- Pivoting is a common and necessary process for startups to find success.
- Brex initially started as a virtual reality headset company but pivoted back to their expertise in payments.
- Goat started as a group dinner platform but pivoted to become a successful sneaker marketplace.
- Tom Blomfield's first startup, Group A, failed to gain traction and he pivoted to create GoCardless, a successful recurring business payments company.
- Clipboard Health started as a hiring platform for nurses but pivoted to become a software-enabled skilled nursing facility agency.
- Pivoting often requires spending time understanding the problem and manually solving it before building software solutions.

- The video discusses the concept of "pivot hell," where companies constantly change their ideas and struggle to find product-market fit.
- It highlights the importance of starting somewhere and becoming an expert in a specific area to find the right idea.
- The story of a company that went through pivot hell but eventually found success by identifying a regulatory change is shared.
- The importance of validating ideas quickly and finding customers who truly want the product is emphasized.
- The significance of picking the right metrics to track and having a main key performance indicator (KPI) is discussed.
- The video encourages founders to pivot when necessary and emphasizes the importance of the founders themselves in the success of a company.

- Successful startups need to find product market fit
- Pivoting is a necessary process for finding this fit
- The group partners at YC are experienced in helping founders navigate the idea maze and find their market
- YC has worked with more zero-to-one startups than anyone on the planet

Pivoting is a common and necessary process for startups to find success. It involves changing the direction or focus of a company to find the right product-market fit. Several examples are given, such as Brex and Goat, who successfully pivoted to different business models. The video emphasizes the importance of understanding the problem, validating ideas quickly, and finding customers who truly want the product. It also highlights the significance of picking the right metrics to track and having a main key performance indicator (KPI). The founders themselves play a crucial role in the success of a company. YC, a group of experienced partners, helps founders navigate the idea maze and find their market.

You might think that pivoting is something done only by the startups that don’t make it. In reality, a huge number of the best startups pivoted. 

In this first episode of our new series, Office Hours, Y Combinator Group Partners share their favorite stories of entrepreneurs who pivoted and went on to build game-changing companies. The group of startup experts also share their own pivot stories and help answer the questions: How do you know if it’s time for your startup to pivot—and how will you know if that next idea is the one?

Apply to Y Combinator: https://yc.link/OfficeHours-apply
Work at a startup: https://yc.link/OfficeHours-jobs

Chapters (Powered by https://bit.ly/chapterme-yc) - 
00:00 - Intro: How To Pivot
00:37 - Favorite Pivots
00:53 - Brex
02:40 - Goat
04:55 - Tom Blomfield: Billion Dollar Startup
07:52 - Clipboard Health
08:49 - The Secret to Finding the Right Problem
10:28 - Pivot Hell
13:43 - Diana Hu's Startup
16:23 - Picking The Right Metrics To Follow
16:47 - Favorite Understanding Of Pivoting
18:34 -  Find And Track Your Main KPI
20:02 - Outro: Pivoting Process

You don't know what the thing is that you're chasing when you wake up every morning, then you probably need to pivot, right?

So many founders have to work on the wrong thing before finding the right thing.

It's like they've internalized, I'm going to fail, so I might as well do something cool on the way down.

You might think that pivots are a mistake or something that only startups that don't make it have to do.

A huge number of the best startups had to pivot.

And today we're sitting down with YC group partners to capture some of the best stories on how to pivot.

Pivoting is 1 of these words that people use all the time that means a lot of different things.

So I always like to just say changing your startup idea.

You know, if you're not making something people want, you usually need to change your idea or your startup will fail.

What are some of your favorite pivot stories?

In the history of crazy pivots, I'm going to start with Brex.

I mean, look, when they initially applied, the idea was a virtual reality headset.

Beyond is basically an augmented reality company focused on replacing your laptop using your smartphone.

And what was funny about it is the 2 founders had no experience with hardware or with the physics behind this stuff.

When they were younger, they actually built a payments processing business in Brazil.

So there were like these high school kids who built something kind of like Stripe for Brazil and were successful enough that it got acquired and they were like, you know, we're reasonably successful.

And so their idea for their second startup was, hey, we've done this payments thing.

We want to do something way more high tech.

And they were like, I don't know, VR headsets.

And so what was funny about it is like, I thought there was no way that that idea would stick when they interviewed.

Once they went and talked to a bunch of hardware experts on the mechanics of building 1 of these things, they realized that they were not the team to do it.

And so, luckily they went back to the thing that they knew a lot about, which was payments.

Do you remember like how far into the YC batch were they when they finally gave up on the VR headset idea?

I think we had them talk to a bunch of experts.

