March 24, 2025 • 36 mins
Google Cloud Hits $10 Billion Milestone Amid Missed Acquisition Opportunities
Bolt’s former CEO is launching a new e-commerce startup
ClearGrid: Transforming Debt Collection with AI for Better Trust and Reduced Costs
The Art of Pivoting - Finding Product-Market Fit
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
(00:00):
Welcome to Innovation Pulse, your quick no-nonsense update covering the latest in startups and
(00:10):
entrepreneurship news.
WIZ is scaling in cloud security, Spangle AI boosts e-commerce conversions, and Clear
Grid modernizes debt collection with AI.
After this, we'll dive deep into the art of strategic pivots in business.
WIZ is a standout player in the cloud security landscape, catching major attention with its
(00:32):
rapid growth and potential.
Founded in January 2020, WIZ quickly became the fastest startup to achieve $100 million
in annual recurring revenue, reaching that milestone in just 18 months.
As of now, WIZ's annual recurring revenue stands at approximately $500 million, with
(00:54):
ambitions to hit $1 billion next year.
The company specializes in hybrid cloud data security, offering solutions that are timely
and essential as more businesses shift to cloud infrastructures.
In the spotlight recently was Google's rumored offer of $23 billion to acquire WIZ, marking
(01:15):
what could have been Google's most lucrative startup acquisition ever.
However, WIZ's leadership, led by CEO Asaf Rappaport, turned down the offer, believing
in the potential to grow independently and possibly surpass the valuation through an
eventual initial public offering.
(01:36):
This decision underscores WIZ's confidence in its innovative approach to cloud security
and its capacity to significantly enhance market valuation through continued organic growth.
With a strong founding team that has a history of successful exits, WIZ is a startup to watch
as it continues to disrupt the cloud security market.
(02:01):
Join us as we explore the evolution of e-commerce innovation.
Maju Kurovilla, former chief executive officer of the one-click checkout startup Bolt, has
launched Spangle AI, a new venture aimed at enhancing online shopping experiences by
addressing what he terms check-in issues.
When shoppers click on ads, they often land on pages lacking the products they were initially
(02:26):
interested in, leading to high bounce rates and poor conversion for retailers.
Spangle AI addresses this by creating AI-powered, personalized landing pages tailored to individual
shopper interactions.
The startup utilizes an AI model called ProductGPT to analyze customer behavior and optimize
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landing pages.
Based in Seattle, Spangle AI secured a $6 million seed round from investors like Madrona Ventures
and Streamlined Ventures.
Early testing indicates a 51% increase in conversion rates, highlighting the potential
of its innovative solution.
(03:09):
With its focus moving to sales, Spangle AI aims to carve out a significant niche in the
competitive e-commerce market, joining other startups like Unbounce and Keen.ai that are
using AI to transform online retail.
Kurovilla, who departed Bolt amid its controversies, is now channeling his passion for e-commerce
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into solving these intricate challenges.
ClearGrid, a Dubai-based startup founded in May 2023, is revolutionizing debt collection
in emerging markets with the power of AI.
With a substantial $10 million in funding, ClearGrid is tackling the outdated and often
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costly debt collection processes that damage borrower trust.
The startup provides an AI-driven platform that helps banks, fintechs, and lenders recover
debt efficiently while building consumer trust.
ClearGrid's platform automates the collections process, integrating with lenders to manage
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borrower accounts.
Its AI models assess repayment likelihood, predict customer behavior, and personalize
communication.
Remarkably, 95% of its operations are automated, including AI voice agents handling a vast
number of calls daily.
The platform also supports human interaction, feeding insights into its AI models.
(04:39):
ClearGrid's unique approach categorizes borrowers and structures repayments into manageable
segments, reducing coercion and cutting collection costs by 50%.
The startup claims to resolve debts twice as fast as traditional agencies, with significant
improvements in recovery rates and borrower engagement.
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ClearGrid's revenue model charges a percentage fee on recovered amounts, and the company's
revenues are growing 30% month-on-month in the UAE.
The startup plans to expand into Saudi Arabia, aiming to significantly increase its operations
and revenue in the coming year.
(05:22):
And now, pivot our discussion towards the main entrepreneurship topic.
Today we will explore the fascinating journey of startups, finding their product market
fit through pivoting.
Many successful companies we know today, like Slack, Twitter, and Brex, started with entirely
(05:46):
different ideas.
Slack was originally a gaming app, Twitter began as a podcast platform, and Brex first
pitched Y Combinator, a VR headset.
But what's often hidden behind these success stories are the specific, painstaking moves
founders made to pivot and find their market.
(06:06):
We've developed a framework called the 4Ps, Problem, Persona, Promise, and Product, which
represents the levers founders can pull to get unstuck and jump to the next level of
product market fit.
I'm excited to dive into these pivot stories and uncover the exact aha moments that helped
these founders succeed.
(06:28):
Thank you for that introduction.
It's quite fascinating how many successful companies started with completely different
ideas from what made them famous.
Could you elaborate on what exactly constitutes a pivot in the startup world?
Is it simply changing direction, or is there more nuance to it?
That's a great question to start with.
Many people think of pivoting as simply going in a different direction, but it's actually
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much more nuanced than that.
What's your more granular definition of pivoting based on the stories you've encountered?
Pivoting is far more precise than just changing direction.
It's about tuning specific dials in your business model to find traction.
Our framework breaks this down into four key levers, Problem, Persona, Promise, and Product.
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The problem is the fix your customers badly need, or don't realize they need yet.
Persona refers to who's buying your product, either an individual decision maker like a
CTO, or a company profile like a manufacturing organization.
The Promise is how you articulate your unique value proposition, and the Product is the
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solution that delivers on that Promise.
What's fascinating is that many founders we've spoken with made pivots that might not sound
dramatic on paper.
By adjusting one or more of these four Ps, they soon saw the first sparks of traction.
These weren't random shifts, but calculated adjustments to specific elements of their
business model.
(07:56):
I love that framework of the four Ps.
It gives founders concrete areas to focus on when struggling to find a fit.
Let's start with the first P, problem.
How do founders typically discover they're solving the wrong problem?
Discovering you're solving the wrong problem often comes through painful customer feedback
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or lack thereof.
Founders typically fall into two camps, those solving a problem they've experienced first
hand and those who want to start something but haven't identified what to solve.
For instance, Christina Cacioppo, founder of Vanta, was in the latter camp.
After leaving her job at Dropbox, she learned to code and built several products that failed
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to excite anyone, from meeting recorders to microphones that transcribe notes into slack.
After these failures, Cacioppo made a critical decision to stop building and start talking
to people.
She focused on understanding what took up people's time by asking them to pull up their
calendars and discuss their best and worst parts of the past weeks.
(09:02):
This approach finally led her to a problem worth solving.
Startup leaders wanted to focus on security compliance and obtain SOC2 certification but
couldn't find the time.
