A pivot is the term for a company that changes its business model in order to take advantage of an opportunity. The opportunity is often only visible after the founders have progressed with their initial concept enough to learn about their market and its needs. Many of the hottest companies today, from YouTube (which started as a dating site) to Flikr (which was a videogame) are examples of great pivots. The founders in these companies tested their hypothesis and realized they wouldn’t work, so they moved in the direction that would. The affectionate name for this is “failing fast” and its a good thing. Chad and I did just this about 3 weeks ago when we changed our underlying business model.
Our previous idea was a marketplace for creative messaging services, from funny eCards to custom phone calls from voice impersonators. What we found was that people wanted ways to interact, but our product offering was too wide. We were talking with too many different target markets. We needed a much more narrow product offering which would enable us to target just one demographic and build a core user group. Our customers and artists told us repeatedly that they were interested in printed cards. We heard “I love the eCards but I want you to mail it as a real card” and “I hate going to the store to buy cards, I end up not sending them! Can you make some of your eCards available to print?”
We started researching the greeting card market and realized that it is massive. Over 7.5 billion greeting cards are bought each year in the US, representing a $11B market with over 3,000 independent publishers. Only a handful of small companies currently print and mail cards from a web marketplace and none of them are executing the concept particularly well. Chad quipped that we could do to greeting cards what NetFlix did for videos, bring the card buying process online. As soon as that came out of his mouth, we both instantly realized the market potential. We were hooked.
That was 3 weeks ago. Since then we’ve repurposed our website and launched the new features as a minimum viable product. Try it out, you can actually have us print and mail a card for you right now. Don’t forget to let us know what you think of this new direction in the comments.
During my last trip back to the East Coast it was obvious that people didn’t understand why I’d become an entrepreneur. Why give up a successful career trajectory for something with a 90% chance of failure? It bothered me and I wanted to start getting my thoughts down, I want to revisit and expand on this topic later. For now, the basic answer is that my life goals and desired lifestyle are not achievable with a job.
Like @mattmireles I grew up as the middle class kid amongst the super rich. This gave me both a strong desire to change my economic positon and also an outsiders mentality. It was obvious that the if the status quo remained I’d never move up. So throughout my life I’ve tried to create things that break the paradigm.
While my last job was perfect for me, the next roles I saw in the future weren’t. It was apparent that the highest I could reach at a large company would be an exec role entrusted to maintaining steady growth and compensated to live a comfortable, and always working, lifestyle. This just wasn’t what I personally wanted and the thought of settling down into a routine job and lifestyle scared me. I still harbor dreams of changing the world and living an adventure. The corporate career path seemed to conflict with that dream.
Entrepreneurship on the other hand feeds directly on passion, profit from disrupting the status quo, and is one of the biggest adventures one could undertake. There is a definitive risk of failure, but the payoff if successful in both money and status is far beyond what is achievable in a job. In essence I’m risking comfort for a chance to be extraordinary.
Its hard at this very moment because I’m not earning what I was, but I’m compensated well by having a lot of fun, working with great people and maintaining a healthy lifestyle. This first project, successful or not, is a chance to really learn the ropes and in that way I see it as an investment.
I know quite a few of the readers here have made, or are contemplating, similar decisions. Use the comment box to tell us what you think.
Look, if you had one shot, or one opportunity
To seize everything you ever wanted-One moment
Would you capture it or just let it slip?
…The soul’s escaping, through this hole that it’s gaping
This world is mine for the taking
-Emimem “Lose Yourself”
About a year ago Chad and I were sitting on a beach in Panama. I was there for a retail bank acquisition and Chad had come for a long weekend to explore Panama. It had been another 100 hour work week and I was exhausted.
To forget about work, we decided on a weekend surfing trip to a remote island called Isla Cebaco with my Panamanian friends. We spoke about how we’d both realized that we did not want to be executives at GE and that we had always wanted to be entrepreneurs. We had climbed the ladder and saw clearly where we’d end up. The people who had the jobs we’d inherit were not living a life we’d enjoy. To be happy we’d need more freedom see our ideas for a better world come to fruition. Life needs to be an adventure, filled with the passion and excitement of chasing your dreams. Is there any better way to live?