Reality sort of started to seep in where they're like, wait a second, what do we even know about this stuff?

It might also be like something that affects smart people where I think smart people feel like things that are worthy, you need to feel really hard.

Like you're trying to overcome a really steep hill or try to do really hard challenges, and you ignore the stuff that actually just seems very easy to you.

So it's probably in the Brexgeisers case, maybe a payments-related company maybe felt easier than building like a VR company?

I think they were just like, oh yeah, I've done that.

We've been there, done that, on to the next 1.

It's a YC company that we actually funded a long time ago, like over 10 years ago at this point.

But I bring it up because it took them a while to figure out what to work on.

We funded them as Grub With Us, which was basically a site that let you meet local people through group dinners.

Actually, it really took off within very specific communities.

So for the investor community in San Francisco loved it.

It's like a way to meet other founders and investors.

But it had awful retention, didn't go anywhere.

It took them I think 2 years post YC to realize that they themselves are really into collecting sneakers and that there was a growing market in these sort of limited edition sneakers would often like sell out like on the day of release and there was like a really big secondary market for them.

And they were like, oh, hey, we know a lot about this stuff.

This seems like a really like growing industry.

Let's just like ditch the whole group dinner thing and go down like a sneaker marketplace.

And So to me, this is the instructive point about this story, is now in present day, you can see on CNBC or reading the New York Times, oh, sneaker collecting, like this seems much more like a real thing.

In 2015, this is so far outside the norm of conventional wisdom to decide to pivot your company into sneaker collecting.

I just want to make that note because a lot of the really great pivots like that are when you're years ahead of consensus.

When I heard about this pivot in 2015, it seemed, I don't know, unconventional is a nice way to

Sometimes the founders to arrive on that idea, they almost need to have the morale so low that they hit a point where like, you know what?

Like, I'm just gonna work on something because I'm interested in that.

It's like they've internalized, I'm gonna fail, so I might as well do something cool on the way down.

That's what lets them take the blinders off to actually see the potential for something like this.

Both Brex and Goat are some of the biggest and most successful startups of our time now.

But as Dalton and Harge walked you through, each had to realize the prior idea they had was not right before they could get to the next step.

Next up, Tom Blomfield sits down with Michael Seibel to talk through the first of his $2 billion startups he co-founded.

We did YC, my first company, my co-founders Matt and Hiroki, we applied with an idea called Group A, which is a classic fintech tar pit.

Every college kid thinks this is the best idea in the world, and we were those college kids back in 2011.

So basically, it was a group payments, bill splitting, like collect money from your friends for your college like soccer team thing.

We hassled our friends into using it, and it wasn't that useful, so no 1 ever retained.

They'd drop off, churn, and we'd phone them up again, and

for a week or 2, and then churn eventually.

So it's like, we weren't delivering value, really.

It wasn't useful enough for people to really care about.

We did office hours with PG in the Mountain View office, and I remember very vividly, we sort of walked around the block, and he told us to stop building functionality, stop building new features, stop like piling more crap onto the sort of mountain of turds we had already, and instead just try and go and get users.

And to do that, all our users were in the UK, and so we got up at 3 or 4 a.m.

To cold call like hundreds and hundreds of Treasurers of sports clubs and after 2 weeks we got like 1 new user After 4 of us cold calling for 2 weeks and we knew it was the time to pivot then so what we did is Took kind of the core technology this by payments infrastructure We're making bank bank payments And instead of trying to sell it to college kids, we applied it to businesses.

So starting with small businesses who are collecting recurring payments from their customers, it turned out DirectDebit's a perfect use case for that.

And 12 years later, that company is go-cardless, basically doing the same thing, recurring business payments from bank to bank.

When you're young, you think of the entire world as consumer, and then the older you get, the more you're like, oh, I guess businesses buy software.

especially to college kids, all of the problems you have been exposed to are the problems that college kids in developed worlds have, you know, like It's bill splitting.

It's how do I organize like to see my friends next week?

It turns out knowing what problem to solve is a huge part of the battle.

It's the primary 1 if you're already a builder.

The process is truly about finding a problem you can solve.

And often, you won't know what that problem exactly is until you've actually made contact with real customers.

Next up, Gustav and I hang out and talk through yet another billion-dollar startup, Clipboard Health.

The founder, Wee Deng's journey is a case study in finding the right problem.

While the other examples mentioned so far came together over the course of months, sometimes you have to spend years in the idea maze to find the key to unlock product market fit.

1 of the big, awesome questions that founders should always ask themselves, like, what do I understand or what do I know and what do I believe that nobody else knows or believes?

And that's actually sort of the core of a lot of the pivots that really work incredibly well.

