The In-Between Stage for Startups: Visions of Growth and the Value of Pivots
Though SEO software company Moz is more than a decade into its business evolution, CEO Sarah Bird says there is no in-between stage for her company.
“As Moz has grown, I still feel that I’m in the very early stages,” Bird says. “You never arrive. There’s no ‘Yay, we did it, we’re done.’ I’m not in between anything. I’m still on the cusp. There’s so much more to do, so much opportunity. That sense of arrival and finality is elusive and in some ways largely fictional. You’re never really done.”
The stages of business growth may have no end point, but the opportunities that lie within them are more abstract than they seem. Moz brings in more than $40 million in annual revenue now – the company isn’t public, but it’s not a tiny startup struggling to hold everything together. Bird says that Jeff Bezos’ well-known assertion that it will always be “day one” at Amazon resonates with her, but that financials can cloud the view of that goal.
One reason that some companies lose sight of that “day one” mentality is the way people talk about financing startups, she says. Finances are too often categorized into growth stages — early stage seed money, series A funding rounds, late stage growth investments.
“My personal experience — and in talking with other company CEOs — is that you never are just done with any of those things,” Bird says. “You have it, then you lose it a little, you have to reinvent yourself. I think that’s a more realistic frame of mind for leaders and entrepreneurs. Whether you’re leading a company or if you’re in it, the world is dynamic, the product is never finished – there’s no end game. If you need a sense of completion and finality, you’re going to be disillusioned in your career. Tech does not stand still.”
Angus Davis, founder and CEO of restaurant management platform Upserve, agrees that there is no finish line in business. For the past five years or so, Upserve’s team has been in a revenue growth stage, consistently building up its product and the range of things it offers customers.
“We’re getting steps closer to fulfilling our vision,” Davis says. “You’re never really done as an entrepreneur.”
Last year Upserve bought the point-of-sale system Breadcrumb from Groupon, and this year the company is planning to roll out additional product modules to the market. Davis does categorize financials, but, like Bird, he doesn’t equate investment stages or revenue milestones as accomplishments. For him, they mostly represent different kinds of problems.
“At any software-as-a-service company, there are different milestones of growth and scale,” Davis says. “When you have $1 million of recurring revenue, the types of problems you’re facing are different than the ones you face at $5 million, $10 million, $50 million, $100 million and so on.”
Early startups often start in a place where a small number of employees are just trying to procure that first $1 million in recurring revenue, signing their initial group of customers, and figuring out if their product is the correct fit for the market, Davis says.
“Then when you get to $5 million to $10 million, you’re probably thinking about how to solve different problems, about ways to sell your product most efficiently, and you may have to change your strategy,” he says. “Then when you go from $10 to $30 million, you’re thinking about unifying the productivity of your sales teams and about what things to scale up. As numbers get bigger, things that worked at a small scale may not be repeatable at a larger scale.”
Davis recalled his own experiences in business and how Upserve has grown — a company that rebranded last year from its previous identity, Swipely.
“As we were just starting out, we definitely had to pivot,” Davis said. “Initially it was a consumer review web service in 2010. We decided it wasn’t a great product idea, and then we tried a different product in 2011 that allowed restaurants and other local businesses to understand their customers. Then we integrated payments into that in 2012, and it’s been the same business since then.”
Davis stresses that the term “pivoting” is overused, but that it’s not the same as rebranding. Pivoting a company is something that is usually only feasible when a company is small and new.
Instagram pulled one of the most successful reinvention moves — it was previously called Burbn (like a hipster spelling of bourbon) almost a clone of the location-based check-in app Foursquare. It’s something Moz also took advantage of early in its creation, and reinventing itself so much that it’s tricky to pinpoint an exact year when it was “founded,” though 2004 seems to be the main turning point when the company became more or less headed toward what it is today.
“Once companies get above a few million in revenue it’s very unusual that they can successfully execute a large pivot,” Davis says. “In the early stages, they can do that quite successfully; try different ideas and iterate quickly to hone in on what works. You have to contain the pivot and iteration to the early stages. That’s when you have the most flexibility to mess up. But then once you figure out what it is and lock on to a target, win customers who are paying you for the value that you’re providing, that’s when you know you have something good, and you want to build on that.”
Most important is the merit in being a customer-driven, Davis says, a core value that tech founders often have in common.
“The most successful entrepreneurs believe that some part of the world should operate in a fundamentally better way than it operates today. Those people have the sort of confidence or the wherewithal to believe that something can be different, and that requires a certain amount of belief in yourself that you and your team can come up with a better way.”
At the same time, there’s a balance that those entrepreneurs must strike in accepting feedback, especially from customers.
“It’s a little bit like if you are parachuting out of an airplane,” Davis says. “If you jump out at 10,000 feet and your parachute doesn’t open, you can’t sit there and argue with yourself about how you designed this amazing parachute and it should be working. You need to spend the next couple thousand feet figuring out how to open your reserve parachute, or figure something else out.”
What causes startup businesses to fail is not that the parachute didn’t open, he says, and very few businesses will get their ideas exactly right on the first try.
“What causes businesses to fail is when they’re diddling around until they’re 2,000 feet above ground level before they admit to themselves that something needs to change. If you had been quick and nimble when things started to go wrong, you wouldn’t have wasted thousands of feet,” he says.
April Nowicki is a contributor at Street Fight.