This insight became the foundation for Vanta, which automates this process.
That's fascinating.
Christina stopped building and focused entirely on listening to potential customers.
(09:25):
Speaking of identifying problems, can you share another example of a company that pivoted
after realizing they were solving the wrong problem?
Absolutely.
Lattice is another compelling example.
Co-founder Jack Altman initially tried to tackle a problem he experienced first hand
at his previous company.
Quarterly OKR planning was a painful process.
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They validated this was a real problem by talking to other companies but soon learned
that while OKR software was a real pain point, it was more of a nice to have for customers.
The key indicators were telling, getting people to pay for the solution was challenging, and
even when entire teams would use Lattice for one OKR planning cycle, they wouldn't naturally
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return for the next quarter.
After about nine months, Altman realized they needed a significant pivot.
Talking to HR leaders they'd built relationships with revealed that performance management
was a more pressing problem.
The difference in traction was immediately clear.
People were paying annual upfront contracts based on design mocks alone, dramatically
(10:31):
different from their OKR experience.
This taught Altman that when something isn't getting traction, you're often not 10% away
from a solution but 200% away.
That's a powerful insight.
Sometimes you need a complete rethink rather than small tweaks.
What about SHPO?
I understand they also had a fascinating journey to finding the right problem to solve.
(10:56):
SHPO's journey is fascinating because the founders, Laura Barron's Wu and Simon Croitz
started a business simply so they could stay in San Francisco.
They began with a Shopify store showcasing independent designers, but to create initial
demand, they bought items from designers to sell themselves.
This immersed them in the complex shipping world, managing inventory, handling shipping
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timelines and solving last mile problems.
Their first pivot was recognizing that shipping was the least fun part of e-commerce, yet
critical.
After deciding to focus on shipping as a problem area, they went through several iterations.
First was a search engine for buying shipping labels, but they quickly realized small businesses
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shipping high volumes found clicking through an interface one by one too tedious.
Their breakthrough came when drawing inspiration from Stripes API model.
They built an API for the shipping industry with a dashboard on top, then connected to
the relatively new Shopify app store to reach small businesses.
This approach generated their first real traction, showing them they were onto something that
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worked.
It's interesting how SHPO's founders essentially stumbled upon a problem through their own
experiences.
Now, let's talk about Goat.
From what I understand, they had quite a winding path to finding their market.
Can you walk us through their journey?
Goat's journey might be the most winding of all the stories we've covered.
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Co-founders Eddie Lu and Dai-Shin Sugano tried numerous entrepreneurial ventures, from a
cream puffs franchise to early iPhone apps, before landing on the sneaker marketplace
idea.
When they moved to Chicago without friends, they created Grub With Us, a social dining
app for sharing meals with strangers, which got them into Y Combinator and secured SEED
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and Series A funding.
However, Grub With Us eventually ran into insurmountable marketplace friction points
related to dining preferences and the social awkwardness of meeting strangers.
Even though they knew it wasn't working, they felt trapped by the sunk cost fallacy.
They tried to create a new startup using their existing restaurant data, primarily to save
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face with investors, rather than pursuing something they were passionate about.
The breakthrough came unexpectedly.
Sugano, a lifelong sneakerhead, received fake Air Jordans from eBay.
This bad luck turned into an opportunity when they realized there was a need for an authenticated
sneaker marketplace.
Despite being nervous about such a dramatic pivot, they approached investor Greg Bettinelli,
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who encouraged them to pursue the new direction.
This demonstrates how finding product market fit often requires three key elements, passion,
a solvable problem, and a bit of luck.
That's a great example of how sometimes the best ideas come from personal pain points.
Let's move on to the second P, Persona.
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How do founders discover their ideal customer and why is it so important to narrow down?
Finding your ideal customer is critical because it focuses your efforts and helps you consistently
build something people will use.
Clay co-founder Karima Mean spent six years working on a data enrichment product before
determining who needed it most.
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The original idea was comprehensive, making programming accessible to more people by creating
a tool that pulled information from various databases into a spreadsheet.
When they started selling, they encountered an overwhelming variety of potential customers.
Recruiters used it to find candidates, salespeople for outbound efforts, front-end engineers
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as a low-code back-end, and even accountants for data transformation.
They sold wide and tailored their pitch to different profiles for a while.
However, this approach didn't result in consistent usage or meaningful revenue growth.
People would get excited about the possibilities but wouldn't use the product daily.
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The breakthrough came when they fully committed to one ICP, outbound salespeople.
This wasn't because Amin was 100% sure it was right, but because he realized they needed
to pick one thing, test it clearly, and ensure it aligned with their larger goals.
His key insight focused on how to get customers to learn quickly and improve rapidly.
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That's a powerful realization that narrowing focus accelerates learning.
Can you share another example of a company that had to pivot their target persona?
Pled offers an excellent example of pivoting personas.
In 2012, they were early entrance to the Fintech space, pioneering the invisible plumbing
Fintech infrastructure that now powers everything from Venmo to Robinhood to Coinbase.
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However, the product was initially built for a consumer budgeting app.
Co-founder Zach Perrette quickly realized they weren't good at building budgeting apps.
Despite creating six different versions, none gained traction.
The pivot idea came from a friend who was an early Venmo engineer who suggested they
license their back end, the way they'd integrated with banks to get data.
(16:09):
This shifted their target persona from consumers to businesses.
They quickly found that five to seven companies would likely use their product, with one willing
to pay for it.
However, the more significant challenge was that the market barely existed, so almost
every VC passed on Pled in the early stages.
They said, you've built an interesting product.
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It could be useful for some customers, but the market's not big.
With minimal validation, Perrette and the team had to take a leap of faith with the pivot.
Creating a market around a product they believed would be necessary for the future.
It's fascinating how Pled essentially had to create a new market.
Now let's explore the third P, Promise.
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How does changing the way you articulate your value proposition affect product market fit?
Promise is about articulating your unique value proposition.
Sometimes it's the key to unlocking adoption, even when your problem and product are sound.
Ironclad, founded by Jason Bowmig, offers a compelling example.
After serving as outside counsel for startups, Bowmig started automating parts of his practice
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with the code he taught himself.
Their first version was advertised as an automated assistant for legal paperwork, though it was
Bowmig manually handling tasks behind an email address.
The breakthrough came when they observed their customers using the product in person.
During a visit to a customer in Boulder, the team watched a legal professional using two
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monitors, one showing email and the other ironclad, as they worked through their routine.
This observation revealed how important repeatable transactions were to legal teams, particularly
legal operations roles that were just being defined around 2015.
This insight led ironclad to reposition from an AI legal assistant that promised to automate
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lawyers' tasks to a contract lifecycle management platform that promised to help enterprise
companies create and manage legal contracts end to end.
This repositioning allowed them to play in an existing category rather than trying to
create one, making their value proposition instantly more comprehensible to their target
market.
