215: "You Have to Be a Little Delusional"

Last week I spoke at the second annual Medium Day, hosted by the publishing platform founded by Ev Williams back in 2012. Medium used to be THE place to post long form content on the internet, back before email newsletters blew up and longform tweets and LinkedIn influencers emerged.

But at some point in the late 2010's and early 2020's, Medium really lost momentum and relevance. Their notable subscriber program didn't seem to be working and there was a lot of click baity, salacious, or get-rich-quick type content that seemed to proliferate the platform.

But in 2022, Ev handed the reins over to Tony Stubblebine, founder of Coach.me and the publisher behind Better Humans and Better Programming, two big Medium publications.

Tony has really pushed to turn things around at Medium and they announced reaching profitability this year for the first time ever, which is phenomenal news for anyone who cares about quality longform content online.

So it's truly a pleasure and honor to have been able to speak on the Entrepreneurship track. I cut the talk together into a video that includes more on the recent progress of Medium and the extended Q&A I had after my noslides talk.

Hope you enjoy!

Main Talk

My name is Jason Shen. I am a three time startup founder and the author of a book called The Path to Pivot. This is a book that actually started as a series of medium articles. I'm actually going to put that in the chat. So I wrote a series of medium articles, became book, and that is what my talk is about.

So I want to take you back to 2012—almost almost a dozen years ago, this was like a peak moment in my career as a startup founder.

I was getting a photo shoot done in South Park Commons in San Francisco alongside the partners of Y Combinator: Paul Graham, Jessica Livingston, a couple of the other early founders of the program and the founders of Dropbox, Drew Houston and Arash. And my team, we were in a Tesla. This is back when Teslas were shiny, new, very cool things. And we're getting our photos taken because why? There's going to be an article in Vanity Fair about our company and how we were going to be sort of like the next big thing. Who wants to be a billionaire was the title of the article.

We were flying high. We raised money after going through Y Combinator. We were building a long distance ride sharing platform. This is in the early days of Lyft and Uber and we were looking to kind of be the next great community marketplace. We had an iPhone app coming out in just like a month or something. It was very, very exciting. I still think about, I get goosebumps when I look at this photo.

But a month later, things were completely different. Anyone who's an entrepreneur knows how quickly the highs can turn into lows. Our business was not working. The iPhone app launch flopped. We got press, we hit the top of the app store. We got no downloads, very little activity. We got kicked off of Craigslist where we were getting a ton of our users. And if you are a ride sharing marketplace and people log on and there are no rides, you have a problem.

So we had a big problem on our hands. We had a team of eight folks and we could not sustain the runway that we had if we weren't going to grow faster. So we panicked. We were 20 something year old first time founders. We kind of panicked. We said, guys, we got to figure something out quick. We got to make a big change. And we didn't really give our team a lot of instruction. So everyone kind of ran around for a couple of weeks and we tried to come up with some new ideas. And we sort of had a day where we all pitched each other our ideas. Of course, none of the ideas were particularly good. And we went home as the as three co-founders and said, I think we got to cut the team.

So we ended up cutting the team. We ended up letting go of our fancy office in San Francisco, moved back into our three bedroom cramped apartment in San Francisco. And we just started spitballing ideas. Weeks went by, months went by. We could not align on a new idea.

And it was really painful. We're eating Costco ravioli and just sitting in room researching stuff, pitching things, going nowhere. And ultimately we folded that business with money still in the bank because we could not get it together. Gary Tan, who was a part-time partner at the time at YC, now the president of Y Combinator had us on the phone. We were on speakerphone. He's yelling at us saying:

"Just get it together. You are so lucky to be in this position, to be an entrepreneur and just pivot, just do something else. Help other people succeed in their businesses and build a product around it."

And we could not do it. Very embarrassing, very humiliating. I ran away. I left the Bay Area entirely. I moved to DC and then to New York. I worked a couple other startups and then I worked at a bigger company like Etsy. And five years later, I finally gained the courage to try again. And to try again, I decided to start a new business and this time it was on hiring and it was taking technical screenings and making that more flexible and making it easier for people to do because that's something I believe is important and something that needs to change. We built software, we got a couple customers, but it wasn't quite working. We iterated into a services business where we were grading assignments that candidates were providing. That wasn't quite working. We pivoted into an agency model where we would find great candidates. We'd run these exciting tournaments, put them in front of employers. They'd run their normal screening process.

