How the startup “pivot” can become a billion-dollar masterstroke
- At SXSW in 2011 a handful of prime movers gathered at an exclusive “jam session” hosted by entrepreneur Gary Vaynerchuk.
- Among the group was visionary Instagram cofounder Kevin Systrom, who would go on to sell his company to Facebook for $1 billion in cash and stock.
- Systrom had perfectly executed a startup pivot — from Burbn to Instagram — and all hopeful founders can learn from his courage and leadership.
The SXSW Conference in Austin, Texas, is a weeklong celebration of culture, education, music, film, and tech. I (Mike) have been a regular attendee and speaker since Buddy Media’s early days. It’s always enlightening and memorable, but never more so than in March 2011.
Gary Vaynerchuk was hosting one of his infamous “jam sessions.” Instead of hitting one of the bars on Austin’s Sixth Street or attending the always-raucous Foursquare party, Gary convened a handful of friends in his hotel suite to talk about the future of the internet business. In addition to Gary and me, the group included Travis Kalanick (the founder of Uber, who was in town to launch his car service in Austin), Aaron Batalion (a wicked-smart engineer who started Groupon competitor Living Social), and Kevin Systrom (Instagram’s cofounder).
Twitter’s explosive launch at SXSW in 2007 turned SXSW into ground zero for early social app innovation. By 2011 the frenzy was in full force. So, it wasn’t surprising that Gary quickly steered the conversation to the big social platforms.
All eyes turned to Kevin, a tall, boyish-looking Stanford grad sitting in the suite’s main living room. Less than six months earlier, Kevin and his partner Mike Krieger had launched Instagram, and the app was now a white-hot challenger to MySpace, Facebook, Twitter, and LinkedIn, the largest social networks at the time. Gary, an early Facebook investor, asked Kevin whether he could compete with the big guys.
Kevin, who had turned down an offer from Mark Zuckerberg to join Facebook in 2006, was so confident he could compete that he said he would never sell the company to one of the larger platforms when it took off. Gary, the ultimate trader and gamer, laughed, knowing everything had a price.
Most people don’t know that Instagram started as Burbn, Kevin’s side project to learn coding. In this gamified version of the popular location app Foursquare, launched at SXSW two years earlier, users earned points for checking into local businesses. But the app was complicated, and very few people signed up for Burbn. Most who did never returned. It was dead on arrival.
For a pivot to succeed, many of the once-sacred cows in the company must be slaughtered.
Kevin could have folded and returned to his job as a product developer at a Bay Area startup. But he didn’t give up. As Michael Dell says, “There’s a simple part of this, which is, you just don’t quit.”
One of the most promising Burbn features allowed users to post pictures with friends from any location on the app. Kevin, an avid photographer, believed this was unique (it was!) and would resonate with users as a standalone app (it did!). He stripped everything from the Burbn app except the ability for a user to add a filter to a photo, post the photo, like a photo, and comment on a post.
He named the app Instagram.
With an iconic, nostalgia-infused logo inspired by Polaroid’s instant photography, Instagram became a place to immortalize your best shots online where anyone could see them, like them, and comment on them in real time. It combined the best of Polaroid (instant results sans darkroom) with the best of Facebook (frictionless tagging and sharing among friends), striking a chord with people worldwide just as mobile phones put a quality camera in each of our pockets.
Later that year, Apple named Instagram the iPhone App of the Year. A year after he told us he wouldn’t sell, Facebook purchased Kevin’s thirteen-person company for $1 billion in cash and stock. Instagram is now one of the most recognized brands on the planet, and Kevin is one of the most successful and respected entrepreneurs I know — and quite rich thanks to the growth of the Facebook stock he received.
The pivot process
Kevin’s results were unique. His process was not.
Even if you know the problem you are trying to solve, have deep industry knowledge, and are armed with mounds of customer survey data, creating a product at an acceptable price point and landing customers is no easy feat. Most new companies don’t get it right the first or even the second time.
You have three options if things aren’t turning out as you expected. You can continue doing more of what isn’t working, fold the business, or stop doing what’s not working, create a new plan, and change direction. The last option is called a pivot, a term popularized in business by Eric Ries in his 2011 best-selling book, The Lean Startup.
This is one of the most stressful leadership tasks an entrepreneur will face. Pivots involve creating and executing a new plan that often includes a team reorganization, layoffs, new hires, additional financing, new technology and priorities, and a new origin story. This is only after a leader has the insight, fearlessness, and humility to see that change is needed.
Leaders often learn the most, gain the most, and are judged the most during pivots. Growth and good times have a way of hiding issues. Pivots expose warts and require founders to have the courage, leadership skills, and finesse to bring others along with them through the change.
Insights and humility come from recognizing that you don’t have all the answers, and from surrounding yourself with people you trust to tell you the uncomfortable truth, instead of a bunch of echo chamber sycophants. When you pivot, you must let go of the ego that keeps whispering (or screaming) that you need to keep moving in the wrong direction because you just know your original approach was right. For a pivot to succeed, many of the once-sacred cows in the company must be slaughtered. This is tough for most founders, especially those who let their pride dictate their decisions.
It seems logical to do less of what isn’t working and more of what is working. But logic has no chance against pride or fear.