That's a great example of how repositioning can make all the difference.
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Let's move to the fourth P product.
Sometimes the problem, persona and promise are correct, but the product must change.
Can you share an example of this type of pivot?
Alma provides a compelling example of a product pivot driven by external circumstances.
Harry Ritter had already found a product market fit with his original vision of co-practicing
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spaces for therapists.
By 2019, Alma had two locations in New York City that were packed to capacity.
When the pandemic hit, and 70% of Alma's revenue disappeared in one weekend as in-person
activities became impossible.
In this crisis, Ritter saw an opportunity.
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Mental health services would become even more critical during lockdown, and therapists
who were already struggling to run their businesses would need even more support.
Analyzing customer data, he noticed an interesting trend, a spike in providers joining Alma specifically
for its virtual support services and insurance program with promising metrics around growth
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velocity, retention, close rates, and customer satisfaction.
With this data, Ritter convinced investors that facilitating providers shift to virtual
care was the path forward.
However, there were challenges, including a reduction in force during the unstable 2020
economy.
The bet on virtual proved successful, allowing Alma to expand nationwide rather than remaining
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limited to New York City locations.
That's a powerful example of turning a crisis into an opportunity.
Can you share another example of a product pivot?
Rupa Health offers another fascinating product pivot story.
Founder Tara Viswanathan was convinced about the problem, giving more people access to
root cause medicine to better understand health concerns instead of just managing symptoms.
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But she built the wrong product first.
She initially created a ZocDoc style marketplace for holistic health providers, but it never
gained traction despite numerous iterations over a year.
Viswanathan combined gut feeling with logic to recognize it was time to pivot.
Next, they tried operating a virtual clinic themselves, which gave them first hand experience
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with the hassle doctors face.
After seeing just a handful of patients, they realized lab work was the biggest problem.
Doctors were figuring out where to order tests, signing up at different laboratories, determining
pricing and explaining patient instructions.
When they texted a few doctors asking if a portal that handled all lab work would be
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valuable, the response was immediate and enthusiastic.
Instead of Viswanathan pitching to doctors, the doctors convinced her to build it and
told her exactly what was needed.
This immediate reaction signaled they'd finally found the right product direction.
It's fascinating how the right product direction often emerges from a deep understanding of
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customer pain points.
Now across all these stories, what are the standard signals telling founders it's time
to pivot?
Several clear signals indicate it's time to pivot.
First, if you're struggling to get people to pay for your solution, that's a red flag.
Jack Altman at Lattice noticed this with their OKR software.
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Getting credit cards out was like pulling teeth.
Second, poor retention is critical.
Even if you can get initial adoption, if people aren't naturally returning to use your product
in subsequent cycles, something fundamental is wrong.
This was also evident in Lattice's experience with their OKR tool.
Another signal is inconsistent usage patterns.
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At Clay, Kareem Amin noticed people would get excited about the possibilities, but wouldn't
use the product daily.
Finally, your passion matters.
The GOAT founders realized they were trying to salvage a failing company primarily to
save face with investors rather than because they believed in the new direction.
Across these stories, we see that pivoting often requires a combination of data, like
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usage metrics and retention rates, and intuition, like Terevis Winathan at Rupa Health trusting
her gut that they were hitting a wall.
Those are really practical signals to watch for.
I'm curious.
How do founders typically validate that their new direction is right after pivoting?
Validation after pivoting typically follows clear patterns.
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The most immediate sign is customer enthusiasm.
When Rupa Health texted doctors about their lab testing portal idea, the response was
instant and enthusiastic, with doctors convincing them to build rather than the other way around.
Another strong validation is payment willingness.
When Lattice pivoted to performance management, they had companies paying annual upfront contracts
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based on DesignMox alone, dramatically different from their OKR experience.
Usage metrics provide another validation path.
For Clay, the decision to focus on outbound salespeople led to more consistent usage patterns.
For Shippo, connecting to the Shopify App Store produced their first real-traction chart,
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showing them they were on to something that worked.
While the numbers were small compared to where they are now, seeing that chart was a transformative
moment.
Sometimes, as with Plaid, the initial validation is minimal, just a handful of potential customers.
But the conviction in the direction is strong enough to take a leap of faith, especially
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when you believe you're creating a market that doesn't yet exist.
Enthusiasm and willingness to pay are strong early indicators.
What are some of the emotional challenges that founders face when deciding to pivot?
The emotional challenges of pivoting are intense and multifaceted.
First, there's the sunk cost fallacy.
Goats founders felt trapped by their previous investments of time and money, making it psychologically
(24:27):
challenging to change course even when they knew their current path wasn't working.
Related to this is the fear of disappointing investors.
Lou and Sugano were nervous about presenting their dramatic pivot to sneakers to their restaurant
app investors.
There's also the claustrophobia of narrowing your focus.
Clay's Karim Amin described how limiting their target persona felt constraining.
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Why are we doing something smaller when we could be doing something bigger?
Then, there's the uncertainty of whether the new direction is genuinely better.
Many founders like Plaid's Zach Perrette had to take leaps of faith with minimal validation,
especially when creating a market that barely existed.
Finally, there's the ego challenge.
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Admitting your initial vision was wrong requires founders to separate their identity from their
original idea.
Christina Cacioppo's decision to stop building and talking to people represented an important
surrender of ego in service of finding a real problem worth solving.
Those emotional challenges are certainly relatable for any founder.
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Let's talk about timing.
How do founders know when to persist versus when to pivot?
Building a pivot is perhaps the founder's most difficult decision, what Tara Viswanathan
at Rupa Health calls the founder's dilemma.
There's no perfect formula, but successful founders typically combine data with intuition.
On the data side, they look at metrics like user acquisition costs, conversion rates,
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retention, and customer feedback patterns.
If you've tried multiple iterations without improving these metrics, that's a strong signal
to consider pivoting.
On the intuition side, many founders describe hitting a wall or feeling in their gut that
something fundamental isn't working.
As Viswanathan put it,
My gut knew we were hitting a wall and this was not the right direction.
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I just needed my brain to catch up.
Jack Altman at Lattice had a specific timeline after about nine or ten months of working
on OKRs with no clear path to the next funding round.
They knew it was time to pivot.
One telling insight from these stories is that if you're not getting traction, you're
probably not a small adjustment away from success, but a significant one.
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As Altman noted, you're probably not a 10% adjustment away.
You're probably a 200% adjustment away.
That's a great insight about the magnitude of change often needed.
I'm curious about the role of external feedback in this process.
How vital are investors, mentors, and peer founders in helping navigate pivots?
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External feedback plays a crucial role in successful pivots.
Many stories feature a key conversation or relationship that catalyze the pivot.
For Goat, investor Greg Bettinelli gave the co-founders emotional support to change from
a dining app to a sneaker marketplace drastically.