And then they would pay us if they hired them. So we weren't making money, but all of a sudden this didn't feel like an impactful, exciting venture scale business. And we raised a little bit of money and all of a sudden we were like, do we need a pivot again?

I was very nervous. Are we going to screw this up a second time?

But me and my co-founder, a different team, pull it together. We ended up pivoting into an AI voice assistant for gamers. This is pre-chat GPT. This is 2018, 2019. Everything is very clunky, very slow, but we are able to raise new money from tech stars, from BetaWorks, from Amazon Alexa Fund. And we get a little bit of headway enough to ultimately land an acquisition by Facebook in 2020.

Failed pivot, successful pivot. And after a couple of years at Facebook, I decided my next big move was to become an executive coach, which is what I do today.

I coach founders and outliers on how to make big changes in their career and their business so they can go and do great things. That's where this book came from. And that's what the rest of this talk is about. So what's interesting about pivots is that they are a paradox. They are both extremely common, right, when you think about it, and extremely awkward and sort of a weird subject to talk about. So why is that? Well, common. I mean, if you think about some of the biggest companies, biggest success stories in the world: Instagram, Slack, Lyft, Twitch, Discord, GOAT.

So many big companies that you've heard of and ones that you haven't heard of are the result of a pivot. Mike Maples, is a co-managing partner at Floodgate, which is a big VC firm, said that something like 80% of the companies that he's tracked that were ultimately breakout successes were the result of pivots. In my book, I talk about how Fred Wilson did another analysis many years back about his companies and the ones that made major shifts in their strategy ultimately were more likely to be big successes than the ones who kind of stuck it out in their original idea all the way through.

So, pivots are common. Ask any entrepreneur, you probably are thinking about pivoting or maybe you have pivoted. It's a common thing. And at the same time, it is so awkward to talk about. And so there's not a lot of great information. There are great books about fundraising. There are great books about going to market, about hiring people. There's something about pivots that's like the whisper network. You talk to one founder, they tell you one story. Somebody else tells you something else. And the reason why is because there's not a lot of good information out there. Once the pivot happens and if it's successful, you want to pretend like that was your idea all along. Nobody wants to be like,

"Hey, we had this amazing idea and it was completely wrong. And actually the great idea was over here."

So there's an incentive to keep this the real story of the pivot kind of buried kind of secret. And so that is why there's not a lot of good information out there. And that's why I did all this research to write a book about it. And obviously in 10 minutes we can't talk about all the lessons from the book. But I want to share with you three lessons that are from this book and that are based on examples from startups that you probably know about.

Lesson number one: pivoting is better done slower and sooner than a big last minute Hail Mary activity.

So we all know Lyft, the ride sharing platform. Before it was Lyft, it was actually called Zimride. It started in 2008 and it was meant to help people carpool to work or to school to help that company or that campus save money on having to buy another parking structure. Because if you shared the ride, then you wouldn't have to have an extra slot for people to park their car. So they actually built an enterprise B2B company for several years and they were making like a million dollars a year doing this business before they realized, "Hey, we've kind of hit a ceiling. This isn't growing the way we want it to."

The iPhone was starting to come out. A lot of new interesting things were starting to happen. And they decided to do a hackathon internally. And they came up with this idea of real-time ride sharing. They were like, let's test this out.

They built a prototype and they started putting a few people on the team on it. And when it kind of worked and they launched in San Francisco and it took off, they didn't just can the existing business. They actually slowly moved people over one at a time. And it was kind of like moving people from one ship to another ship. And they actually sold Zimride to Hertz for some money. And so there was actually a whole business that they got to make money from before they fully transitioned over to Lyft. And of course the rest is history.

Pivoting slower and sooner, you give yourself more time—you have more opportunity to think through the problem, to solve the problem carefully instead of just like closing your eyes, throwing it downfield and just praying that something lands, which of course it does happen. Loom had a pivot several weeks before they were about to run out of money and they were ultimately able to raise their first major round of capital from that, but it is not the ideal way to do it. So that's number one.

