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Anatomy of a successful startup “pivot “: Step 2: Gathering data

Part 1: Spotting a pivot point.

Our customer usage and behavior was the first set of information we had to gather. 
Like most startups we measured most everything during our alpha & beta release. How long were customers on specific pages, which actions did they click on the most, what they searched for (all “in-application” metrics). We were looking for specific information that gave us a sense of what they were trying to do. This was coupled with some in person but mostly web based demos.
142 people were “actively” using the alpha & beta – (we considered once a week as active use at that time). 
We did some very minor multi-variate testing, some people were given a demo before they were given accounts, whereas most were just sent a link and told “have a go at it”. What we found was most people that were given a demo spend far less time on the application that those that were not. At that point we did not know quite what to make of if. The usual suspects were – you needed some type of video “tour” before you used our application, OR the user experience was too complex (which many customers said was not), OR they were looking for things they did not find. 
We did provide a direct number for support and an in-application support link. Of the nearly 73 people who were using the application cold (no demo given), only 15 people called or emailed if they got stuck in the first month. 17 people tweeted their problems, even during alpha, although we requested them to no do so.
So clearly we did not have passionate users yet. 
The data was telling us that they were using it for a specific purpose, but we were not sure what purpose that was. But we did notice that many of the searches were for specific people not for “brands, companies or terms”.
Turns out most people who were given a demo, were using it for influencer search, because that’s what we told them we wanted to do. They were using it to understand who was influential in a space OR they were looking to get influencer contact information.
But the people who were not given a demo were searching for brands, company names and generic terms like iPhone etc.
Our demo pitch was to Do It Yourself PR, but for folks who did not know that this was supposed to be a solution to help them identify key conversations and brands and finally find the influential folks.
The second data point as I mentioned was blog topics of the key PR professionals. After analyzing their posts over a 3 month period, we realized most were talking about social media, not about PR itself. 
The third data point was competitors. The companies we considered competition at that time were doing partnerships with social media software companies (noticed from press releases) and nearly 6 webinars a week on their events page were about social media integration with PR. Their top messages were about PR and the usual media database, etc, but their actions were all around social media.
The fourth was our analysis of companies getting funded (which we got from Crunchbase). We looked at the total number of companies funded in web services and SaaS markets and found out that a significant amount of money (4.3% more, relative to other markets) were towards either seed or follow on rounds at companies doing social media monitoring.
The final portion of data was twitter conversation analysis. We tracked multiple terms – PR, Public Relations, social media, Blogger outreach, Media database and Word of mouth. It revealed what we gathered from all other sources – social media ( specifically monitoring, analysis and brand monitoring) were the most mentioned terms.
I collated all this in a 9 page deck, which I was ready to share with the engineering team. Which lead us to the final step – communicating the Pivot to customers, internal employees and investors.
Other

Anatomy of a successful startup “pivot “: Step 1: Spotting a pivot point

Its the hottest trending buzzword of 2010. Pivoting is not new for most startup entrepreneurs. Most successful founders have an innate gut feel for markets, customer needs and opportunities. 