My favorite 1 is actually Clipboard Health.

So this is a company that came in as a hiring, really almost like an indeed, but for nurses.

We're the co-founders of 2 Magnets, a program that helps nursing graduates get jobs.

Which is somewhat of an idea that we see quite frequently.

Hiring is a big problem, and then seemingly, there are a lot of nurses.

How do you walk into that market and be successful?

And it turns out that if you're just doing Indeed, but for nursing, it's going to be a slog.

And that is actually what Wee Deng, the founder, found for actually a couple of years.

But the cool thing about her is that she just spent enough time selling to hospitals and just talking to everyone around the hospital.

She realized that this person, when someone, when a nurse would call in sick, they would always have to go to an agency.

And that's what really was sort of the key insight that made Clipboard go from a startup that was just really trying to create another Indeed for nurses to now 1 of the biggest software enabled skilled nursing facility sort of agencies.

I think what was so impressive about her, so I worked with her in the early days when I was at YC, was how she adopted the doing things that don't scale motto like so well, and she didn't really build a lot of software early on to solve these problems.

She literally spent time with trying to understand exactly what is the problem that I need to solve, and maybe I can just manually solve this problem.

She manually self-coordinated getting these nurses in front of these hospitals.

And it wasn't until she'd done this a few times, and she was like, okay, there's an opportunity to build software here in automation.

But she started completely, like absolutely in the right direction, which is so difficult for founders, because founders love using software to solve their problems and love getting into the code editor.

That can be extremely distracting in a pivoting process and trying to overbuild things when you really need to just understand the problem that someone's having.

So you've learned it can take a long time to get to product market fit.

What about the other end of the spectrum?

You keep trying new things in faster and faster cycles, but it doesn't come together.

This is called pivot hell, and Surbhi and Jared are going to explain how to avoid getting stuck in it.

We even have a term for it at YC, we call it getting lost in pivot hell.

And we see this with companies in the batch sometimes where like every week we see them for office hours and they're working on a totally new idea.

Like completely, it's like an all new startup every week.

What causes founders to get lost in PivotHell?

I think that if you're too much of a perfectionist upfront and you want everything planned out perfectly and you want to be able to see exactly how the cards are gonna unveil themselves kind of beforehand, I think that keeps you in this loop of constantly iterating instead of just saying, look, there's a bunch of unknowns and I know that, but the only way I'll truly learn is if I sink my teeth into 1 idea and push it forward.

If you're searching for the perfect startup idea, you just keep looking for new ideas because no startup idea is ever perfect.

As soon as you find an idea, you realize the problems with it, and then you switch ideas.

Do you know of any companies that were in pivot hell and then moved on from it?

There is this company, they went through pivot hell all batch.

When they started at YC they had 1 idea and every week it was a different idea.

In fact, they were so deep in pivot hell that when they got to the end of the batch, they had to defer demo day because they literally had nothing to present to investors.

So they didn't know what their company was going to be.

We kept doing office hours with them to talk about their new ideas.

And about 6 months after the batch, they hit on an idea that was like a really high quality idea.

And the idea that they pivoted to is they realized that there had been a regulatory change.

They created the first company, really, that productized this regulatory change.

It's the kind of idea where if they'd come to us earlier in the batch, we would have been like, that's the 1, that's way better than the other 7 ideas that you pitched us, right?

But an interesting thing is how they came up with the idea.

Basically, in order to have this idea, they had to go through a whole bunch of bad ideas first.

But in the process of doing this, they got to know the industry really well.

They got to understand what people actually cared about and tip them off to this regulatory change and this big new opportunity that it opened up.

So many founders have to work on the wrong thing before finding the right thing to work on.

And so the biggest thing, because pivoting is an option, if you want to be a founder and there's a space you want to change or have an impact on, is to start somewhere.

That's how you learn about the space and find the right idea.

You start somewhere and become an expert.

The only way you're going to find a real market and a real problem to solve is in direct contact with users.

The market itself will teach you if you're in the right place.

Next up is Diana Hu talking with Nicolas Dessain about her own YC startup, Escher Reality, which she sold successfully to Niantic, the creator of Pokemon Go.

But before finding product market fit, she started in a very different place.

For a bit of context, Azure Reality would build a augmented reality SDK for game developers, that's what it became.

But what we started with was augmented reality technology, and we didn't know what we were doing.

I mean, we're really much technologists and engineers, and we love writing code.

So I would call it 1 of the syndromes for founders that we had was very much a cool technology in search of a problem.

So some of our first customers were actually marketing people trying to do splashy things with AR.

And I mean, they're very nice people and excited.

