4 ms·

Pivot or Fail?

104 points by petethomas 8y ago

ttul 8y ago
If I could go back in time, I would have chosen to fail rather than pivot. At the time (of the pivot) what made the choice to fail difficult was that we had _some_ success aka revenue, and so could just carry on. What I see now is that I could have still shut that thing down, paid back investors with the trickle of remaining revenue, and in parallel started a new thing. Hindsight is always 20/20, but I think the article is broadly right. If you need to pivot, it’s probably better to fail gracefully instead.
flexie 8y ago
What he says about dilution is right. But there are other considerations: - The founders are not sure they can raise money for the new idea and they might use the money left in the failed company. - The failed company may have users that are useful to the new idea. - The failed company may own the IPR necessary for the new idea. - There is often transaction cost connected with starting all over and almost always time.
nostrademons 8y ago
I thought the point of a pivot is that you take something of value in the old company - whether it be the codebase, team, data, customer list, internal tool, employee's random side project, or just some key algorithm or insight that has some utility - and apply it to a new market or new product. Hard to do this legally without keeping the old corporate structure. If you're actually changing all of product|market|team all at once, I wouldn't call that a pivot, I'd call that a failure. Like Fred, I don't see the appeal of keeping the existing corporate structure and cap table in that case. But I'm surprised that that's now what "pivot" means - he obviously sees more startups I do, but it sounds like the term has been diluted pretty heavily.
- tptacek 8y ago
  You could be doing that, scavenging value out of the existing (doomed) company, or you could be kidding yourself, continuing on with the baggage of that company because it seems easier than starting over from scratch.
- edanm 8y ago
  Yeah, that's the easy I understand the term too. I mean, it's called a pivot. The whole idea is that you have one foot in the old idea, one in the new, and are using the sturdy base of knowledge gained in the past to build something better.
cabaalis 8y ago
Is there not a risk of tremendous legal battles with investors when you start a new, legally separate business that it could be argued you should have pivoted into?
- mooreds 8y ago
  I wonder how much time needs to elapse between failure and a new startup?
  - tptacek 8y ago
    No time at all. If you're misuse IPR (or violating contractual obligations) from your previous company, no amount of time will cure that. If you aren't, you don't even need to wait a millisecond.
nowarninglabel 8y ago
"And I am not sure hard pivots are good for anyone" Except, it was good for Slack and its investors and all of its users. Slack is oddly acknowledged in the first paragraph and then quickly forgotten about. There's a good "Masters of Scale" podcast about the Slack pivot and the Flickr pivot (which was also a hard pivot).
- jgh 8y ago
  Discord came out of a game studio as well (Hammer & Chisel)
andrewstuart 8y ago
This advice is targetted at those who have taken funding. It doesn't apply to bootstrappers of course, who can do anything they think is right.
- charlesism 8y ago
  I think it depends on what your drive is. It might be a desire to just run a business. Or it might be some concept that inspires you. It could be a desire to work with a specific group of people. Or just to make money. Or to serve a particular community. I don't think there's one "correct" answer for everyone.
smacktoward 8y ago
I feel like this misses an obvious source of the appeal of the pivot for the founders, namely that actual money in your hands today beats potential money in your hands tomorrow. If you shut down and start over around the new idea, maybe you’ll be able to raise money around that idea, but then again, maybe you won’t. Nothing’s guaranteed; and if you find you can’t raise the money again, you end up with nothing at all. Meanwhile, in the existing business, there’s a big pot of money already raised just sitting there for you to use. Using it could mean problems down the road, of course. But not using it means problems right now, so it’s not hard to see the appeal of just grabbing it and figuring you’ll cross those bridges if and when you ever actually come to them.
- sturadnidge 8y ago
  > If you shut down and start over around the new idea, maybe you’ll be able to raise money around that idea, but then again, maybe you won’t. Is someone who chooses failure over pivoting likely to get some kind of negative association in the investor community at large? A perception that they don't do enough to protect investment or something like that? No judgement on whether that is right or wrong, just curious.
  - scarejunba 8y ago
    No, it’s just that they have to prove the new thing. This way they go with the existing pot.
- ymolodtsov 8y ago
  That’s actually mentioned in the text.
- daveed 8y ago
  I understand the argument that starting a new company by pivoting with cash in the bank and a team that is already built is attractive and giving those back and starting over from scratch is harder. But the harder path is often the best path. And the easy path is often the harder one.
exogeny 8y ago
I like Fred a lot, and I know it's not his fault, but the sycophantic comments on his posts make me sick.
deleted 8y ago
[deleted]
mbesto 8y ago
> But the bigger issue is the dilution you take into your next startup. I have never understood why entrepreneurs would want to use a company and a cap table that they no longer own 100% of to do a new startup. They are just carrying baggage that they don’t have to and probably should not carry. This happens WAY more than people realize.
Animats 8y ago
Paypal was a pivot. Paypal's original product was a security token.
arsalanb 8y ago
Agree with Fred. I left one of my past companies because of something similar. It wasn't even a "hard pivot", we were an EdTech company catering to higher ed, and then switched to a complete different product, now selling to parents of kids under the age of 8. Two months later I realised I just wasn't excited enough about building apps for kids (this is a great market and has a lot of potential, it just wasn't my thing) The company is still doing sort of okay, but I couldn't picture myself spending 6-8 months there. It felt like taking a formula 1 car and putting it in Dubai traffic. I even felt slightly guilty of not caring enough about "making the buttons bigger so kids can tap them and feel playful". I'm currently working on something entirely different in the productivity space as a one man team with no funding but the process already feels more rewarding. So while I'm still working on something entirely different, starting from scratch and failing (personally atleast) was an important step along the way. I'm solving a problem that I really care about and often tell myself that I would build/use this product for myself anyways. I do have some promising feedback from potential users but what's more important to me is the sense of fulfilment which leads to motivation which then leads to discipline, and this would just not be possible if I was working on something I'm not excited about or felt I didn't sign up for.
hguhghuff 8y ago
TrafOData pivot to become Microsoft was a pretty hard pivot. https://en.m.wikipedia.org/wiki/Traf-O-Data https://en.m.wikipedia.org/wiki/Traf-O-Data
philip1209 8y ago
I did this with Staffjoy two years ago [1]. I'm thankful that we shut down promptly when things were failing - instead of dragging them out. I knew that we had picked great investors (e.g., Caffeinated Capital) when I brought bad acquisition offers to them, and they told me just to shut down and move onto my next project. [1] https://news.ycombinator.com/item?id=13647382 https://news.ycombinator.com/item?id=13647382
tramGG 8y ago
Spoken like someone who hasn't built an entire company from scratch multiple times. It takes a lot to build and share the vision, get buy-in from believers, build up an audience, distribution, marketing channels, the "right" team, right product, the list goes on -- and all of this is both physically, mentally, and emotionally exhausting. It's REALLY hard to just reboot into something else you pour yourself into.

