Startup Experts Reveal Their Favorite Pivot Stories

you don't know what the thing is that you're chasing when you wake up every morning then you probably need to Pivot right so many Founders have to work on the wrong thing before finding the right thing it's like they've internalized I'm gonna fail yeah so I might as well do something cool on the way down you might think that pivots are a mistake or something that only startups that don't make it have to do but the truth is the exact opposite a huge number of the best startups had to Pivot and today we're sitting down

with YC group Partners to capture some of the best stories on how to Pivot [Music] thank you pivoting is one of these words that people use all the time that means a lot of different things so I always like to just say changing your startup idea you know if you're not making something people want you usually need to change your idea or your startup will fail what are some of your favorite pivot stories and the history of crazy pivots I'm going to start with bricks I mean I mean look when they initially applied the idea

was a virtual reality headset Beyond is basically an augmented reality company uh focused on replacing your laptop using your smartphone and what was funny about it is the two Founders had no experience with Hardware or with the physics behind this stuff when they were younger they actually built a payments processing business in Brazil so there were like these high school kids who built something kind of like striped for Brazil and were successful enough that it got Acquired and they're like you know we're reasonably successful and so their idea for their second startup was hey we've

done this payments thing we want to do something way more high-tech and they were like I don't know VR headsets and so what was funny about it is like I I thought there was no way that that idea would stick when they when they interviewed once they went and talked to a bunch of Hardware experts on the mechanics of building one of these things they realized that they were not the the team to do it and so luckily they went back to the thing that they knew a lot about which was payments do you remember

like how far into the YC batch were they when they finally gave up on the VR headset I did it's probably like three or four weeks okay it wasn't it wasn't like on day one yeah I think we had them talk to a bunch of experts reality sort of started to seep in where they're like wait a second like what do we even know about this stuff it might also be like something that affects smart people where like I think smart people feel like things that are worthy need to feel really hard like you're trying

to like overcome like a really steep hill or try to do really hard challenges and you ignore the stuff that actually just seems very easy to you so it's probably in the break Skies maybe like a payments related company maybe felt easier than building like a VR I'm just like oh yeah I've done that we've been there been there done that on to the next one makes sense one dramatic pivot would be goat it's a YC company um that we actually funded a long time ago like over 10 years ago at this point but like

I bring it up because it took them a while to figure out what to work on like we funded them as grub with us which is basically a site that let you meet local people through group dinners yeah it was like and it was really cool actually it really took off within very specific community so for like the invested community in San Francisco loved it it's like some a way to meet like other Founders and investors right but it had awful attention didn't go anywhere um it took them I think two years post YC to

realize that they themselves were really into collecting sneakers and that there was a growing Market in these sort of limited edition sneakers um I would often like sell out like on the day of release and there was like a really big secondary market for them and they were like oh hey we know a lot about this stuff this seems like a really like growing industry let's just like ditch the whole group dinner thing and go down like a sneaker marketplace and what year was this that was I think 2015. and so so to me this

is the instructor point about this story is now in present day you can see on you know CNBC or reading the New York Times oh sneaker collecting like like this seems much more like a real thing yeah in 2015 this was so far outside the norm of conventional wisdom to decide to Pivot your company into sneer collecting yeah I just want to I just want to make that note because a lot of the really great pivots like that are when you're years ahead of consensus yeah when I heard about this pivot in 2015 yeah seemed

I don't know unconventional is a nice way to say yeah sometimes the founders to arrive on like that idea they almost need to have the morale so low that they hit a point where like you know what like I'm just gonna work on something because yeah I'm interested it's like they've internalized I'm gonna fail yeah so I might as well do something cool yeah on the way down that's what lets them take the blinders off to actually see the potential for something like that yeah I agree both brex and goat are some of the biggest

and most successful startups of our time now but as Dalton and harj walked you through each had to realize the prior idea they had was not right before they could get to the next step Next Step Tom blomfield sits down with Michael Seibel to talk through the first of his two billion dollar startups he co-founded why don't you kick it off yeah I'd love to um this is kind of embarrassing we did YC my first company my co-founders Matt Hiroki we applied with an idea called group a which is a classic fintech tar pit like

every college kid thinks this is the best idea in the world and we were those college kids back in 2011. but we didn't know that at the time no it wasn't a targeted exactly I think we helped prove it was a Target you did a public service yeah exactly so basically it was a group payments Bill splitting like collect money from your friends for your college like soccer team thing we all know how this ends uh it we know uh we hassled our friends into using it and they like it wasn't that useful so no

one ever retained they they'd like drop off churn and we'd phone them up again they'd start using it again for a week or two and then churn eventually so it's like um we weren't delivering value really um it wasn't useful enough to people for people who really care about we did office hours with PG in the Mountain View office and I remember very vividly we sort of walked around the block um and he told us to like stop building functionality stop building new features stop like piling more crap onto the sort of mountain of turds

we had already and instead just try and go and get users and to do that all our users were in the UK and so we got up at three or four a.m to cold call like hundreds and hundreds of um of treasures of sports clubs and after two weeks we've got like one new user after four of us cold calling for two weeks and we knew it was the time to Pivot then and so what we did is took kind of the core technology uh this like payments infrastructure way of making bank-to-back payments and instead

