The Path to Pivot: The Playbook for Founders Who Want to Reboot their Startup

The

Path

to

Pivot

The Playbook for

Founders Who Want to

Reboot Their Startup

Jason Shen

Copyright 2024 © Jason Shen

Version 1.0 May 1, 2024

Edited by Rhea Purohit

Get worksheets, videos, and other free resources at pathtopivot.com

Learn more about Jason Shen at jasonshen.com

All rights reserved. No part of this book may be reproduced or used in any manner without the prior written permission of the copyright owner, except for the use of brief quotations in a book review.

The information in the book is distributed on an as is basis, without warranty. While every precaution has been taken in preparation for this book, neither the author nor the publisher shall have any liability to any person, or any with respect to any loss, or damage caused or led to be caused, directly or indirectly by instructions contained in this book, or by the computer, software and hardware products described in it.

ISBN (paperback) 979-8-9906104-0-8

ISBN (ebook-ePub) 979-8-9906104-1-5

ISBN  (ebook-KDP) 979-8-9906104-2-2

ISBN  (paperback-KDP) 979-8-9906104-3-9

ISBN (hardcover) 979-8-9906104-4-6

Refactor Labs

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To every founder who dared to dream.

Go forth and write a new destiny.

"Not everything that is faced can be changed but

nothing can be changed until it is faced."

— James Baldwin

You never change things by fighting the existing reality. To change something, build a new model that makes the existing model obsolete.

― Buckminster Fuller

Introduction         9

My tale of two pivots and how this book

can help you reboot your startup

PIVOT BLUEPRINT

1. Grit, Pivot, or Quit         23

Three options for when  you’ve lost

conviction and your startup is stuck

2. Shoot the Zombie         41        

Let go of your undead business and

embrace the possibility of a new vision

3.  Pilot Your Pivot         51

Get on maintenance model so you

can plan a structured exploration period

4. Leverage Your Assets         61

How to identify your unfair advantages and

the 6 waves your startup can ride on

5.  Make the Call         73

Use data and intuition to commit to the

pivot, return to the old biz, or keep exploring

6.  Own Your Story         84

Win new fans and neutralize detractors by

shaping a powerful narrative of change

PIVOT TOOLKIT

7. Align Incrementally         102

There’s a right order to getting people

onboard with your pivot plans

8. Extend Your Runway         111

Dial back your burn and find creative

ways to bring in more money

9. Get Out of the Building         121

The best way to understand a problem

is to inhabit your customer’s world

10. Narrow Down         132

Your new business can’t win at everything

so find the edge where you can compete

11. Work Like a Scientist         139

Push the boundaries of your solution

and let reality be your teacher

12. Stay Resilient         152

Prioritize your health & wellbeing so

you can come out of the pivot stronger

APPENDIX

I: Venture Math         165

II: Pivot Case Studies         167

INTRODUCTION

My tale of two startup pivots—one failed, one successful—and how this book will help you reboot your startup.

The highest and lowest moments of my first startup venture were barely a month apart.

In August 2012, my team and I were part of a Vanity Fair cover article photoshoot alongside the Dropbox founders and the partners of Y Combinator  (YC) with the headline Who Wants to Be a Billionaire?

A year earlier we had launched our company Ridejoy out of the Silicon Valley accelerator with a long-distance ridesharing service. Back then Lyft didn’t exist yet and Uber was an app for getting limos in San Francisco.

A journalist was embedded in our YC batch of summer 2011 to write a book about the world’s most successful accelerator. They featured Ridejoy’s story on the very first page. Vanity Fair was running the first chapter of this book as an excerpt hence why my co-founders Kalvin Wang, Randy Pang, and I  got to pose next to Silicon Valley royalty as the rag tag team of young upstarts .

Beyond this ego-stoking experience, we had also just launched our iOS app after 7 months of development and it had quickly been featured by App Store editors as an eco-friendly way to travel. We were soaring high and the future looked bright.

Just a few weeks later, we were crashing back down to earth. Our only effective growth channel, Craigslist, had threatened legal action to keep us from siphoning users off their platform, and we needed to make some big changes.

My cofounders and I tried to explore adjacent opportunities in the travel space. When that exploration went nowhere, we were forced to lay off the team to preserve cash and retrench. We spent eight months jumping from idea to idea, unable to agree on a direction to  start building.

We didn’t run out of money—we ran out of resilience.

I remember huddling over the phone with my cofounders as one of our investors, Garry Tan, now President of Y Combinator (gulp) chewed us out for wanting to give up. Do you know how many founders would kill to be in the position you’re in?

We should have been able to pull off a pivot, but we failed. If I had known what I know now, I wonder if things would be different.

This book is written for founders and CEOs of venture-backed startups contemplating—or in the middle of—a major shift in their business.

If that’s not you, that’s cool. Maybe you’re an indie hacker, corporate executive, or angel investor. There is still something here for you, but I would recommend you to tweak the advice as needed.

I’ve taken my own advice and written for a specific niche: the early / mid stage startup funded by VC dollars. My target reader is the person in the arena [1] , face marred by dust, sweat, and blood, facing a tough decision. This book is for you.