Number two, pivoting is about keeping something that you've created while going in a new direction.

Our pivot was actually somewhat of a total hard pivot in a completely new direction, a James Harden pivot, if you will, for those who follow basketball. But you've got to keep one foot on the ground. You're supposed to keep one foot on the ground when you're pivoting, and that's your stable place. And Hugging Face is a great example of this. Hugging Face is a platform for AI models and data sets and apps to be hosted.

on their platform, they actually started hugging face. What does that have to do with AI? It actually started as a chat bot for teenagers in 2016. So for two years, these ML researchers were building a chat bot that understood a lot about like current events, sports, news, fun, things like that. And they tried to detect emotion in the people they were messaging. This is again, early, early days.

And they got to about a hundred thousand users using this product. Not bad, but not nearly enough as a consumer product to be a venture scale outcome. And so they were kind of questioning what they needed to be doing. And they realized that along the way they had, they'd really open sourced a lot of these foundational libraries that they were using to power the chat bot and people liked that. It was it was fun thing. They had it on GitHub. And thenGoogle releases there, all, all you need is attention paper, which is all about the transformers model that powers the large language models that we use today, like ChatGPT.

But it was very complex. They had an example in the paper, but it was somewhat complex. And so they sort of on the side translated this and put it on GitHub. Again, just as an example for the community, it did really well. The next year, there's another paper from Google about the BERT, BERT model of transformers. Again, they translated it. It blew up.

And they realized, "Hey, maybe what we really are in our core is a machine learning company and a place to empower anybody to engage with machine learning, with AI, and to allow people to explore and make a playground of that."

So that's what they ended up doing. They had tremendous assets and skills. And sometimes it takes an outside view or a new perspective to look at what you have from a new lens, not just to power a chat bot for teenagers, but to empower any developer and just curious, passionate tech enthusiasts to engage with machine learning. So that is the second lesson is to

take stock of what you have, the assets and the insights, I talk about this more in my book, that you have developed as a company and leverage that in a new way for a new opportunity.

The third and final lesson for my talk around the things to do when you are considering a pivot is to own your story.

When you make a pivot, if your company had any level of success, then it's already known as one thing. And a lot of people are scared because they feel that they can't communicate why they're doing something else. And I think the best example of doing this is the courage of a company called Remotion. So Remotion had raised both a seed and a Series A $12 million from some top tier companies to make remote work and Zoom calls better. And of course, during the pandemic, it really kind of like blew up and it was an exciting time. But a year or two into that, the CEO, Alexander Embricos actually posted on LinkedIn saying,

He had a conversation with his co-founder and they didn't think that the product was doing well and the company is doing well and that they needed to pivot. So they just announced it to the world. Right. And this is actually, while very scary in some ways, very empowering because first of all, it got a lot of attention and it got the attention of his community, which is a lot of technologists, which is who they were testing for. They said, we can't build a product for everyone. We need to focus and we need to focus on both a user segment and a use case. And so

Because of that, they were able to post weekly and monthly over the next year or so, and they basically pivoted in public. They said, here's what's not working about our product. Here's what we think is great. We're interested in these types of problems. What do you think? And people were leaving comments in the feed explaining what they wanted. They were looking for users to test things. They were able to get that from their posts.

They really owned the story. They explained both what was hard about the business and what they were excited about and proud of having built in their business. And that you need both those elements. And you explain why the current thing wasn't working and what was hard about it, and why you still believe overall in the larger mission of what you're doing. It's still about collaboration. They even rebranded the company from Remotion to Multi. And so Through this public pivot process, they ultimately were acquired by OpenAI. So not a bad outcome for this team. Maybe not what they would have loved to have, but still a success in the end and it was a result of owning your story.

Those are my three lessons, pivot slower and sooner, look at the assets and insights that you have and really tell and own your story of this pivot to make it a success. So thanks for tuning in to the prepared remarks of this presentation. I would love to turn it over to all of you, look into the Q&A. I've got it right over here and see what questions you have.

The Q&A

First question from Tony: that I see here. How do you handle the faith of the team with successful pivots? Did the team just naturally go along with it or did it require a lot of convincing? So this is a great question and something that I, you as you heard in the first company, there was some awkwardness around getting the team on board.

