The origin of many big companies is not as straightforward as it seems. Finding the correct product market fit can take months or even years for many, and is sometimes farther from the original idea. The term ‘pivot’ was first publicly used by Eric Ries, an entrepreneur and author, in his book about how course correction by founders is important for success.
In India, two of the leading startups, Zepto and Razorpay, pivoted in their early days. Interestingly, both these unicorns are alumni of Y Combinator, the San Francisco-based startup school, which with less than 1% acceptance rate guides founders into the right pivot. Globally as well, several YC-backed companies like Clipboard Health, Brex, Goat, and Escher Reality, among many others went through cycles of feedback at YC to reach their consumer base.
“Founders Pivot. That’s what happens at YC. You go out and test your product with users, and if it doesn’t work, you try something else. The idea maze is a perfect competition,” Garry Tan wrote on X, commenting on the recent launch of Void AI, which is interestingly, the fifth YC-backed AI code editor.
Should You Pivot Fast?
Globally, the examples are plenty. However, below are a few companies that pivoted within a year of launch.
Instagram, a social photo-sharing app, founded by Kevin Systrom and Mike Krieger in 2010, initially began as Burbn, a location-sharing app where people could check in and upload photos. However, in a year’s time the founders pivoted to solely focus on photo sharing, its chief and most-used feature.
Instagram reported over two billion monthly active users as of early this year. Acquired later by Facebook (now Meta), the journey of Instagram – both in its pivot and acquisition – is a masterclass in strategy.
Also, Twitter was originally a podcasting company called Odeo. It is interesting to note the social network’s evolution from that to what it is today. The launch of iTunes rendered the business model of Odeo useless, forcing the founders to build on a new idea. In October 2022, Elon Musk acquired Twitter, and rebranded it as X.
Slack, a cloud-based communication platform for enterprises, was initially founded as an online gaming company called Glitch. Due to the lack of commercial traction, the founders decided to build on the chat feature, which was underrated at that time. In a way, Slack was the result of a Glitch!
YouTube, a leading online video platform, found its start as a dating site where people uploaded videos talking about their partners. But within a week, it realised that the idea was not very unique. By generalising the core product beyond just dating videos, their internal tech was used to creating the video-sharing app. This was one of the first videos uploaded on YouTube, posted by one of the founders, Jawed Karim. WhatsApp, the messaging giant, also has a similar story which started as an app merely for sharing statuses with friends.
PayPal, an online payments platform, started out as an encryption services application known as Confinity. Its journey to what it is today included not one but multiple pivots. Later, eBay acquired PayPal in a deal valued at $1.5 billion.
Some Took More than a Year
For instance, Hugging Face, an AI and machine learning collaborative platform, began as an entertainment app. After two-and-a-half years, the founder pivoted by launching a model he was working on. This one immediately gained traction.
Notion, the all-in-one productivity platform, had its origins as a website builder. With a very unsuccessful start, the founders took four years to pivot and build on its collaborative feature. The founders fired the team and relocated to Kyoto to rebuild the app from scratch.
Twitch, a famous streaming platform, initially began as a 24-hour reality TV webcaster, streaming Justin Kan’s life. It took the founders five years to double down on the games and streaming aspect of the startup to differentiate it from the rest. The core product was applied to a different problem. Later, Amazon acquired Twitch for nearly $1 billion.
The Trend Continues Among Startups
Since the launch of OpenAI’s ChatGPT in 2022, a lot of startups have pivoted towards building an AI-first product or solution. Earlier this year, SoftBank signalled its pivot towards becoming AI-focused, after funding several AI-driven startups in the ecosystem.
Funding for AI startups in India totalled $8.2 million in the April-June 2024 quarter. Despite the enthusiasm, a lot of AI startups get acquired by a larger corporation, due to the challenges like funding.
In order to stand out, it is imperative for startups to focus on building the next LLM instead of building existing use cases of AI. A lot of founders go through the dilemma and decision-making of either merging, pivoting, or getting acquired when their startup does not perform well in the initial days.
Pivoting May Not Always Be The Answer
As seen above, while pivoting is considered normal, and sometimes even healthy for startups, there are many times when founders should be cautious of it.
“If you pivot over, and over, and over again, it causes whiplash. Whiplash is very bad because it causes founders to give up and not want to work on this anymore, and that actually kills the company. Weirdly, it’s more deadly to your company to get whiplash and get sad than to work on a bad idea,” said Dalton Caldwell, partner at Y Combinator.
There is even a term for it within Y Combinator – it is called the ‘Pivot Hell’, and founders must avoid it at all costs.