For Plaid, a friend who was an early Venmo engineer suggested they licensed their back-end
(27:25):
infrastructure rather than building consumer apps.
These external perspectives are valuable because they're less emotionally attached
to the original vision.
However, the quality of feedback matters.
It should come from people who understand your space or represent potential customers.
Christina Caccioppo's approach of talking to startup folks about their calendar pain
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points led her to Vanta's focus on security compliance.
For Alma, Harry Ritter had to convince skeptical board members with precise data showing their
pivot to virtual care was working.
The most successful founders seem to balance external input with their judgment.
They listen carefully to feedback, but make decisions based on a combination of that feedback,
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market data, and their convictions about where their industry is heading.
That makes much sense.
Now, let's zoom out a bit.
Across all these stories, what would you say are the biggest myths about pivoting that
these real-world examples dispel?
These stories dispel several persistent myths about pivoting.
First, there's the myth that pivoting means altogether abandoning your vision.
(28:36):
In reality, many successful pivots maintain the core mission while changing the approach.
Rupa Health stayed focused on root cause medicine.
Still, it changed its product from a marketplace to a lab testing platform.
Second is the myth that pivoting is a sign of failure.
These stories show it's a sign of learning and adaptation.
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Refusing to pivot when something's not working often leads to failure.
There's also the myth that pivoting requires a dramatic 180-degree turn.
Many successful pivots involve adjusting one of the four Ps while keeping others consistent.
Ironclad didn't change their products substantially, but repositioning their promise from AI assistant
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to contract life cycle management made all the difference.
Another myth is that founders should have perfect clarity before pivoting.
In reality, as seen with Plaid, sometimes you have to leap with minimal validation when
you believe you're creating a market that doesn't yet exist.
Finally, there's the myth that good ideas come in flashes of inspiration.
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These stories show that finding product-market fit is usually a methodical process of talking
to customers, analyzing data, and making calculated adjustments.
Those are helpful mythbusters.
I want to talk about the role of customer conversations in pivoting.
How do the most successful founders approach these discussions?
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The most successful customer conversations during pivoting periods have several distinctive
characteristics.
First, they focus on problems rather than solutions.
Christina Cacioppo's decision to stop building and talk about people's daily routines exemplifies
this.
By asking about calendar pain points rather than pitching specific products, she discovered
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the security compliance problem Vonta now solves.
Successful founders also observe behavior rather than just collecting opinions.
Ironclad's team flying to Boulder to watch customers use their product revealed how central
routine transactions were to legal teams.
They look for emotional reactions.
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When Rupa Health texted doctors about their lab testing idea, the immediate enthusiasm
signaled they'd hit on something important.
They ask about priorities and time allocation rather than features, understanding how customers
spend their most precious resource, time, reveals what truly matters to them.
Another pattern is seeking concrete commitment rather than theoretical interest.
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As Jack Altman discovered with Lattice, people saying they like an idea differ significantly
from people willing to pay for it.
Finally, the best conversations happen with a beginner's mindset.
Founders put aside assumptions and truly listen, which often leads to surprising insights
that wouldn't have emerged if they were validating their existing ideas.
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Those are great insights on customer conversations.
Let's talk about team dynamics during pivots.
How do successful founders bring their teams along through these transitions?
Team dynamics during pivots are challenging yet crucial for success.
The most effective founders approach these transitions transparently about the rationale
for change.
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Harry Ritter at Alma had to hold difficult board meetings explaining their pandemic forced
pivot to virtual services using precise data to make his case.
Successful pivots often involve bringing the team into the discovery process.
Ironclad S, entire early team, than just four to five people, flew to Boulder to observe
customers using their product, creating a shared understanding of why they needed to
(32:13):
focus on legal operations teams.
There's also an essential balance between decisiveness and inclusivity.
While founders must make the ultimate pivot decision, involving the team in customer
conversations and data analysis creates buy-in.
Unfortunately, pivots sometimes necessitate complex team changes.
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Alma had to reduce staff during their transition before eventually rebuilding with different
skill sets.
The most successful founders maintain consistent communication throughout these transitions,
connecting the pivot back to the company's core mission and values to help the team see
how the new direction still serves their fundamental purpose.
(32:55):
This preserves cultural continuity even as strategy changes.
That's helpful insight on managing teams through pivots.
As we end our conversation, how founders should consider funding during pivots?
How do the most successful navigate investor relationships through these transitions?
Funding and investor relationships during pivots require delicate handling.
(33:17):
The Goat story illustrates this well.
The founders were nervous about presenting their dramatic pivot from a dining app to
a sneaker marketplace.
Their approach of testing the waters with one trusted investor, Greg Bettinelli, before
approaching their broader investor base proved successful.
This demonstrates the value of finding a champion who can help convince others.
(33:39):
Transparency with data is crucial.
Harry Ritter at Alma convinced skeptical board members with clear metrics showing their pivot
to virtual care was working.
Sometimes pivots happen between funding rounds, giving founders room to show traction in the
new direction before facing investors again.
In other cases, like with Goat, investors may encourage founders to use remaining capital
(34:02):
to pursue the new direction rather than continuing on a failing path.
Plaid faced a different challenge, convincing investors to back a product serving a barely
existing market.
While early investors passed because they couldn't see the market size, Parrot's conviction
in the direction and the early customer validation, however limited, eventually helped them secure
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funding.
Those are valuable insights on managing investor relationships.
For my final question, what would you say are the most critical lessons for early stage
founders about pivoting based on all these stories?
The most important lessons about pivoting for early stage founders boil down to several
key principles.
First, build learning systems before building products.
(34:48):
Christina Caccioppo's decision to stop creating and talk to people accelerated Vanta's path
to finding a real problem worth solving.
Second, develop a framework for evaluating potential pivots.
Our four P's, problem, persona, promise, and product, give founders specific levers to
consider adjusting rather than making random changes.
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Third, recognize that pivoting is normal, not exceptional.
Almost every successful company has pivoted somehow.
Fourth, balance data with intuition.
Use metrics to identify when something's not working, and trust your gut about which
new direction feels most promising.
Fifth, separate your identity from your original idea.
(35:34):
The sunk cost fallacy is powerful.
Still, successful founders like those at Goat overcome it by focusing on the opportunity
ahead rather than the investment behind it.
Finally, understand that pivoting is rarely about dramatic 180-degree turns.
It's usually about tuning specific elements of your model while maintaining your core
(35:55):
mission and values.
As we wrap up today's podcast, we've explored the dynamic growth of companies like Wizz
and Spangle AI in the tech sector and delved into the strategic importance of pivots with
examples from successful businesses like Vanta and Ironclad.
(36:17):
Stay tuned for more updates.
Welcome to Innovation Pulse, your quick no-nonsense update covering the latest in startups and
(00:10):
entrepreneurship news.
WIZ is scaling in cloud security, Spangle AI boosts e-commerce conversions, and Clear
Grid modernizes debt collection with AI.