104 points by petethomas 8y ago

ttul 8y ago

If I could go back in time, I would have chosen to fail rather than pivot. At the time (of the pivot) what made the choice to fail difficult was that we had _some_ success aka revenue, and so could just carry on. What I see now is that I could have still shut that thing down, paid back investors with the trickle of remaining revenue, and in parallel started a new thing. Hindsight is always 20/20, but I think the article is broadly right. If you need to pivot, it’s probably better to fail gracefully instead.

flexie 8y ago

What he says about dilution is right. But there are other considerations: - The founders are not sure they can raise money for the new idea and they might use the money left in the failed company. - The failed company may have users that are useful to the new idea. - The failed company may own the IPR necessary for the new idea. - There is often transaction cost connected with starting all over and almost always time.

nostrademons 8y ago

I thought the point of a pivot is that you take something of value in the old company - whether it be the codebase, team, data, customer list, internal tool, employee's random side project, or just some key algorithm or insight that has some utility - and apply it to a new market or new product. Hard to do this legally without keeping the old corporate structure. If you're actually changing all of product|market|team all at once, I wouldn't call that a pivot, I'd call that a failure. Like Fred, I don't see the appeal of keeping the existing corporate structure and cap table in that case. But I'm surprised that that's now what "pivot" means - he obviously sees more startups I do, but it sounds like the term has been diluted pretty heavily.

tptacek 8y ago
You could be doing that, scavenging value out of the existing (doomed) company, or you could be kidding yourself, continuing on with the baggage of that company because it seems easier than starting over from scratch.
edanm 8y ago
Yeah, that's the easy I understand the term too. I mean, it's called a pivot. The whole idea is that you have one foot in the old idea, one in the new, and are using the sturdy base of knowledge gained in the past to build something better.

cabaalis 8y ago

Is there not a risk of tremendous legal battles with investors when you start a new, legally separate business that it could be argued you should have pivoted into?

mooreds 8y ago
I wonder how much time needs to elapse between failure and a new startup?
- tptacek 8y ago
  No time at all. If you're misuse IPR (or violating contractual obligations) from your previous company, no amount of time will cure that. If you aren't, you don't even need to wait a millisecond.