Spotting trends is the key to pivoting. You have to be able to take a lot of data (from the market, blogs, conferences, customer conversations, etc.) to understand and have a sense for if what you are doing aligns with what people will want in a few weeks / months / years.
The thing about trend spotting is that is not even close to a science. 
Most entrepreneurs either know their market very well and understand the ecosystem or they are rank outsiders trying to disrupt (link). We were the later. While most startup advisors tend to advocate “blinders on” approach towards solving the problem that your company set out to solve, I tend to ask entrepreneurs to keep looking outside. Spend a good 80% of your time on building what you set out to build, but keep talking to customers, industry folks, etc.
At BuzzGain, most recently we went through a pivot exactly 8 months after our incorporation, 3 months after our alpha and 2 months after our beta launch. We started as a DIY PR web service and ended up being a social media monitoring solution. It was not a 180 degree turn, but a significant enough change from our initial vision. So I thought I’d share the insights I had learned from that experience.
In a customer conversation (as a follow up to our beta launch), I asked the user what he thought, what value he got from using our product, and what we can do to improve it. He was mostly complimentary (since he was a old friend) and suggested a few small, minor changes. At that point we were excited. Finally after 6 months of intense work, we had something customers would pay for. Or so we thought.
Exactly 6 days after the conversation with the customer, he had posted a blog article about a new product he was trying out in a adjacent area. His blog post was a lot more complimentary, since it solved a problem that was a big issue for him. I read the post with great interest, and recalled that his conversation with us was a lot less effusive about what we were doing. Luckily for us, our product could do about 50% of what the other product could do and the work we had done was the base for a lot of their functionality.
Still I did not think it was a reason to pivot yet. In fact at that time, I had no idea what Pivot even was.
Since I was new to the PR space overall, I was following over 50 key bloggers in the space. A day later I spent 11 and 1/2 hours going over 218 blog posts over 3 months, manually trying to find out what excited them, what disappointed them and what they were looking for.
Social media monitoring was all the rage among the PR folks I was following.
I did not notice it even though I read their posts daily. Turns out its hard to spot the forest from the trees when you have your blinders on.
Data point #2 was available, but we were still not completely convinced.
So we decided to do an experiment. We developed the top 3 features quickly with our current capability an in a week put it in our product. We did make sure that those were prominently available to every customer.
Our Google Analytics data showed in a week, customer interaction was up 133%.
Pivot? Hell yeah! 
We removed 25% of the current features, and focused on getting more data sources, ranking social media expertise based on 3-5 factors and started working towards a 1.0 launch with a target of 2 months.
What I learned while going through our pivoting exercise:
1. Most initial customers for startups tend to be friends, family or old acquaintances. They wont always tell you that what your are building is awful or that does not solve their problem. Its in their DNA to encourage you. 
Suggestion: Get at least 2-3 rank outsiders to test and use your product. Preferably people who you have met only once (or never) at a conference.
2. Take some time every 3 months to reflect. Blinders on approach rarely helps you spot pivot points.
Suggestion: Write a summary blog post (or prepare an internal presentation to share with your team) every 3 months of all the key things people in your industry talked about. Look for what they are saying, who they are linking to and what events they are attending.
3. Look for multiple data points before you pivot. Most times you may get a head fake. These could be the most challenging for your company to recover from.
Suggestion: Read the book 6 hats thinking – By Edward Bono. Learn how to get multiple data points (but dont take too long) and analyze them to make a more informed decision. 
But realize, its never going to be 100% right so I suggest you make risk taking a discipline.
Other

Entrepreneurship is about reducing risks and taking new risks at the same time

I met an interesting entrepreneur who had it all right 6 months ago, only to face the daunting prospect of “slow growth” for years. He had done most things right – acquired early adopters quickly, at low cost, found ways to monetize the problem he was solving, gained enough traction to get venture funding, but was now stuck at the $2 Million revenue with 20% annual growth. 
He mentioned that he had done everything to reduce risk the systematic way by doing the right things, but failed to anticipate the change in the market, which occurred rapidly. 
I dont think many (including the VC’s on this deal) would have anticipated this turn of events.
The thing that struck me is that as entrepreneurs we should be looking to reduce risks and keep taking new risks at the same time.
There are many risks – market risk, hiring risk, financial risk, idea risk, etc. There are ways to making risk reduction a process.
Make risk taking a discipline. 
Ask everyone in the company to ensure they do one risky project each quarter. A new marketing mechanism, a new sales territory, a new architecture upgrade, a new segment of customer to target. Help them understand then how to quickly reduce the risk from that project. 
Celebrate both failures and successes, but remember to keep taking risks.
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Entrepreneurship is glorious

1. Entrepreneurship tells your parents that the values they imbibed in you are not lost.

2. Entrepreneurship tells your sister that you are going to give her a job if “all else fails”.
3. Entrepreneurship tells your brother that you like to build something of lasting value.
4. Entrepreneurship tells your teachers that you were inspired by them.
5. Entrepreneurship tells your friends that you are looking to make it big and you value their support.
6. Entrepreneurship tells your boyfriend that your are a very passionate person.
7. Entrepreneurship tells your kids that you are teaching them to take risks and never give up.
8. Entrepreneurship tells your neighbor that you appreciate them putting up with your messy garden since you hardly have time to mow the lawn.
9. Entrepreneurship tells your accountant that you value other things more than just money.
10. Entrepreneurship tells your grand-dad that hard work and discipline still pay off (after all these years).
11. Entrepreneurship  tells your grandma that you heard all the stories she told you as a kid and are trying to make your own story a legendary one.
12. Entrepreneurship tells your uncle that he’s not the only black sheep in the family.
13. Entrepreneurship tells your barista that its their coffee that keeps your soul company, after a bad VC meeting.
14. Entrepreneurship tells your landlord that a few years from now, you’re more likely to be his landlord.
15. Entrepreneurship tells your lawyer that his initial low fees will result in a large windfall during the stock sale.
I could go on, but you get the point. Go on, be an entrepreneur.
Other