After this, we'll dive deep into the art of strategic pivots in business.
WIZ is a standout player in the cloud security landscape, catching major attention with its
(00:32):
rapid growth and potential.
Founded in January 2020, WIZ quickly became the fastest startup to achieve $100 million
in annual recurring revenue, reaching that milestone in just 18 months.
As of now, WIZ's annual recurring revenue stands at approximately $500 million, with
(00:54):
ambitions to hit $1 billion next year.
The company specializes in hybrid cloud data security, offering solutions that are timely
and essential as more businesses shift to cloud infrastructures.
In the spotlight recently was Google's rumored offer of $23 billion to acquire WIZ, marking
(01:15):
what could have been Google's most lucrative startup acquisition ever.
However, WIZ's leadership, led by CEO Asaf Rappaport, turned down the offer, believing
in the potential to grow independently and possibly surpass the valuation through an
eventual initial public offering.
(01:36):
This decision underscores WIZ's confidence in its innovative approach to cloud security
and its capacity to significantly enhance market valuation through continued organic growth.
With a strong founding team that has a history of successful exits, WIZ is a startup to watch
as it continues to disrupt the cloud security market.
(02:01):
Join us as we explore the evolution of e-commerce innovation.
Maju Kurovilla, former chief executive officer of the one-click checkout startup Bolt, has
launched Spangle AI, a new venture aimed at enhancing online shopping experiences by
addressing what he terms check-in issues.
When shoppers click on ads, they often land on pages lacking the products they were initially
(02:26):
interested in, leading to high bounce rates and poor conversion for retailers.
Spangle AI addresses this by creating AI-powered, personalized landing pages tailored to individual
shopper interactions.
The startup utilizes an AI model called ProductGPT to analyze customer behavior and optimize
(02:49):
landing pages.
Based in Seattle, Spangle AI secured a $6 million seed round from investors like Madrona Ventures
and Streamlined Ventures.
Early testing indicates a 51% increase in conversion rates, highlighting the potential
of its innovative solution.
(03:09):
With its focus moving to sales, Spangle AI aims to carve out a significant niche in the
competitive e-commerce market, joining other startups like Unbounce and Keen.ai that are
using AI to transform online retail.
Kurovilla, who departed Bolt amid its controversies, is now channeling his passion for e-commerce
(03:32):
into solving these intricate challenges.
ClearGrid, a Dubai-based startup founded in May 2023, is revolutionizing debt collection
in emerging markets with the power of AI.
With a substantial $10 million in funding, ClearGrid is tackling the outdated and often
(03:54):
costly debt collection processes that damage borrower trust.
The startup provides an AI-driven platform that helps banks, fintechs, and lenders recover
debt efficiently while building consumer trust.
ClearGrid's platform automates the collections process, integrating with lenders to manage
(04:14):
borrower accounts.
Its AI models assess repayment likelihood, predict customer behavior, and personalize
communication.
Remarkably, 95% of its operations are automated, including AI voice agents handling a vast
number of calls daily.
The platform also supports human interaction, feeding insights into its AI models.
(04:39):
ClearGrid's unique approach categorizes borrowers and structures repayments into manageable
segments, reducing coercion and cutting collection costs by 50%.
The startup claims to resolve debts twice as fast as traditional agencies, with significant
improvements in recovery rates and borrower engagement.
(05:01):
ClearGrid's revenue model charges a percentage fee on recovered amounts, and the company's
revenues are growing 30% month-on-month in the UAE.
The startup plans to expand into Saudi Arabia, aiming to significantly increase its operations
and revenue in the coming year.
(05:22):
And now, pivot our discussion towards the main entrepreneurship topic.
Today we will explore the fascinating journey of startups, finding their product market
fit through pivoting.
Many successful companies we know today, like Slack, Twitter, and Brex, started with entirely
(05:46):
different ideas.
Slack was originally a gaming app, Twitter began as a podcast platform, and Brex first
pitched Y Combinator, a VR headset.
But what's often hidden behind these success stories are the specific, painstaking moves
founders made to pivot and find their market.
(06:06):
We've developed a framework called the 4Ps, Problem, Persona, Promise, and Product, which
represents the levers founders can pull to get unstuck and jump to the next level of
product market fit.
I'm excited to dive into these pivot stories and uncover the exact aha moments that helped
these founders succeed.
(06:28):
Thank you for that introduction.
It's quite fascinating how many successful companies started with completely different
ideas from what made them famous.
Could you elaborate on what exactly constitutes a pivot in the startup world?
Is it simply changing direction, or is there more nuance to it?
That's a great question to start with.
Many people think of pivoting as simply going in a different direction, but it's actually
(06:52):
much more nuanced than that.
What's your more granular definition of pivoting based on the stories you've encountered?
Pivoting is far more precise than just changing direction.
It's about tuning specific dials in your business model to find traction.
Our framework breaks this down into four key levers, Problem, Persona, Promise, and Product.
(07:15):
The problem is the fix your customers badly need, or don't realize they need yet.
Persona refers to who's buying your product, either an individual decision maker like a
CTO, or a company profile like a manufacturing organization.
The Promise is how you articulate your unique value proposition, and the Product is the
(07:35):
solution that delivers on that Promise.
What's fascinating is that many founders we've spoken with made pivots that might not sound
dramatic on paper.
By adjusting one or more of these four Ps, they soon saw the first sparks of traction.
These weren't random shifts, but calculated adjustments to specific elements of their
business model.
(07:56):
I love that framework of the four Ps.
It gives founders concrete areas to focus on when struggling to find a fit.
Let's start with the first P, problem.
How do founders typically discover they're solving the wrong problem?
Discovering you're solving the wrong problem often comes through painful customer feedback
(08:16):
or lack thereof.
Founders typically fall into two camps, those solving a problem they've experienced first
hand and those who want to start something but haven't identified what to solve.
For instance, Christina Cacioppo, founder of Vanta, was in the latter camp.
After leaving her job at Dropbox, she learned to code and built several products that failed
(08:39):
to excite anyone, from meeting recorders to microphones that transcribe notes into slack.
After these failures, Cacioppo made a critical decision to stop building and start talking
to people.
She focused on understanding what took up people's time by asking them to pull up their
calendars and discuss their best and worst parts of the past weeks.
(09:02):
This approach finally led her to a problem worth solving.
Startup leaders wanted to focus on security compliance and obtain SOC2 certification but
couldn't find the time.
This insight became the foundation for Vanta, which automates this process.
That's fascinating.
Christina stopped building and focused entirely on listening to potential customers.
(09:25):
Speaking of identifying problems, can you share another example of a company that pivoted
after realizing they were solving the wrong problem?
Absolutely.
Lattice is another compelling example.
Co-founder Jack Altman initially tried to tackle a problem he experienced first hand
at his previous company.
Quarterly OKR planning was a painful process.