of trying to sell it to college kids we applied it to businesses so starting with small businesses who are collecting recurring payments from their customers it turned out direct debits a perfect use case for that and 12 years later that company is go cardless basically doing the same thing recurring business payments back to bank it's a multi-billion dollar company when you're young you think of the entire world as consumer and the older you get the more you're like oh I guess businesses buy software yeah it's funny I think especially college kids all of the problems

you have been exposed to are the problems that college kids in developed worlds have you know like is feel spitting is how do I organize like to see my friends next week how do I pick the right day of the week it turns out knowing what problem to solve is a huge part of the battle it's the primary one if you're already a builder the process is truly about finding a problem you can solve and often you won't know what that problem exactly is until you've actually made contact with real customers that's the knowledge you're

looking for next up Gustav and I hang out and talk through yet another billion dollar startup clipboard Health the founder we deng's journey is a case study in finding the right problem while the other examples mentioned so far came together over the course of months sometimes you have to spend years in the idea maze to find the key to unlock product Market fit one of the big awesome questions that Founders should always ask themselves like what do I understand or what do I know and what do I believe that nobody else knows or believes and

that's actually sort of the core of a lot of the pivots that really work incredibly well my favorite one is actually clipboard hell so this is a company that came in as a hiring really almost like an indeed but for nurses founders of two magnets a program that helps nursing graduates get jobs which is somewhat of an idea that we see quite frequently you know hiring is a big problem and then seemingly uh there are a lot of nurses you know how do you walk into that market and be successful and it turns out that

if you're just doing indeed but for nursing it's going to be a slog like there isn't really a why now and that is actually what we dang the founder found for uh actually a couple years but the cool thing about her is that she just spent enough time selling to hospitals and just talking to everyone around the hospital did she realize that this person when someone when a nurse would call in sick they would always have to go to an agency and that's what really was sort of the key Insight that made clipboard go from

a startup that was just really trying to you know create another indeed for nurses to now one of the biggest software enabled Skilled Nursing Facility sort of agencies I think what was so impressive about her I I worked with her in the early days when I was at YC was how she adopted the doing things that on scale motto like so well and she didn't really build a lot of software early on to um to solve this problem it's like she literally spent time with I'm trying to understand exactly what is the problem that I'm

I need to solve and like maybe I can just like manually solve this problem and that's what she did um she manually like kind of like self-coordinated um getting these nurses from in front of the these these hospitals and it wasn't until she'd done this a few times it's just like okay there's an opportunity to build software here and automation but she started complete like absolutely in the right in the right direction uh which is so difficult for Founders because Founders love using software to solve the problems and love getting into the code editor that

it can be extremely distracting in a typical process and trying to over build things when you really need to just understand the problem of someone's having so you've learned it can take a long time to get to product Market fit what about the other end of the spectrum you keep trying new things in faster and faster Cycles but it doesn't come together this is called pivot hell and Serbian Jared are going to explain how to avoid getting stuck in it can a company pivot much yes a couple a company can pivot too much we even

have a term for at ycee we call it getting lost in pivot hell just thinking um and we see this with companies in the batch sometimes um where like every week we see them for office hours and they're working on a totally new idea not like a slightly different idea like you get like completely it's like an all new startup every week what what causes Founders to get lost and pivot hell I think that if you're too much of a perfectionist up front and you want everything planned out perfectly and you want to be able

to see exactly how the cards are going to unveil themselves kind of beforehand I think that keeps you in this Loop of constantly iterating instead of just saying look there's a bunch of unknowns and I know that but the only way I'll truly learn is if I sink my teeth into one idea and push it forward if you're searching for the perfect startup idea you just keep looking for new ideas because no I startup ideas ever perfect as soon as you find an idea you realize the problems with it and then you switch ideas companies

can still survive it right do you know of any companies that were in pivot hell and then moved on from it I do there is this company they went through pivot hell all batch when they started at YC they had one idea and every week it was a different idea in fact they were so deep in pivot hell than when they got to the end of the batch they had to defer demo day because they literally had nothing to present to investors so they didn't know what their company was going to be we kept doing

office hours for them to talk about their new ideas and about six months after the batch they hit online yet there was like a really high quality idea and um the idea that they pivoted to is they realized that there had been a regulatory change they created uh the first company really that productized this regulatory change the kind of idea where they'd come to us earlier in the batch we would have been like that's the one that's way better than the other seven ideas that you pitched us right and how are they doing now and

they're doing super well now but an interesting thing is how they came up with the idea yeah basically in order to have this idea they had to go through a whole bunch of bad ideas first but in the process of doing this they got to know the industry really well they got to understand what people actually cared about and tipped them off to this regulatory exchange and this big new opportunity that had opened up so many Founders have to work on the wrong thing before finding the right thing to work on and so the biggest

