Iterations: Reinvention And Re-Rolling The Dice

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Editor’s Note: Semil Shah is currently an EIR with Javelin Venture Partners and has been a contributor to TechCrunch since January 2011. You can follow him on Twitter at @semil.

The topic of this week’s column is time-honored when it comes to business, perhaps even overused in many cases, and in the startup world, sometimes mocked, and at others, romanticized, but usually only in hindsight: The Pivot. This is a loaded word, so I should be clear that its more to describe a business decision on a spectrum, with “slight shift” on one end and “complete reinvention” on the other.

If a startup company matures and is able to achieve some level of success, we sometimes begin to hear from the founders about how they changed course along the way, either through a slight tweak, massive reset, or something inbetween. Fab, which now drives one of the fastest-growing e-commerce properties, originally started as a gay social network called Fabulis. Before entering the daily deals space as Groupon, the founders started The Point, trying to catalyze action by using the crowd to reach a certain “tipping point.” More recently, the small team behind Instagram initially began with Burbn, a location-based mobile application which struggled to find its way.

As founders know all too well, things change between the creation of fundraising slide decks and a diminishing runway, and it’s nothing to be ashamed of. It is simply part of the struggle in creating something new, big, lasting, and meaningful. In fact, considering the stodginess in many traditional, larger workplaces, it is a luxury to re-roll the dice, the creative license to continually question direction paired with the nimbleness to optimize for a bigger opportunity.

Most of us don’t hear about all the slight tweaks or bold pivots early-stage startups make, partly because there are too many, aren’t of consequence (yet), and usually are only relayed once the move can be linked to a good outcome, in the same way that failure is discussed often only after success is in hand. In hindsight, the changes made by Fabulis, The Point, and Burbn look like strokes of genius (and they probably are), but what about all of the pivots and transformations currently unfolding, the shifts that are not too far removed from re-incubation, those gut-check moments when founders elect to rewrite their plans or come to the conclusion that while today’s opportunity looks rosy, they set their sets to change in order to address the larger markets tomorrow’s brings?

In 2012, there have been some “pivots” that, while early, show just how powerful (and risky) these moves can be. I’ll share a few recent examples, but of course cannot begin to list them all, though if you’ve encountered similar decision points, please do share in the comments.

Two years ago, a small team formed Greplin to power a new kind of search engine for people, places, and things. The service worked reasonably well, and I even used the iPhone app as a way to check up on people before meeting them in person, as sort of a quick, lightweight piece of context. At some point since 2010, Greplin’s team elected to pull back, reset, and rebuild, this time focusing on mobile with a web tie-in. The team came back reincarnated with Cue, which on the surface looks like a basic calendar utility application, but is in fact a bold attempt to collect and harmonize data between email, social networks, and your personal and professional networks, tied to your calendar and location, and all rolled into one service. While the app’s performance isn’t quite ready for prime time, it’s one that I certainly use and can see the future value in. Eventually, Cue could provide an intelligent background service that helps prepare us what we stuff our calendars with. (There is another service I’ve seen in this space is Sunrise, which emails a daily digest of your calendar, but it isn’t as deep.)

Almost four years ago, thredUp launched to be a “Netflix for used clothes.” The idea was to help facilitate peer-to-peer transactions, where customers would pay small fees to swap out the clothes in their closets that were never worn. The founders changed tack a few times, focusing on men’s shirts and women’s blouses, only to find that the real demand was in kids’ clothing. So, they brought their model to kids’ clothing, trying to facilitate those swaps. Through these iterations, the founders realized that in order to reach any meaningful revenue scale, they needed to power an extremely high number of transactions. Winding down this path, albeit one that was working and making money, wasn’t big enough. Luckily, their years of experience focusing on their market enabled them to have their potentially breakthrough idea — to actually physically handle used clothing, centralize operations in a warehouse, and attempt to create the largest online brand for “certified, pre-owned” clothes, which is a much larger market. Investors liked the idea, as well, recently helping the company raise a Series C financing round.

Perhaps the most notable pivot of 2012 is when Zimride launched Lyft. Originally designed to help facilitate ridesharing, mainly at college campuses and corporate partners, Zimride was founded and is run by folks who are obsessed about making transportation efficient, so it’s not all that surprising that their newest creation, Lyft, is taking San Francisco by storm. While the original Zimride is up and running, we perhaps don’t have a sense of its potential to scale, but for Lyft, it’s becoming evident in the Bay Area. While Uber certainly deserves credit for opening up the “on-the-demand” transportation market, Lyft entered the market by leveraging the team’s experience with Zimride and adding a slight twist to the model — and so far, it’s working.

Sometimes, pivots can be disorienting. Launched almost three years ago by a talented team, Blippy received significant hype (and money) for a big idea: to make credit card purchases social. No harm in taking a big swing, and while their approach may have either been off or too early, the team recently pivoted to the curated daily deals space with Heartsy, which helped the well-capitalized team with revenues, but was ultimately shut down. More recently, the folks behind Blippy tried their hand with Tophattr, a virtual auction house that unfortunately resembles the offspring of eBay, Etsy, Groupon, Zaarly and Turntable.fm. I hear that the team may be on to another idea, and while it’s easy to mock the changes and turns, it’s worth keeping in mind that they still have more shots on goals. It’s all a function of their talent retention and will power at this point, to keep stacking the deck and resetting the plans. I don’t know if they’ll shut the company down and return money to investors, or keep grinding.

Not enough time has passed for us to assess whether these were all good transitions or not. In hindsight, we’ll know, hopefully. In looking at these few examples above, what strikes me is that in most cases, it involved a close-knit team that had accumulated experience and expertise in their respective domains, accumulating knowledge by doing constantly. Making these changes are often very difficult decisions among founders and their teams, thinking through all the risks against the opportunities, reflecting on their learnings to date, and communicating those new decisions to existing users or customers, colleagues, investors, and even family and friends. I am not advocating for gambling blind, but if the experiences founders build up is truly unique, it may lead to new insights that could transform the business, if the dice is rolled properly. As a friend and former venture capitalist recently remarked, “if you’re a founder whose business doesn’t have a chance to be #1 in its market, pivot. The risk/reward question doesn’t make sense for you.” And economic incentives aside, isn’t that why we’re all here playing this beautiful game, to take big risks and constantly reinvent?

In hindsight, we marvel at the evolutions, pivots, and slight flashes of genius successful founders make. It is quintessentially American in nature, the ability for a person or business to constantly evolve and reinvent. Whether its individuals trying to pick up new programming languages or business model techniques between jobs or companies that rely on markets, platforms, or customer bases that shift, change is inevitable. But what about those business moves that are happening right now? How do we know if we’re witnessing something routine or something transformative? How could we know if Cue is going to help us to prepare for each meeting, or if Blippy can change again, or if thredUp can actually become the leader in the second-hand clothing space, or if Lyft and ridesharing takes the country by storm? The truth is, of course, we will only know in hindsight, so for a moment, let us pause and admire the changes these and scores of other founders take, often in the dark of night, setting their sights on the largest opportunities for the chance to look brilliant — in hindsight.

Photo Credit: Steve A Johnson / Flicker Creative Commons