(09:48):
They validated this was a real problem by talking to other companies but soon learned
that while OKR software was a real pain point, it was more of a nice to have for customers.
The key indicators were telling, getting people to pay for the solution was challenging, and
even when entire teams would use Lattice for one OKR planning cycle, they wouldn't naturally
(10:09):
return for the next quarter.
After about nine months, Altman realized they needed a significant pivot.
Talking to HR leaders they'd built relationships with revealed that performance management
was a more pressing problem.
The difference in traction was immediately clear.
People were paying annual upfront contracts based on design mocks alone, dramatically
(10:31):
different from their OKR experience.
This taught Altman that when something isn't getting traction, you're often not 10% away
from a solution but 200% away.
That's a powerful insight.
Sometimes you need a complete rethink rather than small tweaks.
What about SHPO?
I understand they also had a fascinating journey to finding the right problem to solve.
(10:56):
SHPO's journey is fascinating because the founders, Laura Barron's Wu and Simon Croitz
started a business simply so they could stay in San Francisco.
They began with a Shopify store showcasing independent designers, but to create initial
demand, they bought items from designers to sell themselves.
This immersed them in the complex shipping world, managing inventory, handling shipping
(11:19):
timelines and solving last mile problems.
Their first pivot was recognizing that shipping was the least fun part of e-commerce, yet
critical.
After deciding to focus on shipping as a problem area, they went through several iterations.
First was a search engine for buying shipping labels, but they quickly realized small businesses
(11:41):
shipping high volumes found clicking through an interface one by one too tedious.
Their breakthrough came when drawing inspiration from Stripes API model.
They built an API for the shipping industry with a dashboard on top, then connected to
the relatively new Shopify app store to reach small businesses.
This approach generated their first real traction, showing them they were onto something that
(12:05):
worked.
It's interesting how SHPO's founders essentially stumbled upon a problem through their own
experiences.
Now, let's talk about Goat.
From what I understand, they had quite a winding path to finding their market.
Can you walk us through their journey?
Goat's journey might be the most winding of all the stories we've covered.
(12:28):
Co-founders Eddie Lu and Dai-Shin Sugano tried numerous entrepreneurial ventures, from a
cream puffs franchise to early iPhone apps, before landing on the sneaker marketplace
idea.
When they moved to Chicago without friends, they created Grub With Us, a social dining
app for sharing meals with strangers, which got them into Y Combinator and secured SEED
(12:49):
and Series A funding.
However, Grub With Us eventually ran into insurmountable marketplace friction points
related to dining preferences and the social awkwardness of meeting strangers.
Even though they knew it wasn't working, they felt trapped by the sunk cost fallacy.
They tried to create a new startup using their existing restaurant data, primarily to save
(13:11):
face with investors, rather than pursuing something they were passionate about.
The breakthrough came unexpectedly.
Sugano, a lifelong sneakerhead, received fake Air Jordans from eBay.
This bad luck turned into an opportunity when they realized there was a need for an authenticated
sneaker marketplace.
Despite being nervous about such a dramatic pivot, they approached investor Greg Bettinelli,
(13:36):
who encouraged them to pursue the new direction.
This demonstrates how finding product market fit often requires three key elements, passion,
a solvable problem, and a bit of luck.
That's a great example of how sometimes the best ideas come from personal pain points.
Let's move on to the second P, Persona.
(13:56):
How do founders discover their ideal customer and why is it so important to narrow down?
Finding your ideal customer is critical because it focuses your efforts and helps you consistently
build something people will use.
Clay co-founder Karima Mean spent six years working on a data enrichment product before
determining who needed it most.
(14:17):
The original idea was comprehensive, making programming accessible to more people by creating
a tool that pulled information from various databases into a spreadsheet.
When they started selling, they encountered an overwhelming variety of potential customers.
Recruiters used it to find candidates, salespeople for outbound efforts, front-end engineers
(14:38):
as a low-code back-end, and even accountants for data transformation.
They sold wide and tailored their pitch to different profiles for a while.
However, this approach didn't result in consistent usage or meaningful revenue growth.
People would get excited about the possibilities but wouldn't use the product daily.
(14:58):
The breakthrough came when they fully committed to one ICP, outbound salespeople.
This wasn't because Amin was 100% sure it was right, but because he realized they needed
to pick one thing, test it clearly, and ensure it aligned with their larger goals.
His key insight focused on how to get customers to learn quickly and improve rapidly.
(15:21):
That's a powerful realization that narrowing focus accelerates learning.
Can you share another example of a company that had to pivot their target persona?
Pled offers an excellent example of pivoting personas.
In 2012, they were early entrance to the Fintech space, pioneering the invisible plumbing
Fintech infrastructure that now powers everything from Venmo to Robinhood to Coinbase.
(15:45):
However, the product was initially built for a consumer budgeting app.
Co-founder Zach Perrette quickly realized they weren't good at building budgeting apps.
Despite creating six different versions, none gained traction.
The pivot idea came from a friend who was an early Venmo engineer who suggested they
license their back end, the way they'd integrated with banks to get data.
(16:09):
This shifted their target persona from consumers to businesses.
They quickly found that five to seven companies would likely use their product, with one willing
to pay for it.
However, the more significant challenge was that the market barely existed, so almost
every VC passed on Pled in the early stages.
They said, you've built an interesting product.
(16:32):
It could be useful for some customers, but the market's not big.
With minimal validation, Perrette and the team had to take a leap of faith with the pivot.
Creating a market around a product they believed would be necessary for the future.
It's fascinating how Pled essentially had to create a new market.
Now let's explore the third P, Promise.
(16:53):
How does changing the way you articulate your value proposition affect product market fit?
Promise is about articulating your unique value proposition.
Sometimes it's the key to unlocking adoption, even when your problem and product are sound.
Ironclad, founded by Jason Bowmig, offers a compelling example.
After serving as outside counsel for startups, Bowmig started automating parts of his practice
(17:17):
with the code he taught himself.
Their first version was advertised as an automated assistant for legal paperwork, though it was
Bowmig manually handling tasks behind an email address.
The breakthrough came when they observed their customers using the product in person.
During a visit to a customer in Boulder, the team watched a legal professional using two
(17:38):
monitors, one showing email and the other ironclad, as they worked through their routine.
This observation revealed how important repeatable transactions were to legal teams, particularly
legal operations roles that were just being defined around 2015.
This insight led ironclad to reposition from an AI legal assistant that promised to automate
(18:03):
lawyers' tasks to a contract lifecycle management platform that promised to help enterprise
companies create and manage legal contracts end to end.
This repositioning allowed them to play in an existing category rather than trying to
create one, making their value proposition instantly more comprehensible to their target
market.
That's a great example of how repositioning can make all the difference.
(18:28):
Let's move to the fourth P product.
Sometimes the problem, persona and promise are correct, but the product must change.
Can you share an example of this type of pivot?