What does “adding” a social layer to everything buy you?

I watched the 60 minutes interview with Facebook founder  Mark Z over the weekend. Impressive, especially since I have seen him at a conference speaking (or mumbling) a few years ago and he’s dramatically changed since. Its certainly worth a view, especially if you are an entrepreneur looking to find “the next big things”.

He and others talk a lot about the “social layer”. So, I had a few questions and a few thoughts. Most of the answers may not be perfect from a purists’ point of view, but nonetheless, here’s my first take. I might change some of these later.
What is the social layer?
Any layer is an organization of a functional set of components that will work with each other in a way that each set will only interact with sets above or below it. This abstraction helps make the overall solution modular and optimizes each set. E.g There’s a database layer, a business layer and a user interface layer etc. So the “social layer” is adding your friends, likes, preferences, etc. on top of your online profile, allowing other sites to take advantage of these likes, preferences to help tailor their offerings for you.
Why is the social layer important?
Previously (as in 5 years ago) most everyone just had an email address to identify themselves on the web. Email addresses, by themselves are fairly useless to help determine “who you really are”. With social networking sites, you have a rich set of data that profiles, categorizes and uniquely identifies the person and more importantly their “persona” or “archetype”. No longer do you have to identify everyone with just their email, but customize to their needs specifically.
What is the value of the social layer?
To an individual it means more specificity and customized web experience. You dont have to wade through 200 daily articles written on NYTimes to get to the 5 that you would like to read the most.
So what does adding the social layer to everything buy you?
1. Social hiring. For entrepreneurs and hiring managers, it means no longer looking at resumes in a silo to understand if the person will be a fit. It means getting a lot more information upfront to make a wise hiring decision. It might also mean making it easy to get to your friends and family network to look and hire “referrals”. It has been proven that people who are referred to a role by existing employees at a company tend to be better hires than rank outsiders.
2. Social sales. For sales professionals it means making it easier to build relationships with prospects faster. Which saves you time, reduces your sales cycle and that should make you more money.
3. Social marketing. For marketers, it means taking into account the likes, dislikes, preferences, attitudes, demographics and intent of individuals to customize and segment their customers better. Rather than the 20% off for everyone, you can tailor your offers and products better.
4. Social buying. It could mean checking with your friends and family regarding their experiences with products / services so you can make a better informed decision.
5. Social development: It means asking known experts who have the same problem or bug that you do and not having to wade through 2 pages of Google search results before you find the right answer. It should help you answer questions faster. Given that your social profile will say you are an expert at “X”, others should find it easier to find you and you should find it easier to find others who are interested in “X”.
and so on.
What do you think?
Other

Doing what’s important versus doing everything at your startup

I read this interesting piece on Wired on how everyone should be a developer. You have probably heard this and many other things before, so let me overwhelm you right away. 

1. Founders should code.
2. Founders should be sales people.
3. Founders should be marketers.
4. Founders should do customer support .
5. Founders should raise money .
6. Founders should be product managers.
7. Founders should do their own public relations.
8. Founders should be CEO’s.
9. Founders should flip burgers (no kidding).
Is there anything that as founders you should not do? Well the only thing I have heard so far is to get a lawyer.
I love the DIY approach as much as the next guy, but before you decide there’s no way you can be an entrepreneur if you need to do all this, hold on.
Do what you are good at and like, and ensure that the rest gets done.
There have been founders of technology companies with commerce backgrounds, like my friend Alok, founders of restaurants with technology backgrounds, like my friend Gaurav.
Nope, they did not do everything. They surrounded themselves with people who were good at other things, that they trusted, and they focused on getting the right things done.