The faster you launch your product in the market, the sooner you will figure out what works and what doesn’t. If things are not working you should be able to pivot, to shift your focus. And do it fast. But pivoting doesn’t necessarily mean desperation. It can be the key to growth – growth that you might otherwise have overlooked.
Tech startup history is filled with successful pivots like Pinterest and Instagram. A little closer to home, SEED portfolio startup Plytix is now pivoting after spotting an opportunity in a $5 billion-dollar industry.
When your first idea doesn’t work, sometimes success means doing something different. Imagine if Nintendo, a company that has been around since 1889, never changed their business model from selling playing cards to video games. They would not be the household name they are today. Pivoting has become an integral part of the startup landscape. Well-known companies like Instagram and PayPal attribute their success to being able to pivot at the right time.
Instagram used to be called Burbn. Before they became the photo sharing giant they are today, they were something akin to FourSquare, a check-in app. In what TechCrunch called “A huge risk” and “Ballsy” they scrapped their work and reduced the platform from a complex location-based app to just the photography in just 8 weeks. The stripping away of features and a focus on simplicity gave them the edge they needed to explode in growth.
Even FinTech can benefit from turning things around. Originally PayPal was built to transfer money solely between PDAs (Remember Blackberry’s?). Luckily for them, they realized that there was more potential out there and opened their service to anyone online. They were quickly acquired by Ebay for $1.5 billion in 2003 and now the service processes over 8 million payments per day.
Being a VC-investor entails seeing our fair share of pivots. Almost all our companies pivot to some degree, as it’s pretty much adapt or die in the world of startups. For us, it can be a good sign. It means that the founders have enough insight to recognize that there is a problem with the assumptions on which they built their business model. We always say that we invest in the people, not the idea.
That is why, when Plytix told us they were going through a pivot of their own, we did not run away screaming. For a little background, Plytix is a Danish startup that began as an image-based product analytics company, but they have recently launched a Product Information Management (PIM) system. For those of you who aren’t familiar with the term, a PIM is basically a centralized digital product catalog where companies can edit, manage, and distribute product content. Not exactly an analytics platform.
So how did Plytix, a product analytics company end up getting into the PIM business? For them it started when they realized that a core component of implementing their product analytics app, a product feed, was a big hurdle for the small and medium retailers they were in dialog with. “The blow to the stomach came when we realized that something like 94% of the brands we talked to (over 500 at that point) didn’t use a PIM or DAM system and couldn’t generate a simple product feed.” says Morten Poulsen, CEO & Co-Founder of Plytix. “Almost all of them said pricing and complexity were what kept them away.”
Inadvertently, co-founders Morten Poulsen and Alejandro (Alex) López had uncovered a sizeable hole in a $5 billion-dollar industry that caters specifically to big-budget enterprise companies. There was indeed a market for a simpler, more affordable PIM and they were staring it in the face.
But initially they didn’t jump in headfirst. The decision to pivot is a big one, and not something to be taken lightly. It requires your whole team to be onboard and a hard look at your reallocation of resources for the new project. When we asked CTO and Co-founder of Plytix, Alex Lopez, if he had any advice for businesses thinking about pivoting he said, “If you are considering a pivot, don’t make any impulsive decisions. Are you completely switching focus or are you doing something that will help your main project succeed? Take time to decide what the move will mean for your goals and for your business.”
To avoid making an impulsive decision, Plytix voted to test the waters first. They built a basic tool where companies could generate product feeds, but quickly learned that wasn’t enough. This was the moment where it became clear that a hard decision had to be made. No more half-way solutions. “All the clients we got onboard were very happy with the basic solution for hosting product content, but they became hungry for more,” Morten noted, “They would ask for more and more features that closely resembled a full-on PIM. We realized there was a real need for an affordable way for smaller businesses to manage product content. So, we decided to build it.”
In the end the project took less than a year to complete and Plytix now has more than 500 accounts signed up for their system. It may still be too early to declare the Plytix pivot a total success, but the founders are positive about the change. Despite initial uncertainty, they now agree that it was an inevitable step to collect complete and reliable product information, which is a key asset to Plytix’s overall success. For them this was not a full departure from the vision, but rather a foundational project that would complete their product management stack and set them up for future growth.
For companies thinking about pivoting, there is a famous quote by Reid Hoffman, the founder of LinkedIn: "If you're not embarrassed by the first version of your product, you’ve launched too late".
At SEED Capital, we are firm believers of launching early. Launch your minimum viable product to learn what your customers really want and need, rather than building a polished final product you think has value. Pivoting doesn’t mean you’re desperately grasping at straws to make your business work. It means giving yourself a chance to make modifications to or even fully scrap a project before you run out of money. Reimagining your business model can be a real opportunity for growth if you approach it with an open mind.
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