Alma provides a compelling example of a product pivot driven by external circumstances.
Harry Ritter had already found a product market fit with his original vision of co-practicing
(18:50):
spaces for therapists.
By 2019, Alma had two locations in New York City that were packed to capacity.
When the pandemic hit, and 70% of Alma's revenue disappeared in one weekend as in-person
activities became impossible.
In this crisis, Ritter saw an opportunity.
(19:12):
Mental health services would become even more critical during lockdown, and therapists
who were already struggling to run their businesses would need even more support.
Analyzing customer data, he noticed an interesting trend, a spike in providers joining Alma specifically
for its virtual support services and insurance program with promising metrics around growth
(19:34):
velocity, retention, close rates, and customer satisfaction.
With this data, Ritter convinced investors that facilitating providers shift to virtual
care was the path forward.
However, there were challenges, including a reduction in force during the unstable 2020
economy.
The bet on virtual proved successful, allowing Alma to expand nationwide rather than remaining
(19:58):
limited to New York City locations.
That's a powerful example of turning a crisis into an opportunity.
Can you share another example of a product pivot?
Rupa Health offers another fascinating product pivot story.
Founder Tara Viswanathan was convinced about the problem, giving more people access to
root cause medicine to better understand health concerns instead of just managing symptoms.
(20:22):
But she built the wrong product first.
She initially created a ZocDoc style marketplace for holistic health providers, but it never
gained traction despite numerous iterations over a year.
Viswanathan combined gut feeling with logic to recognize it was time to pivot.
Next, they tried operating a virtual clinic themselves, which gave them first hand experience
(20:45):
with the hassle doctors face.
After seeing just a handful of patients, they realized lab work was the biggest problem.
Doctors were figuring out where to order tests, signing up at different laboratories, determining
pricing and explaining patient instructions.
When they texted a few doctors asking if a portal that handled all lab work would be
(21:06):
valuable, the response was immediate and enthusiastic.
Instead of Viswanathan pitching to doctors, the doctors convinced her to build it and
told her exactly what was needed.
This immediate reaction signaled they'd finally found the right product direction.
It's fascinating how the right product direction often emerges from a deep understanding of
(21:27):
customer pain points.
Now across all these stories, what are the standard signals telling founders it's time
to pivot?
Several clear signals indicate it's time to pivot.
First, if you're struggling to get people to pay for your solution, that's a red flag.
Jack Altman at Lattice noticed this with their OKR software.
(21:48):
Getting credit cards out was like pulling teeth.
Second, poor retention is critical.
Even if you can get initial adoption, if people aren't naturally returning to use your product
in subsequent cycles, something fundamental is wrong.
This was also evident in Lattice's experience with their OKR tool.
Another signal is inconsistent usage patterns.
(22:10):
At Clay, Kareem Amin noticed people would get excited about the possibilities, but wouldn't
use the product daily.
Finally, your passion matters.
The GOAT founders realized they were trying to salvage a failing company primarily to
save face with investors rather than because they believed in the new direction.
Across these stories, we see that pivoting often requires a combination of data, like
(22:35):
usage metrics and retention rates, and intuition, like Terevis Winathan at Rupa Health trusting
her gut that they were hitting a wall.
Those are really practical signals to watch for.
I'm curious.
How do founders typically validate that their new direction is right after pivoting?
Validation after pivoting typically follows clear patterns.
(22:58):
The most immediate sign is customer enthusiasm.
When Rupa Health texted doctors about their lab testing portal idea, the response was
instant and enthusiastic, with doctors convincing them to build rather than the other way around.
Another strong validation is payment willingness.
When Lattice pivoted to performance management, they had companies paying annual upfront contracts
(23:21):
based on DesignMox alone, dramatically different from their OKR experience.
Usage metrics provide another validation path.
For Clay, the decision to focus on outbound salespeople led to more consistent usage patterns.
For Shippo, connecting to the Shopify App Store produced their first real-traction chart,
(23:41):
showing them they were on to something that worked.
While the numbers were small compared to where they are now, seeing that chart was a transformative
moment.
Sometimes, as with Plaid, the initial validation is minimal, just a handful of potential customers.
But the conviction in the direction is strong enough to take a leap of faith, especially
(24:02):
when you believe you're creating a market that doesn't yet exist.
Enthusiasm and willingness to pay are strong early indicators.
What are some of the emotional challenges that founders face when deciding to pivot?
The emotional challenges of pivoting are intense and multifaceted.
First, there's the sunk cost fallacy.
Goats founders felt trapped by their previous investments of time and money, making it psychologically
(24:27):
challenging to change course even when they knew their current path wasn't working.
Related to this is the fear of disappointing investors.
Lou and Sugano were nervous about presenting their dramatic pivot to sneakers to their restaurant
app investors.
There's also the claustrophobia of narrowing your focus.
Clay's Karim Amin described how limiting their target persona felt constraining.
(24:50):
Why are we doing something smaller when we could be doing something bigger?
Then, there's the uncertainty of whether the new direction is genuinely better.
Many founders like Plaid's Zach Perrette had to take leaps of faith with minimal validation,
especially when creating a market that barely existed.
Finally, there's the ego challenge.
(25:11):
Admitting your initial vision was wrong requires founders to separate their identity from their
original idea.
Christina Cacioppo's decision to stop building and talking to people represented an important
surrender of ego in service of finding a real problem worth solving.
Those emotional challenges are certainly relatable for any founder.
(25:31):
Let's talk about timing.
How do founders know when to persist versus when to pivot?
Building a pivot is perhaps the founder's most difficult decision, what Tara Viswanathan
at Rupa Health calls the founder's dilemma.
There's no perfect formula, but successful founders typically combine data with intuition.
On the data side, they look at metrics like user acquisition costs, conversion rates,
(25:56):
retention, and customer feedback patterns.
If you've tried multiple iterations without improving these metrics, that's a strong signal
to consider pivoting.
On the intuition side, many founders describe hitting a wall or feeling in their gut that
something fundamental isn't working.
As Viswanathan put it,
My gut knew we were hitting a wall and this was not the right direction.
(26:19):
I just needed my brain to catch up.
Jack Altman at Lattice had a specific timeline after about nine or ten months of working
on OKRs with no clear path to the next funding round.
They knew it was time to pivot.
One telling insight from these stories is that if you're not getting traction, you're
probably not a small adjustment away from success, but a significant one.
(26:43):
As Altman noted, you're probably not a 10% adjustment away.
You're probably a 200% adjustment away.
That's a great insight about the magnitude of change often needed.
I'm curious about the role of external feedback in this process.
How vital are investors, mentors, and peer founders in helping navigate pivots?
(27:03):
External feedback plays a crucial role in successful pivots.
Many stories feature a key conversation or relationship that catalyze the pivot.
For Goat, investor Greg Bettinelli gave the co-founders emotional support to change from
a dining app to a sneaker marketplace drastically.