A lot of people have that realization, acting on it is a lot tougher. In the moment of clarity that only a remote tropical beach offers, we saw our life in a different light. We realized that we had an opportunity. With no girlfriends, mortgages, children or debt we had little downside if we failed. With our pedigrees, the GE jobs would always be there. We started to plan the Split Our Tab business model with the hopes of having it up and running before leaving our jobs. In the ensuing months we were both offered promotions. We knew that if we took them, we wouldn’t be able to leave easily and our dream might become a low priority.
Would we let the opportunity slip? Hell no! We turned down the new positions and left GE 2 weeks later in late February. About 4 weeks after that we realized that Split Our Tab wasn’t a good model and pivoted to Nudgems.com which we’re super excited about.
Last night, an old friend of mine said “what you guys are doing is so awesome” to which I responded “let’s see if we’re successful first” and Chad immediately commented “no, it’s awesome anyway, we’re living the life we always wanted and having fun” I couldn’t agree more.
We are often asked how much money we have raised and it seems that our success and capabilities are sometimes judged on that metric. To be sure, having a vote of confidence from a VC is a badge of honor and may even increase your chances of success, but the decision is a lot more complicated than that. We decided not to seek outside investment despite having access to wealthy friends, colleagues and professional investors.
Before we dive into the reasons why we chose this path, I must disclose that I’m a sucker for prestige. It hurts when others don’t see me as successful or doubt my capabilities. Luckily, Chad is well grounded and reminds me that making the right decision to build an enduring long term business is more important than my ego.
With that in mind, there are plenty of reasons to get investors, in fact getting adequate capital is sometimes necessary to make a technology business model viable. Certainly this is true for businesses that want to keep growing but must float significant costs for inventory, development or user acquisition while they’re recouping the customer’s lifetime value. It’s also true if the founders don’t have personal savings, they need at least some money to live. There are, of course, also soft benefits like access to an investor’s contacts, prestige, great advisors and being able to hire outside help instead of learning to do something yourself.
With this line of thinking in our heads, we decided against an investor because we didn’t see any need to trade equity for money to grow the business. We can build the site ourselves, the business model doesn’t requires floating a lot of user acquisition costs and we both saved diligently for years so we’re not starving without a paycheck. The soft benefits like PR and great advisors was the one benefit we needed most. To fill the gap, we’ve been identifying strong mentors. We’ve been treating this as a core part of our strategy, and have had a lot of success. On average, we’re meeting with 3 new mentors a week and identified a lot of absolutely phenomenal ones. We’ll continue to grow our network, but are committed to concentrating on developing deep relationships with a select few that are passionate about helping us succeed by introducing us to their network and being brutally honest with their feedback. Is it the same as board meetings with investors, no, but so far it’s been pretty effective. The true test will be whether we can get the corporate partnership and PR contacts we’ll need in a couple months.
The guys at Everlater thought the same way and ultimately changed their opinion and got funding from with what I understand is a great VC partner. We’ve talked with them at length about that decision, so if anyone else is interested in getting in on this discussion, feel free to jump in.
The talk of the town seems to be why Boulder is number one for startups, and a visit this week from a NY Times writer has further fanned the self love. Having just “debated” Chad for two months on what city was best to launch our technology business, I feel I should weigh in.
Here is how we stacked up each of the tech hubs we considered:
San Fran – Big name connections & mentors, small fish in a crowded ocean, expensive, high taxes, outdoor lifestyle available
NYC – Our great friends, expensive, aggressive tech scene, amazing nightlife drains funds/concentration
Seattle – Well established startup scene, too rainy in fall, great outdoor lifestyle, we have no contacts
Boulder – Collaborative & fast growing startup scene, outdoor adventures, have a few friends, low cost of living
Austin – no taxes, sexy accents, tech scene is gearing up but still seems small, lifestyle great but not outdoorsy
A lot of people told us to go to San Fran because of the access to Capital. We didn’t include that in our decision process because we didn’t see it being hugely effected by geography. When the product is ready to be taken to the next level, we can fly to San Fran or NYC looking for the best partner if one is not available in Boulder.