Pivots Steal Startups (Burning is So Much Better)

Giff Constable lean

It feels like every week Techcrunch hosts an article that says “lean startup doesn’t work my my category.” I would remain blissfully ignorant of these pieces if not for the fact that they end up polluting my morning coffee, when I scan my twitter stream.

The latest is Roman Stanek’s piece on enterprise software.

“There is much talk in the Silicon Valley community of lean startups and pivoting. The idea is that you get going, learn from your mistakes, and then evolve toward what the market needs. There is a lot less talk about what this process of evolution does to the founder’s stake in the company, which goes down with every pivot, every attempt to start over.”

Here’s a tip: if you really want to dilute your ownership stake quickly, then assume that your vision is perfect. Build up a large engineering team (after all, you need to make it highly scalable and integrate to every 3rd party system out of the gate). Rush out and hire an army of sales reps from Oracle and HP (after all, you need their relationships and proof that they can sell their quota, right?). Don’t forget to hire lots of senior managers who don’t like to get their hands dirty anymore but will impress investors and prospects.

Burn, baby, burn.

In reality, enterprise software has a technology adoption curve just like every other market. Early adopters usually fall into two buckets: execs who want to perceived as visionary and cutting edge, or businesses who feel your pain point (what you are solving) extremely acutely.

Early adopters don’t need you to have crossed every t and dotted every i right out of the gate. They’ll need some, and it is your job to figure out which. Learn in the market, not your conference room.

And sales… don’t scale up sales until you have a repeatable sales model, or you’ll burn a hole in your pocket. Start with the founder leading sales and scale up at first with a maverick (tip: read that Suster post if you haven’t).

Tactics that we might call “lean startup” are nothing new in enterprise. When I was at Trilogy in the mid-90s, we often pre-sold products before we built them. At Envive (bought by Keynote), we pivoted our main product and leveraged early beta customers like Bay Networks (where Maynard Web was a classic “visionary” CTO) as our foundation. In both companies, we also did loose experimentation via smart, creative consulting teams doing implementation and customization. However, this stuff didn’t have the rigor, focus or self-awareness that has emerged with the work of Steve Blank and Eric Ries.

Of course, across these companies and others, I’ve also seen teams burn through cash by scaling sales and infrastructure too soon, in essence trying to buy growth before they or the market was ready. I’ve closed and then watched exciting bizdev deals fail because of lack of product-market fit. I’ve seen how expensive sales reps from big companies could struggle without an established brand behind them and a repeatable playbook to work with (and then watched them trigger a destructive internal war between sales and product). I’ve seen companies refuse to listen to their customers, and on the other extreme, I’ve seen enterprise companies trap themselves into being IT extensions of their biggest customer, and thus lose the broader market.

Consumer or enterprise, there are a lot of ways to screw up…