This is part #2 of my Lesson #1 post, if you didn’t catch it, you can find it here.
If you’ve never been to Buck’s of Woodside, it’s difficult to find a similar place. I’ll just say that it’s just your traditional greasy spoon diner with a very peculiar collection exhibited on the restaurant walls…you can find everything from Shaquille O’Neal’s size #22 basketball shoe to the Google license plate that (I guess) Larry or Sergey had on their cars when Google was a small startup.
In August of 2015, it was a cold and misty morning…I can still remember the fog on Highway 280. I was anxious to get to my meeting on time, but always wary of speeding. Even though I know where the cops normally hide, it’s always good to be extra cautious. I got to Buck’s at 8:53 (my meeting was at 9:00), waited in the car for a few minutes and walked in. It was especially busy that morning…I remember the noise of the china stacking was a bit loud. I approached the hostess…and then saw him sitting just underneath Shaquille O’Neal’s shoe.
“Good morning Joe,” (names have been changed to protect the innocent) I called in my most secure voice, extended my hand, and received a firm handshake.
Joe is a great guy…one of the best. To be talking with him is almost a trophy for any entrepreneur in the Valley. We talked about family and fun stuff for a few minutes (you know us Latin guys never get directly to the point, you kind of need to “grease” the conversation). “So what do you think are next steps,” he asked, steering us back to business.
I started explaining why I thought the outcome of our first real market tests were not successful…(for some context, we were experimenting with a concept around peer to peer banking). I was selecting my words very carefully: the risk / reward equation is unbalanced, customers didn’t trust us enough to try the service, the market isn’t ready, etc. “So, how do you think we should proceed?” asked Joe in a light inquisitive tone.
In the lingo of the entrepreneur, there’s probably not a more overused word than “pivot.” It’s an overused word and a misunderstood one. The main definition of pivot by Eric Ries is: “A structured course correction designed to test a new fundamental hypothesis about the product, strategy, and engine of growth.” So when Joe asked how we should proceed, I gave him a list of new hypotheses that I wanted to try, from shifting to a less-progressive model to switching to a different market, to solving a different problem than the one we were originally tackling. “Our customers have so many needs, we have so many things we could do to help them,” was my closing remark.
The room suddenly was quiet, or so I thought. For some reason, I felt what Mia Wallace describes as an uncomfortable silence in the movie Pulp Fiction. Joe broke the silence with what ended up being one of my least expected responses ever and — as I write this post a year later — I acknowledge one of the biggest lessons of my professional career. “Listen Leo, I want to start by saying most of the companies I invest in fail, I want you to understand that you don’t owe me anything and you don’t need to prove anything to me. I’m a big boy here.” “Pivots rarely work,” he said and gave me a few examples of companies that had successful ones like Chegg, Yammer and others I can’t remember. “A pivot only works if when you were trying to prove your initial business model, you get an insight about something else. It’s like a secret than nobody else on planet Earth knows about…what’s your secret insight, Leo?”
I was speechless. I didn’t know how to respond and my mind was spinning at 1,000 miles per hour….and then… he said it. “If you don’t have any insights, my recommendation would be to shut the company down, return the capital you still have, take a break, and start all over again.”
I barely have any recollection on what happened during the rest of that meeting…
Lesson#1, you don’t pivot without an insight.