nowarninglabel 8y ago

"And I am not sure hard pivots are good for anyone" Except, it was good for Slack and its investors and all of its users. Slack is oddly acknowledged in the first paragraph and then quickly forgotten about. There's a good "Masters of Scale" podcast about the Slack pivot and the Flickr pivot (which was also a hard pivot).

jgh 8y ago
Discord came out of a game studio as well (Hammer & Chisel)

andrewstuart 8y ago

This advice is targetted at those who have taken funding. It doesn't apply to bootstrappers of course, who can do anything they think is right.

charlesism 8y ago
I think it depends on what your drive is. It might be a desire to just run a business. Or it might be some concept that inspires you. It could be a desire to work with a specific group of people. Or just to make money. Or to serve a particular community. I don't think there's one "correct" answer for everyone.

smacktoward 8y ago

I feel like this misses an obvious source of the appeal of the pivot for the founders, namely that actual money in your hands today beats potential money in your hands tomorrow. If you shut down and start over around the new idea, maybe you’ll be able to raise money around that idea, but then again, maybe you won’t. Nothing’s guaranteed; and if you find you can’t raise the money again, you end up with nothing at all. Meanwhile, in the existing business, there’s a big pot of money already raised just sitting there for you to use. Using it could mean problems down the road, of course. But not using it means problems right now, so it’s not hard to see the appeal of just grabbing it and figuring you’ll cross those bridges if and when you ever actually come to them.

sturadnidge 8y ago
> If you shut down and start over around the new idea, maybe you’ll be able to raise money around that idea, but then again, maybe you won’t. Is someone who chooses failure over pivoting likely to get some kind of negative association in the investor community at large? A perception that they don't do enough to protect investment or something like that? No judgement on whether that is right or wrong, just curious.
- scarejunba 8y ago
  No, it’s just that they have to prove the new thing. This way they go with the existing pot.
ymolodtsov 8y ago
That’s actually mentioned in the text.
daveed 8y ago
I understand the argument that starting a new company by pivoting with cash in the bank and a team that is already built is attractive and giving those back and starting over from scratch is harder. But the harder path is often the best path. And the easy path is often the harder one.

exogeny 8y ago

I like Fred a lot, and I know it's not his fault, but the sycophantic comments on his posts make me sick.

deleted 8y ago

[deleted]

mbesto 8y ago

> But the bigger issue is the dilution you take into your next startup. I have never understood why entrepreneurs would want to use a company and a cap table that they no longer own 100% of to do a new startup. They are just carrying baggage that they don’t have to and probably should not carry. This happens WAY more than people realize.

Animats 8y ago

Paypal was a pivot. Paypal's original product was a security token.

arsalanb 8y ago

Agree with Fred. I left one of my past companies because of something similar. It wasn't even a "hard pivot", we were an EdTech company catering to higher ed, and then switched to a complete different product, now selling to parents of kids under the age of 8. Two months later I realised I just wasn't excited enough about building apps for kids (this is a great market and has a lot of potential, it just wasn't my thing) The company is still doing sort of okay, but I couldn't picture myself spending 6-8 months there. It felt like taking a formula 1 car and putting it in Dubai traffic. I even felt slightly guilty of not caring enough about "making the buttons bigger so kids can tap them and feel playful". I'm currently working on something entirely different in the productivity space as a one man team with no funding but the process already feels more rewarding. So while I'm still working on something entirely different, starting from scratch and failing (personally atleast) was an important step along the way. I'm solving a problem that I really care about and often tell myself that I would build/use this product for myself anyways. I do have some promising feedback from potential users but what's more important to me is the sense of fulfilment which leads to motivation which then leads to discipline, and this would just not be possible if I was working on something I'm not excited about or felt I didn't sign up for.

hguhghuff 8y ago

TrafOData pivot to become Microsoft was a pretty hard pivot. https://en.m.wikipedia.org/wiki/Traf-O-Data https://en.m.wikipedia.org/wiki/Traf-O-Data

philip1209 8y ago

I did this with Staffjoy two years ago [1]. I'm thankful that we shut down promptly when things were failing - instead of dragging them out. I knew that we had picked great investors (e.g., Caffeinated Capital) when I brought bad acquisition offers to them, and they told me just to shut down and move onto my next project. [1] https://news.ycombinator.com/item?id=13647382 https://news.ycombinator.com/item?id=13647382

tramGG 8y ago

Spoken like someone who hasn't built an entire company from scratch multiple times. It takes a lot to build and share the vision, get buy-in from believers, build up an audience, distribution, marketing channels, the "right" team, right product, the list goes on -- and all of this is both physically, mentally, and emotionally exhausting. It's REALLY hard to just reboot into something else you pour yourself into.