For Plaid, a friend who was an early Venmo engineer suggested they licensed their back-end
(27:25):
infrastructure rather than building consumer apps.
These external perspectives are valuable because they're less emotionally attached
to the original vision.
However, the quality of feedback matters.
It should come from people who understand your space or represent potential customers.
Christina Caccioppo's approach of talking to startup folks about their calendar pain
(27:48):
points led her to Vanta's focus on security compliance.
For Alma, Harry Ritter had to convince skeptical board members with precise data showing their
pivot to virtual care was working.
The most successful founders seem to balance external input with their judgment.
They listen carefully to feedback, but make decisions based on a combination of that feedback,
(28:11):
market data, and their convictions about where their industry is heading.
That makes much sense.
Now, let's zoom out a bit.
Across all these stories, what would you say are the biggest myths about pivoting that
these real-world examples dispel?
These stories dispel several persistent myths about pivoting.
First, there's the myth that pivoting means altogether abandoning your vision.
(28:36):
In reality, many successful pivots maintain the core mission while changing the approach.
Rupa Health stayed focused on root cause medicine.
Still, it changed its product from a marketplace to a lab testing platform.
Second is the myth that pivoting is a sign of failure.
These stories show it's a sign of learning and adaptation.
(28:56):
Refusing to pivot when something's not working often leads to failure.
There's also the myth that pivoting requires a dramatic 180-degree turn.
Many successful pivots involve adjusting one of the four Ps while keeping others consistent.
Ironclad didn't change their products substantially, but repositioning their promise from AI assistant
(29:17):
to contract life cycle management made all the difference.
Another myth is that founders should have perfect clarity before pivoting.
In reality, as seen with Plaid, sometimes you have to leap with minimal validation when
you believe you're creating a market that doesn't yet exist.
Finally, there's the myth that good ideas come in flashes of inspiration.
(29:41):
These stories show that finding product-market fit is usually a methodical process of talking
to customers, analyzing data, and making calculated adjustments.
Those are helpful mythbusters.
I want to talk about the role of customer conversations in pivoting.
How do the most successful founders approach these discussions?
(30:02):
The most successful customer conversations during pivoting periods have several distinctive
characteristics.
First, they focus on problems rather than solutions.
Christina Cacioppo's decision to stop building and talk about people's daily routines exemplifies
this.
By asking about calendar pain points rather than pitching specific products, she discovered
(30:23):
the security compliance problem Vonta now solves.
Successful founders also observe behavior rather than just collecting opinions.
Ironclad's team flying to Boulder to watch customers use their product revealed how central
routine transactions were to legal teams.
They look for emotional reactions.
(30:43):
When Rupa Health texted doctors about their lab testing idea, the immediate enthusiasm
signaled they'd hit on something important.
They ask about priorities and time allocation rather than features, understanding how customers
spend their most precious resource, time, reveals what truly matters to them.
Another pattern is seeking concrete commitment rather than theoretical interest.
(31:08):
As Jack Altman discovered with Lattice, people saying they like an idea differ significantly
from people willing to pay for it.
Finally, the best conversations happen with a beginner's mindset.
Founders put aside assumptions and truly listen, which often leads to surprising insights
that wouldn't have emerged if they were validating their existing ideas.
(31:28):
Those are great insights on customer conversations.
Let's talk about team dynamics during pivots.
How do successful founders bring their teams along through these transitions?
Team dynamics during pivots are challenging yet crucial for success.
The most effective founders approach these transitions transparently about the rationale
for change.
(31:49):
Harry Ritter at Alma had to hold difficult board meetings explaining their pandemic forced
pivot to virtual services using precise data to make his case.
Successful pivots often involve bringing the team into the discovery process.
Ironclad S, entire early team, than just four to five people, flew to Boulder to observe
customers using their product, creating a shared understanding of why they needed to
(32:13):
focus on legal operations teams.
There's also an essential balance between decisiveness and inclusivity.
While founders must make the ultimate pivot decision, involving the team in customer
conversations and data analysis creates buy-in.
Unfortunately, pivots sometimes necessitate complex team changes.
(32:34):
Alma had to reduce staff during their transition before eventually rebuilding with different
skill sets.
The most successful founders maintain consistent communication throughout these transitions,
connecting the pivot back to the company's core mission and values to help the team see
how the new direction still serves their fundamental purpose.
(32:55):
This preserves cultural continuity even as strategy changes.
That's helpful insight on managing teams through pivots.
As we end our conversation, how founders should consider funding during pivots?
How do the most successful navigate investor relationships through these transitions?
Funding and investor relationships during pivots require delicate handling.
(33:17):
The Goat story illustrates this well.
The founders were nervous about presenting their dramatic pivot from a dining app to
a sneaker marketplace.
Their approach of testing the waters with one trusted investor, Greg Bettinelli, before
approaching their broader investor base proved successful.
This demonstrates the value of finding a champion who can help convince others.
(33:39):
Transparency with data is crucial.
Harry Ritter at Alma convinced skeptical board members with clear metrics showing their pivot
to virtual care was working.
Sometimes pivots happen between funding rounds, giving founders room to show traction in the
new direction before facing investors again.
In other cases, like with Goat, investors may encourage founders to use remaining capital
(34:02):
to pursue the new direction rather than continuing on a failing path.
Plaid faced a different challenge, convincing investors to back a product serving a barely
existing market.
While early investors passed because they couldn't see the market size, Parrot's conviction
in the direction and the early customer validation, however limited, eventually helped them secure
(34:24):
funding.
Those are valuable insights on managing investor relationships.
For my final question, what would you say are the most critical lessons for early stage
founders about pivoting based on all these stories?
The most important lessons about pivoting for early stage founders boil down to several
key principles.
First, build learning systems before building products.
(34:48):
Christina Caccioppo's decision to stop creating and talk to people accelerated Vanta's path
to finding a real problem worth solving.
Second, develop a framework for evaluating potential pivots.
Our four P's, problem, persona, promise, and product, give founders specific levers to
consider adjusting rather than making random changes.
(35:11):
Third, recognize that pivoting is normal, not exceptional.
Almost every successful company has pivoted somehow.
Fourth, balance data with intuition.
Use metrics to identify when something's not working, and trust your gut about which
new direction feels most promising.
Fifth, separate your identity from your original idea.
(35:34):
The sunk cost fallacy is powerful.
Still, successful founders like those at Goat overcome it by focusing on the opportunity
ahead rather than the investment behind it.
Finally, understand that pivoting is rarely about dramatic 180-degree turns.
It's usually about tuning specific elements of your model while maintaining your core
(35:55):
mission and values.
As we wrap up today's podcast, we've explored the dynamic growth of companies like Wizz
and Spangle AI in the tech sector and delved into the strategic importance of pivots with
examples from successful businesses like Vanta and Ironclad.
(36:17):
Stay tuned for more updates.
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