What I actually recommend people do in the book is do what I call a pivot pilot, where you actually tell people, hey, we don't think the business is growing as quickly as we would like, or it's not going the way we want. And we're actually going to dedicate six to 10 weeks where we're going to kind of keep the company on standby and sort of keep it running. Don't let the servers fail, support the customers how you can usually you just stop growing if you don't invest in sales and marketing and all these sort of outbound efforts. But you sort of stop doing that, leave it alone, and then investigate a new area.

And what happens in that is that the team can get buy -in around, hey, this is an interesting area. There's a lot of opportunity here. And also like, wow, we were working so hard to just keep this thing alive. And when we stopped working on it, it really died. Or maybe it sort of keeps going and it's actually like does better. Some things do better when you leave it alone. And so, but by having that six to eight week process, you're breaking people into the idea that a big change is going to happen. And when it finally does happen, they feel like they're part of the decision.

Right. You still have to make an analysis and say, OK, we looked at some new areas. We have our existing business. Do we want to move forward? And it's not a vote. Right. But it is a conversation. And that conversation is a little bit easier when you have that time. So that's that's sort of what I recommend. And I think a lot of the companies that have been successful either had a very aligned team that where they everyone saw it like me and my co -founder of the second business. We just looked at each other and we're like, let's make a change. And we were a pretty small company. But you have Lyft where it took the better part of a year to make that full transition. So it really depends on how closely aligned the team is to the trajectory of the business. Hopefully that answers your question. OK, Pivot Pilot. When I was at Odeo, this was on Twitter. Why don't we just do this little test, right? Yeah, so perfect example. mean, Twitter, how could we forget Twitter as a sort of pivot from Odeo? Thank you, Tony.

Lancelot says, leaving Facebook must have been a pivotal decision. How did you know it was the right thing to do and did you already have a strong portfolio of pivot consulting?

When I joined Facebook in 2020 through the acquisition, I didn't know how long I was gonna stay. I kind of said to myself, I'd like to stay four years and also I'd like to get promoted and some other goals that I had. But I also knew that I probably wouldn't stay there forever. So part one was I knew that a change was gonna happen. Part two was I started to think more about coaching and I had seen a couple of my friends go full time into coaching and they were having a good time with it. I was pretty excited about that. I started coaching part time. So I had my own little pilot, right? Year one, I had one client. Year two, I had four clients. Year three, I 13 clients. And so that sort of gave me the confidence to also leave. And of course there was a bunch of layoffs and there's sort of like not as much excitement about the upward opportunity for growth at the business. so that all kind of factored in. And of course there's still that leap. There's no way there's not a leap of faith in the end about making some kind of change. But if you are clear about what you are trying to do, you recognize what you have and you say that the future opportunity is better than the current opportunity and then you go for it and then you figure things out along the way. And that's what I did. I've been full time in my coaching business for a little over a year, had some great wins still not necessarily where I want to be long -term, but obviously I'm actually quite happy with the decision. Hopefully that answers your question. I missed one back here. okay. Michael.

Michael says, what recommendations do you have for vetting best investors and board members to support your business? Get that later. I once worked at a company where the investors and board members changed CEOs and board members five times in less than a year and a half.

Oof. That is a tough one. So I guess, you looking at, okay, so whether you're a founder or an employee, the thing is part of the board's job is to look at the leadership of the organization and make sure that the leadership is sound and that they're making good decisions. I worked at Etsy where they did actually fire the CEO and bring in a new guy. and so the thing is if it happens five times, then you really have to ask the question, like, where's the judgment in the board, right? Cause you picked the last four people. Answer is there's no clear answer. I mean, you have to look at the history of those board members. If you really want to do your research, you have to look at: have they been extremely likely to fire people in previous roles. and this is also one of those things where the, turns out the investors that are the most sort of like have the most reputation tend to be much more careful about how they approach the founders. And the reality is that if you are growing and you are performing for the business as a CEO or as a executive leadership team, you will likely keep your seat. It is only when things start looking really rough that they want to make a change because it's a lot of work. You have to give up equity for the business. So, it is one of those things where like the winners keep winning. And if you start to struggle and you start to replace the CEO, they don't have time to onboard and it just starts to get ugly from there. So I don't know that's the best answer, but that's the answer I've got for you. Okay. So

Lynn says, you mentioned it was difficult. It's difficult to talk about how much is psychological resistance and how do you work through that fast and well?

