My partner @joshk has written about finding entrepreneurs who are “heat seeking missiles” , and this past week has driven that point home to me and the entire @Firstround team. When we fund a company, we hope that we have picked the combination of a great entrepreneur and his/her team, along with a great product in a large available market. But sometimes it doesn’t turn out the way we all expected. Perhaps we need to modify the old adage to “If at first you don’t succeed, try, try again. Then pivot, don’t be a foolish slave to the first idea.” When the first idea doesn’t succeed, the true heat seekers show their advantage over those who are so wedded to their initial idea that all the contrary data does not move them off of it
Jason (@betashop) came to us with an interesting social networking idea, well executed in terms of product design and market focus.. But the truly viral growth wasn’t happening. However, once he had an audience, Jason tried to add a few daily deals to his audience. Seeing how well they did inspired Jason and Bradford, his cofounder, to stop and tell the board they wanted to pivot into becoming a truly design inspired flash sale site. He set some ambitious goals, such as having more than 100,000 people on the list pre-launch, and getting lots of beautifully designed products in the sales queue. And then he added the community feature to encourage people to post on the inspiration wall, so that the design aesthetic of the site could be shared across communities. Fab.com launched a week ago (sign up here), and the results blew us all away. Sales were a significant multiple of expectations, ASP was higher, viral signups higher, and it looks as if we have another winner here. Jason has been generous enough to share some of the experience on his Betashop blog. Only time will tell, but this seems as well designed a pivot as we’ve seen.
Billy Chasen (@BillyChasen) came to us with StickyBits, a FourSquare for objects. The concept was to allow users to scan bar codes of objects, and attach comments, get offers, share with friends and participate in some games. The launch at SXSW went very well, and there was a lot of interest in testing. But, in the end, scanning bar codes, QR codes, etc. did not prove to be a viral behavior. Lots of things were tried to boost engagement, but we never quite found the secret sauce. However, Billy told the board he had been thinking about another completely different idea, listening to music with friends, synchronously.
The music space is littered with startup corpses, and the record industry has a number of barriers even for those entrants who want to legitimately allow and pay for music to play over the internet. But the pioneering work of people like Tim Westergren (@twestergren) of Pandora and others has gotten a licensing model (however egregiously expensive it may be) for legal streaming. The board decided to let Billy pivot with the remaining capital, although not every investor agreed. Those who didn’t were offered a buy back. Over the past few weeks, turntable.fm has launched, and we’ve been amazed at the way it pulls users in, and has gone viral.
As I write this, there are dozens of rooms, with all different types of music. Users are competing to DJ, and get points that give them priorities, new avatars, etc.. Watching the comments in the chat window is also an addictive experience. Here then is a pivot that also seems to be working.
These two examples reinforce my conviction that backing great people in big markets remains the best way to play the venture game. And we at First Round are lucky to have the chance to back some great ones.