It felt like they wanted it because they were so excited.

And it wasn't until we got into YC that we understood that that wasn't real feedback.

And we went on a series of user interviews and learned that marketers were just being nice to us.

It's a mistake that a lot of founders do because you're so excited about your idea and people just want to reciprocate that exciteness, but that doesn't mean that they really want to use it.

Because when we get to like, oh, are you going to pay us?

Which is really the real, real better feedback.

Yeah, I mean, we kind of got some soft yeses and this and they signed up, but not really.

But the conversations really changed when we started selling them to game developers.

And for a bit of context, we had started the company before Pokemon Go was a thing, which is what made augmented reality in gaming more of an SDK that people wanted.

So that was not as a pivot in terms of changing the complete idea.

It was pivoting more in terms of our go-to market and who our users were.

And this is actually a very common thing that founders do in the batch and who we work with, is really understanding who really wants what you Build is a big question to try to figure out.

who like it may not be the right customers in the end.

as much as fast as you can, so that you don't waste too much of your time working on something that doesn't matter, that people don't want.

When you get to the right idea, it becomes a hell yes.

What if you want something more quantified?

Aaron Epstein sat down with Brad Flora to talk about how important it is to pick the right metrics to follow.

When things are working really well, it's easy to know you should keep going.

When things are not working, it's obvious you should do something else.

It's that gray area where you're like making some money, but it's maybe not repeatable, that it becomes tricky to figure out, like, should I pivot or not?

My favorite understanding of pivoting is when you change what you're working on, but not necessarily always every part of it, right?

In basketball, when you pivot, you have to keep 1 foot stationary.

And so you may keep the type of product that you're building, but maybe the audience that you're going to build it for is going to change.

Or you might build a different product for the same audience that you're already going after.

But it's basically to change your idea in some way that hopefully builds on the learnings that you've had from the prior ideas that you've worked on?

We actually applied and got into Y Combinator as Color Lovers, which is, was and is a creative design community for people to create and share color palettes and patterns and shapes.

And we'd built that up to a community of more than a million members.

And we tried all these different ways to monetize the community.

We tried selling software, we tried ad model, we tried running contests on the site to our community.

All kinds of crazy, non-repeatable, non-scalable things we were trying for, honestly, probably a year and a half after the YC batch that we went through.

So it took us for a long time and I like to say that we were wandering in the wilderness and the reason it took so long was because we didn't have a main KPI that we were focused on And it never even occurred to us that it wasn't working for that long time because we never had this main KPI that was not growing.

So we just weren't paying attention to that.

And so ultimately we pivoted to a marketplace for graphic design assets that we called Creative Market.

And as soon as we launched that, all of a sudden the main KPI was clear.

Like, are people buying on the marketplace?

And is that number going up every day, every week, every month?

And it was much clearer, like you were saying earlier, with the clarity and the focus of what we needed to do to grow and whether it was working or not.

So that's my advice for all founders out there.

Make sure you have a main KPI that you're focused on and make sure that you're tracking it on a regular basis.

I was like refreshing it every 15 minutes, you know, to see, are we growing, how are we trending versus yesterday versus last week, and that's gonna be your main indicator for whether your business is working or not.

And if you hear what Aaron just said, and you don't immediately know what your main KPI is, Like, you don't know what the thing is that you're chasing when you wake up every morning, then you probably need to pivot, right?

1 thing I think as group partners, because of that experience that we had, we try really hard to get founders to that moment of realization a lot sooner.

But if not then, you know, early on in the batch to try to help push them along to that moment of clarity of like, oh, this doesn't add up.

1 of the ways that I like to think about it is it's kind of like when buying real estate, a lot of people say location, location, location, right?

And really when it comes to startups it's really like the founders, the founders, the founders, the founders.

Because everything else can change and we've seen this so many times where you know it's the same founders, That's like the location, you can't change that.

But you could knock the company down to the studs, rebuild it, they can work on a totally different idea, and all of a sudden it looks like a different company.

And oftentimes the founders even act like different founders.

They become more formidable when they're working on an idea that they're excited about and they're well-suited for.

Each successful startup we've talked about today had to pivot to find product market fit.

Whether you're just getting started or still thinking about launching a startup or even wondering if you need to pivot, I hope these examples helped.

I'm proud to say the group partners at YC are some of the most experienced people in the world at helping founders in the idea maze try to figure out their market.

We can do it not just because we've been there, we can also do it because we've directly worked with more zero-to-one startups than anyone on the planet.

Thanks for watching, and we'll see you on the next episode of Office Hours.

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Startup Experts Reveal Their Favorite Pivot Stories