When conviction fades

Dear founder,

You’ve probably been in business for a few years, having built a modest level of traction. A good number of consumers or companies use your product—maybe you’re even generating meaningful revenue from these customers.

You’ve raised a few million in venture funding, made a name for yourself in this space. On the outside, you look like a successful company. Your friends and family have been following your journey with enthusiasm.

Despite all your external success, you’ve got a problem. A nagging doubt in the back of your head, speaking in a whisper or perhaps even a shout, that you’re going down the wrong path.

You’ve missed major milestones you’ve set for the team and the gap seems to be growing every day. You’re watching your bank account drop without knowing how you’re going to raise more money.

Maybe you’re having trouble sleeping. You’ve got a perpetual tightness in your chest. Headaches that knock you out for hours. A distinct lack of appetite or enthusiasm for even your favorite things.

Conviction is one of the most important and powerful assets a founder can possess. It’s what inspires your team, recruits new customers and employees, wins deals, and lands new investment. But these days, your flame is getting weaker and dimmer each day. Intrusive thoughts are popping into your head:

Do I really have what it takes to succeed as a founder?

Would my investors freak out if I tried to radically change the business? What about my team?

Why the hell did I quit my job to chase this dream?

Whether you came across this book via a desperate search for an answer out of this predicament or because someone you trust recommended it to you, rest assured: you’re in good hands.

Over a couple of short, actionable chapters, I’m going to share a practical framework for rebooting your business, without burning all your bridges or imploding your business in the process. Because I’ve done it.

The tale of two pivots

I wrote this book as a resource I wish I had when I was building my companies. Everything about a startup is hard but pivots are particularly uncertain because there’s such a wide range of opinions and anecdotes about how to execute one.

I attempted a pivot in my first startup and failed, ultimately shutting down due to our inability to commit to a new direction.

My second startup also hit a point where a pivot was necessary. This time, I avoided the mistakes we made the first time and successfully navigated through the pivot, raised new funding, and eventually landed a modest acquisition by Facebook.

Pivot 1: Failing out of fear

Despite warnings  from Paul Graham that ridesharing was a bad business because the market would be limited to people who were extremely cost-conscious, my cofounders and I launched Ridejoy at Y Combinator Summer 2011 Demo Day. We were thrilled to raise $1.3 million for our long-distance ridesharing platform, which was about average for YC back then. Though some of our peers like Codecademy, Parse, and (Rap)Genius raised far more).

We launched as a carpool service for Burning Man and got 1,600 users without spending a dollar on advertising. Things were looking great. But there was a problem — while we easily acquired users through Craigslist, we struggled to gain traction from other channels like events and partnerships, and couldn’t inspire word of mouth. Our Ridejoy iOS app also failed to drive growth despite an initial press spike and getting featured by the App Store editors. Then, Craigslist sent a cease and desist for letting users post back to their platform—our growth hack was toast.

With no clear path to Series A, we tried pivoting but the process was chaotic and our employees were clearly rattled and unprepared for such a sudden shift. We let our team go, gave up our office, and retreated to our shared apartment to find a new direction. We had built a warm, close-knit culture with home cooked meals at the office and watching our employees cry on our last day as a team was one of the worst feelings I’ve ever experienced.

We struggled to come up with a new direction. I cringe at our ideas now: a social media platform for sharing thoughtful quotes, a tool for pooling donations to charity, a laundry delivery service.

As privileged twenty-somethings with little business or life experience, finding big problems that we were uniquely qualified to solve felt next to impossible. Garry Tan saw it differently. Just call up some YC companies, ask them what problems they have, and go solve those!

We were naive and thought that we could dream up an idea out of our living rooms. We were wrong.

Without a structured framework, a deadline, or any real accountability, we were stuck. We ultimately returned nearly six hundred thousand dollars back to our seed investors.

Result: Failed pivot, business shut down

Pivot 2: Succeeding through scrappy execution

Nearly five years after the Ridejoy debacle I founded a new company called Headlight with Wayne Gerard, an engineer I worked with at Etsy. We wanted to reinvent the hiring process by making it easier for companies to assess a candidate’s technical skills via a timed take-home assignment. After raising a small pre-seed round, we landed a handful of customers for our initial software product.

Following market demand over the next year, we found ourselves operating more-or-less a technical recruiting agency rather than a tech platform. My cofounder and I felt like we were no longer building a venture-scale business and wanted to shift gears.

When our lone in-office employee went to a conference in Europe, we took a week to map out new directions we could take our business that we presented to a small group of trusted advisors. One area that excited us was gaming— my cofounder Wayne had been a Diamond ranked Starcraft 2 player  and worked at Bloomberg Sports, an analytics platform used by professional sports teams. I was more of a casual gamer but loved the growing competitive scene in professional and collegiate esports, which reminded me of my own experience as an NCAA athlete.

Throwing away our brand, product, and market position was painful, but we let our conviction guide us. Despite our lack of experience or relevant product offering, we pursued a hard pivot in the gaming and esports space.

We renamed the company Midgame, raised new capital from Techstars, Amazon, and Betaworks, recruited a new team, and built several analytics and proto-AI powered products that were used by collegiate and professional esports teams as well as consumer gamers. It was thrilling to build in a new space, going from B2B to B2C and avoid the stallout that Ridejoy