I think freemium works for most businesses if you do it right. The business plan was about 15 bucks a month pretty simple, simple pricing.
04:23
Now, early in 2014, they had more than 120,000 daily users, but only 38,000 of those people were paying customers right. So what Slack had to do was figure out how to get more people to be paying customers, and in 2017, they were spending 99% of their revenue on sales and marketing, and in 2019, they dropped to about 58%. So, if you notice, from 2014 to 2017, they were having some issues in terms of converting those free users into paid users, and they made some changes in that marketing department and started getting them to convert a lot better. The real outcome here is that Slack is now worth billions. It's one of the most profitable companies in the world, right? I think this is one of the best examples of changing direction to solve a different problem, because in the beginning, they were like, yeah, we're just going to create a game and have fun with this, but now Slack is literally for companies Like. It's not for gamers at all. Well, I guess it could be it's more of Discord, though. Now Slack is for businesses Like if you're a part of a network or some kind of company sales team or whatever it is, you probably use Slack to communicate, you know? I think that's a perfect way for businesses to pivot.
05:35
One of the other examples that I think would be absolutely amazing is YouTube. Before we get to that, I got to remind you to subscribe to the Creator Founder Weekly newsletter. It's completely free. We send two emails a week breaking down how you can become a better founder. You get content like this about you know understanding what it is to be a founder, how you can get better, improve your skills, your relationships. And in the future, we'll be doing events and all kind of stuff. Man, we have amazing guests or other people that have made billions of dollars that come on a podcast, that are part of the newsletter. So it's exciting. You got to be a part of this brand. Make sure you check it out. It's linked down in the description box down below.
06:12
So if you don't know, youtube actually started off as a dating website. I love telling people this. I absolutely love this. If there's any fun fact about startups, I love saying it's this one, because telling people that YouTube used to be a dating website sounds insane. On the surface it sounds wild, but that's true. In the beginning with YouTube, they were literally running ads on Craigslist trying to get women to post their dating profiles on YouTube. Like, hey, if you, we'll pay you 20 bucks if you post your dating profiles on YouTube. Like, hey, if you will pay you 20 bucks if you post your dating profile on YouTube.
06:43
And I just think in 2005, the world wasn't ready yet for online dating, I just don't think the world was ready yet. Like, I'm one of the, I'm a millennial I'm like my space, millennial age, right. Like I was one of the early people on Facebook and all of that stuff. I couldn't imagine meeting girls online at that period of time in 2005. I remember going to the mall to meet girls like I would go to the mall on the saturday as soon as it opened and wouldn't leave till it closed and just be there all day talking to girls. I couldn't imagine doing that online at that point in time. It's just being online at that point in time wasn't as accessible everywhere, so it just wouldn't have been conducive, especially the way it is now. It's just a completely different world.
07:26
So how did YouTube pivot? Well, the problem they had was people started posting other videos on YouTube that had nothing to do with dating, and the founder, kareem, couldn't find videos online anywhere, right? So he knew OK, I can start posting these videos on YouTube and this could be where people find videos online, right, which I think is just some really innovative thinking like that's. That's incredible, and that was how YouTube changed direction. Is they listen to the market? There's one thing I've learned is you should listen to what the industry is telling you If you got the market telling you that they don't care about this problem or that the problem you're trying to solve just isn't an important problem. I think one of the worst things you can do is keep trying to solve that problem. You're basically banging your head on the wall like going in the same direction. That's not working. It's not working. So it's obvious. Youtube pivoting was one of the best things they ever did. They got acquired by google in 2006 for 1.6 billion. The rest is history. We know youtube is one of the biggest search engines in the world. All that good stuff.
08:35
So here are some reasons when and why you should pivot. Like this is just something for you to think about. The first reason you should pivot is if competition is just too crazy. If you look up and you see that the market is full of a bunch of people doing the same thing you're doing really attacking the same problem that you are I think you should pivot, like if everybody's trying to use AI to solve the same problem in the same way. You need to let that go and focus on something else. Or or you can keep the same problem but go for a different part of the market. For example, I personally know thousands of podcast editors and producers, but I don't know very many that work with the clients that I do right, that do things the way that I do. I don't know very many that operate that way. I studied them. I think this is why you should study the market too, because then you start to learn what people are doing and you see the competition and you can start to really pivot and change your positioning in the marketplace by simply serving different people in that same industry. Obviously, it'd be, you know, changing your business and stuff, maybe adding some things in, like my service in terms of production and editing, and all of that stuff is not the same as it was when I work with just regular podcasters that are in Facebook groups all the time like coaches and authors and speakers. It's a different ballgame now because I work with a different type of customer, right? That's kind of the point. That's why you make that shift.
10:03
Another reason your pivot is if revenue is stagnant, if you're stuck at one level and the income isn't going up, you know you're not making more with your company. Then you should probably pivot some, and I think part of that pivot should be adding other customers into the market. Should be adding other customers into the market. If you're already bringing in good revenue, you're doing well to amplify that. You can bring in another part of the market and start dominating that area too, right? For example, for me, I work really well with the high level experience podcasters, right, like that's who I have a lot of experience with, who is, you know, my ideal client. But if I get to a point where business isn't growing and not scaling, then I'll probably add in, you know, the smaller clients, the beginners, something like that, or maybe even other people that aren't necessarily beginners but haven't reached a certain level, right? So I think you should look at the market in three different tiers.
10:52
You know, now, one of the last reasons you should pivot and switch things up is if your perspective is different. For me, my perspective changed a lot with my pod central software. I knew I wanted to serve a different type of podcaster. Like. I knew that the beginner podcaster isn't somebody that is the best user, simply because most beginners and this is just data from my industry most beginners don't stick around. Like 80% of podcasts die out before episode seven. So if I position myself as I want to solve that problem, that's a huge hill to climb. Now that's something I can come back to later on, after I have a hold on the marketplace in terms of the veteran podcasters, the people that are going to the podcast events that are investing in their show in terms of equipment or guests, all of that stuff. Events that are invested in their show in terms of equipment or guests, all of that stuff.
11:47
So if your perspective is different, that's when you can pivot and change direction as well, and I think you should. I think that's part of the growth and being a founder. So I think pivoting is one of those things that it's very nuanced, it's very different for every founder. I just think you have to understand if you're not getting the results that you want after you've been putting in the work and you're super focused and dedicated, at a certain point it's time to change direction at a certain point. Now I do think it's bad to rush it, like you run a Facebook ad campaign and you don't get results the same week.
12:21
That's not saying you need to pivot. I think it comes down to the work you've put in and the focus you put in and the amount of time. Like, if you sit and you do a hundred calls with your ideal customers and you can't get any of those people to become a customer. Yeah, you probably might want to pivot, right, like if you're doing sales calls every week and you get five to seven sales calls a week and you aren't closing at least half, that might be a problem. Also, like we said, competition, all of that stuff.
12:51
And I just think you shouldn't get too down on yourself either, because look at the examples of slack and youtube like some companies pivot and it literally is what makes them. I couldn't imagine a world without youtube. I use it so much. Right, love YouTube. We wouldn't have gotten here if they were super stuck on, you know, having some dating website or whatever in 2005. Like that, just it would never would have worked, to be honest. So I think pivoting is good and I hope you learn something from this episode. Man, learned something from this episode. Man, make sure you subscribe to the creative founder weekly newsletter. Also, let's connect on twitter. I am at chris podcasting. I'll put a link to that in the show notes as well. But, man, thank you guys for being here. Thank you for tuning in. I'll see you next time.