thing because pivoting is an option if you want to be a founder and there's a space you want to change or have an impact on is to start somewhere that's how you learn about the space and find the right idea you start somewhere and become an expert the only way you're going to find a real market and a real problem to solve is in direct contact with users the market itself will teach you if you're in the right place ask the right questions and listen next up is Diana who talking with Nikola desane about her

own YC startup as your reality which she sold success fully to Niantic the creator of Pokemon go but before finding product Market fit she started in a very different place for a bit of context Azure reality would build a augmented reality SDK a for game developers that's what it became but what we started with was augment the reality technology and we don't know what we're doing I mean we're really much technologists and engineers and we love writing code so we're I would call it one of the syndromes for Founders that we had was very much

a cool technology in search of a problem we had no idea who wanted this so some of our first customers were actually marketing people trying to do splashy things with ar and I mean they they they're very nice people and excited they felt like they wanted it because they were so excited and it wasn't until we got into YC that we understood that that wasn't real feedback and we went on a series of user interviews and learned that marketers were just being nice to us it's a mistake that a lot of Founders do because you're

like you're so excited about your idea and people just want to like reciprocate that exciteness but that doesn't mean that they really want to use it because when we get to like oh are you going to pay us which is really the real real better feedback and yet not asked that before yeah yeah we kind of got some soft yeses and this and they signed up but not really but the conversations really changed when we started selling them to game developers and for a bit of context we had started a company before Pokemon go was

a thing which is what made augment the reality in gaming more of an SDK that people wanted so that was not as a pivot in terms of changing the complete idea it was pivoting more in terms of our go to market and who our users were and this is actually a very common thing that Founders do in the batch and who we work with is really understanding who really wants what you build is a big question to to try to figure out and the first people who like it may not be the right customers in

the end the idea here is to validate your idea as much as fast as you can so that you don't waste too much of your time working on something that doesn't matter that people don't want when you get to the right idea it becomes a hell yes that's what you're looking for that's qualitative though a feel what if you want something more Quantified Aaron Epstein sat down with Brad Flora to talk about how important it is to pick the right metrics to follow when things are working really well it's easy to know you should keep

going yeah when things are not working it's obvious you should do something else it's that gray area where you're like making some money but it's maybe not repeatable that it becomes tricky to figure out like should I pivot or not my favorite understanding of pivoting is when you change what you're working on but not necessarily always every part of it right in basketball when you pivot you have to keep one foot stationary and so you may keep the type of product that you're building but maybe the audience that you're going to build it for is

going to change or you might build a different product for the same audience that you're already going after but it's basically to change your idea in some way that hopefully Builds on the learnings that you've had from the prior ideas that you've worked on we actually applied and got into y combinator as color lovers which is uh was and is a Creative Design Community for people to create and share color palettes and patterns and shapes and we'd built that up to a community of more than a million members and we tried all these different ways

to monetize uh the community we tried selling software we tried add model we tried running contests on the site to our community all kinds of crazy non-repeatable non-scalable things we were trying for honestly probably a year and a half after the YC batch that we went through so it took us for a long time and I like to say that we were wandering in the wilderness and the reason it took so long was because we didn't have a main kpi that we were focused on and it never even occurred to us that it wasn't working

for that long time because we never had this main kpi that was not growing so we just weren't paying attention to that and so ultimately we pivoted to a Marketplace for graphic design assets that we called creative market and we launched that and as soon as we launched that all of a sudden the main kpi was clear like are people buying on the marketplace and is that number going up every day every week and it was much clearer like you were saying earlier with the clarity and the focus of what we needed to do to

grow and whether it was working or not so that's my advice for all founders out there make sure you have a main kpi that you're focused on and make sure that you're tracking it on a regular basis I became obsessed with it I was like refreshing it every 15 minutes you know to see are we growing how are we trending versus yesterday versus last week and that's going to be your main indicator for whether your business is working or not and if you hear what Aaron just said and you don't immediately know what your main

kpi is like you don't know what the thing is that you're chasing when you wake up every morning then you probably need to Pivot right one thing that I think is group partners because of that experience that we had we try really hard to get Founders to that moment of realization a lot sooner totally sometimes in the interview yes but if not then you know early on in the batch to try to help push them along to that Moment of clarity of like oh this doesn't add up let's do something else one of the ways

that I like to think about it is it's kind of like when buying real estate a lot of people say location location right and really when it comes to startups it's really like the founders the founders the founders the founders because everything else can change and we've seen this so many times where you know it's the same Founders that's like the location you can't change that but you could knock the company down to the studs rebuild it they can work on a totally different idea and all of a sudden it looks like a different company

and oftentimes the founders even act like different Founders they become more formidable when they're working on an idea that they're excited about and they're well suited for each successful startup we've talked about today had to Pivot to find product Market fit this is the process whether you're just getting started or still thinking about launching a startup or even wondering if you need to Pivot I hope these examples helped I'm proud to say the group Partners at YC are some of the most experienced people in the world at helping Founders in the idea maze try to

figure out their Market we can do it not just because we've been there we can also do it because we've directly worked with more zero to one startups than anyone on the planet thanks for watching and we'll see you on the next episode of office hours foreign [Music]