Billion-Dollar Pivots: Key Lessons Behind 3 Incredible Success Stories

March 20, 2015

What do a financial services chatting app, a “never-ending” online mulitplayer game, and a 24/7 livestream of a startup founder’s life have in common? They were all false-starts that eventually became billion dollar businesses.

We all know the famous pivot stories behind Twitter, Instagram, and Groupon, but here are three lesser-known examples that provide valuable lessons for founders who want to learn from their successes as well as their mistakes.

Mark Organ, founder of Eloqua and Influitive

  • Background: While it will be remembered as an incredibly successful software company that pioneered the marketing automation category, the truth is Eloqua started off as a chat/messaging app geared toward financial services, insurance, and real estate companies. Founder Mark Organ and his team struggled to gain any traction with that focus, however, and they quickly realized that they had to pivot or go out of business.
  • Reason for the pivot: They were targeting the wrong market with the wrong features. Organ gravitated toward financial services and insurance because those were sectors he was familiar with from his days with Bain & Co. Unfortunately, they were also extremely difficult to sell into, resulting in costly extended sales cycles that ended with someone in IT or security squashing the deal. Ultimately, chatting simply wasn’t a mission-critical priority to those groups.
  • Key to bouncing back: Organ soon discovered that the real excitement wasn’t around chatting, but in the ability to follow-up on leads via email. He and his team went back to the drawing board and decided to shift their go-to-market strategy to target companies who were desperate for lead gen (companies like themselves). Thirteen years later, in August 2012, Eloqua went public, and four months after that the company was acquired by Oracle for $871M.

Stewart Butterfield, co-founder of Flickr and Slack

  • Background: Butterfield may be a Silicon Valley darling now, but not everyone knows that both his successes — Flickr and more recently the potential $1B unicorn Slack — were only launched after two failed attempts to create a “never-ending” online game. Both times, Butterfield was forced to let staff go and find a way to salvage things with next to no time & cash left to work with.
  • Reason for the pivot: The concept wasn’t validated — the game was too different and difficult for users to understand. Of course, the dotcom crash and subsequent funding drought actually sank “Game Neverending” before it ever got going. But Butterfield and his team were able to launch their second attempt, “Glitch,” and despite gaining a small cult following, it failed to truly catch on. Some of the concepts it was attempting to introduce were simply too new and strange to players. By Butterfield’s own admission, “It was super f***ing weird.”
  • Key to bouncing back: Facing extreme limitations and a ticking clock, Butterfield’s teams were able to make huge pivots by plucking features they’d developed to support each of the games — a photo sharing platform (Flickr) and an internal chat system (Slack) — and spin them into standalone products. In both cases, being down to the wire pushed the teams to reign in all their efforts and hyper focus on one game-winning solution.

Justin Kan and Emmett Shear, co-founders of and Twitch

  • Background: Childhood friends and Yale classmates Justin Kan and Emmett Shear were bouncing around from idea to idea when they finally landed on one Y Combinator founder Paul Graham was willing to invest in — turning Kan’s life into a 24/7 reality show. Hence was born. They walked away with $50K, but admittedly not much of a plan. “We had no idea what we were doing,” Kan says. “This much was obvious to anyone who watched.”
  • Reason for the pivot: They had zero understanding of the medium or the market. Neither Kan or Shear really knew reality TV. They didn’t have a clue how they were going to get sponsorships or advertising, or even how they were going to create a show people actually wanted to watch.
  • Key to bouncing back: Thanks to the novel concept, got a significant amount of media coverage when it launched in 2007, but soon it became apparent viewers were more interested in broadcasting their own livestreams than watching Kan. The site opened up later that year, and by 2010 it was claiming 31 million unique users per month. Around that time, Shear began focusing on the site’s growing audience for video game content, creating a spin-off site later called Twitch. It took off, and by 2014 was reaching 50 million monthly viewers. That caught the attention of Amazon, which ended up acquiring Twitch for $970M. Not bad for something that started out almost as a dare.

5 Key Lessons Behind Successful Startup Pivots

  1. Validate your assumptions: Take nothing for granted and challenge every idea you come up with. Organ’s story is a great example of the importance of taking a scientific, iterative (aka lean startup) approach. By testing their hypotheses and being extremely honest with the data/answers they got back, the Eloqua team was able to steer themselves away from the path they thought they should be on, towards the path that would actually get them somewhere.
  2. Don’t get too attached to your original idea: Kan and Schear didn’t launch to stream video games, but they didn’t hesitate to jump in that direction once they saw all the interest, either. Imagine if they hadn’t been able to broaden their original vision for the site as just a platform for broadcasting Kan’s life. By listening to their users and paying attention to their data they were able to take in a new direction they never would have imagined.
  3. Strip it down. Ask yourself whether there’s any aspect of your solution that can be radically simplified, or better yet, spun out as a standalone product. Take a cue from examples like Flickr, Slack, and Instagram (or, more recently, Meerkat) by focusing on doing one thing, and doing it extremely well.
  4. Don’t take things too personally: That doesn’t mean you shouldn’t be passionate or even obsessed with solving a particular problem. But it does mean you shouldn’t fixate on one particular way of doing it. Let go of your ego and be open to other options. Focus on your why, then iterate to (re)discover the best what and how that gets you there.
  5. Dip a toe before you dive in: Before you decide to do something big like dominate a particular market or create a massive online game that never ends, try developing quick, inexpensive ways to put out feelers and see how receptive people are to your idea. Send out a survey. Create a basic landing page. There are many approaches and experiments you can conduct. The key is to keep it simple and exert the least amount of effort necessary to achieve the desired result. That holds true to any business activity, not just launching a startup.

Bonus: 16 Lessons from Successful Tech Entrepreneurs Who Failed & Bounced Back

In the tech world, you don’t actually get a prize for failing. What counts is how you bounce back. That’s why we’re hosting our Fail Fast March Madness Tournament. Check out the bracket and make your picks for the most resilient entrepreneur in tech. Vote now.

Photo by Doran

Senior Content Manager

<strong>Jonathan Crowe</strong> is Senior Content Manager at <a href="">Barkly</a>. He was previously the Managing Editor of OpenView Labs.