So pivots are difficult to talk about. Yes, because it involves admitting that maybe you were wrong, that maybe you didn't have the best idea from the get go. So there's a couple of things here for you personally, you have to sort of separate your, your own sense of self and your own self worth and self ability from the performance of your company, right?

Lots of people have great ideas and when you actually go out and do them, either the world changes or you weren't able to do it as well as you thought, or you didn't understand the world as well as you thought. And again, recognizing that pivots are common should help break down the barrier of saying like, look, we're not the first company that started doing one thing and realized they might need to do something else.

The second part is to really be honest about what you are trying to do. So, one of the things that's tough is that when you start a business, you're full of confidence. You have to be kind of delusional to go and start a new business and raise venture capital and do all these things. And you think, of course, it's going to work. And then when you sort of like aren't able to grow as quickly as you want, and maybe you've gotten some success, you start to get nervous and you say, shoot, well, maybe this is all I can do. And I'd rather like have some success than no success.

It's really about what game do you want to play. I am not as an executive coach trying to do a venture scale outcome. I am trying to do a sustainable business. But if you are raising venture capital, you are trying to build this exponential business. And the whole point is it's better to try to go and swing big and then to try to retain some very small business.

Now, look, there's a whole other strategy around—maybe you do try to like convert that into this other kind of business, but if you are honest with yourself and everyone's honest with themselves and saying like, hey, we are not on that path. It becomes a lot easier to have a conversation about, what do we want to do about it? Is there something we can do in this business to try to get on that path or do we need to kind of roll the dice again and see if we can get on that trajectory?

Because like at the end of the day, it may not work out either way. you, wouldn't you rather have taken a bunch of other swings in things that you think are compelling now that you know enough about this to know that it's probably not going to be it. So I think those things are really helpful.

Of course, working with a team and investors and co -founders that you trust and respect and that they respect you makes it lot easier to do that. All right, we're coming in here. Yes, five times in one and a half years is probably too high. I don't know what the right number is, but it's definitely less than five in a year and a half. I don't think you can just get anything going.

Golden says, I have made many pivots in my timeline. I industry hop, always found a ceiling that never aligned with my vision. I now started a consulting and coaching company. It's the best decision ever. I I have newfound freedom. Amazing consultant, different array. When does a pivot lead to permanency and when is it best to niche down and start branding to one or two markets?

Hmm. Okay. So this is more about, coaching and consulting. Look, I'm in the middle of this too. I do not have a book about how to run an amazing, consulting firm or coaching business just quite yet. For me personally, what I've realized is that, I'll just tell you what I'm doing with my own business and you can draw your own conclusions from that is that I've tried to articulate two niches that intersect.

One niche is a sort of functional niche: pivots. This book, The Path to Pivot, it's about, hey, maybe you are trying to pivot and if so, I might be the right guy to work with because I have a lot of knowledge about this, I have lot of experience about this and I kind of know some of the steps and some of the pitfalls to avoid. So that's like sort of one dimension. The other dimension I have is I use this term outliers. So outliers are people that I consider to have really, really high talent or skill or, you know, ability in certain dimensions. Maybe they have corresponding deficits or problem areas that they're kind of like on the other side of that. And they probably don't fit in with the traditional pathway, conventional levels of success. and so this is more of an archetype.

There's a great book called The Business of Expertise by David Baker, which talks about this, right? So he talks about an example of a marketing agency that went from marketing to anybody to social media marketing, which is like a function for credit unions. And so theoretically, they can work on credit unions on maybe some other things too, and they could probably do social media marketing for some other types of firms. But like the perfect sweet spot is that intersection.

And so by offering that two kinds of sweet spots, you can still kind of like have some flexibility to move around, but it's kind of clear what you want to do. And the reality is some people will still work with you, even if you're outside of your explicitly defined niche, because they just think you're great. And so it's, it's still helpful to have that sign on the door.