The Role of Culture in a Pivot
Owen Matthews has always been an advocate of culture, and it is something he works to instill in teams he works with from the get-go.
YUPIQ had developed a strong and open culture from inception. The corporate culture allowed it to function very effectively under a flat organizational structure within which every single team member had a voice, and the opportunity to be heard.
This open organizational structure that formed the basis of this culture would prove to be key through the process of pivoting. When the founders opened the formal discussion with the team when it was clear to everyone that something needed to give. The team then decided, as a whole, that they would work towards finding a solution, whatever it may be.
“The process that they went through and the outcome was supportive of the culture, the fact that it happened that way was a sign of the strength of the culture, and it was very inclusive and very focused on the objective of what’s best for the company. Everybody had a voice, as opposed to some executive or board producing some sort of dictated new strategy. I was very happy with the approach that they took.”
Cultural Alignment between Investor and Entrepreneur
Having an open and transparent culture within an organization is important. But too often investors and entrepreneurs ignore if the corporate cultures that exist in each of their organizations are also aligned. If the investor’s cultural organization differs from the company they invest in, when issues arise, problems are exacerbated by the differences.
Therefore, although the YUPIQ founders were nervous when they came to Owen to discuss the changes they wanted to implement, they also felt cautious optimism. The lines of communications were always open, and the process leading up to this point was marked by frank, honest, and overwhelmingly positive and supportive discussions. To the entire team’s credit, it was evident that they had done their research, considered options in a plan, and tested their hypotheses before presenting their findings. Therefore, when they were ready to present their decision to pivot, they were not only able to ask for advice, but also had independent proof-points to justify making the necessary decisions.
“They, as a small team, sat down and decided they were going to do something, discussed the best way to approach doing something, and then designed a process to determine how best they could narrow their focus.” – Owen Matthews
Owen had no intention of pulling his support. He recognized their potential as a team and was comfortable investing in them. The product was less important and the fact that the product was changing did not really scare or worry YUPIQ’s investors.
“That’s typical for us – to find a strong team that we like, find a market that we’re interested in, but the specific product or the specific solution can change as you get feedback from the marketplace.
And that, in our experience, is the one thing that is flexible and can change. If the team isn’t right, it’s unsolvable. If the general market space isn’t right, if the market as a whole isn’t a good place to be, then you’re going to suffer. But the specific product or the specific offering can change which is why I was comfortable backing them through the pivot. And I even question the word ‘pivot’. It’s more like a focusing.”
A focusing is exactly what the pivot became. While much of the core value proposition of YUPIQ remained – a better way to provide a customer’s audience with a way to share their content – the structure of the product and the customer base evolved to accomplish new objectives.
“Really, what they did was go from a broad set of customers to focusing on a much narrower set of customers which had a much higher propensity to see the value in the product and be willing to pay for it.”
The realization that they needed to focus on a smaller customer base that was much more informed and receptive to the concept of referrals was crucial to the pivot. Recognizing that their existing customer base was too broad, and that it required too many product features to support, YUPIQ’s team focused more on the customers their new product would cater to.
Research and experimentation in the self-assessment process, the team identified Software as a Service (SaaS) companies as the ideal customers. These companies required the least amount of support, having internal tech teams able to implement the service, and most importantly they understood the process and the value behind a successful referral program. SaaS companies also generally ran ongoing, long-term campaigns which alleviated YUPIQ’s struggles with customer retention. Lastly, SaaS companies were accustomed to paying for external tools that helped their business. Focusing on a this particular set of customers made YUPIQ a new company; one that really fit with the product’s direction.
Coming to these realizations through their reevaluation process provided the YUPIQ team with the knowledge they needed to pivot to their new product and name, Referral SaaSquatch.
“By March or April of 2013 they knew what they were doing and they were all firmly committed to it. Every single employee had had their voice, they all agreed that it was the right thing to do and they were heads down and after it with a huge amount of conviction.
My job was to enable them and support them through what was a great deal of uncertainty for them. They recognized that, if it didn’t work, then maybe the company didn’t have a reason to exist so they understood the risks. I wasn’t going to stop funding them anytime soon because I believed in the team and I believed in the market space, but they were worried.”
Worried or not, the team stuck to it. They quickly built their new product, and rolled it out with the first five clients who had been found during their research and market testing competition, and were learning fast from the lessons YUPIQ had taught them.
Referral SaaSquatch’s new focus on a certain type of customer allowed them to become successful very quickly, and provided immediate growth soon after launch. While much of the original YUPIQ team remained in its new incarnation, new people came on board as well. Even with the increased speed in development and growth, however, there has been little change in culture, a fact that both Will Fraser and Owen Matthews take pride in: Everyone’s voice remains important.
Managing Pivots Through a Measured Approach
As much as YUPIQ’s pivot was a learning experience for the team, it was also a learning experience for Matthews, the other investors, and the Alacrity Foundation.
For most investors, a pivot is risky, uncertain, and nerve-wracking. It induces a sense of panic that is difficult to control or avoid. There are alternatives to this panic mode, though.
“I like a measured pace. You don’t throw a whole pile of money at something with the hope that you’re gonna create something great. You keep a low burn with a very small, very bright team that can accomplish a lot.”
The Importance of Trust
By trusting the team and investing early in people instead of the product, the chance of success increases. Owen’s heavy focus on building a strong sense of culture within the teams he works with and invests in ensure that they develop under a great set of values. Although it might take more time and dedication from the investor’s side, the rewards are much greater.
“Taking the time to develop a strong sense of culture saves money. You’re not $50MM into something that you then have to pivot on and hope that it works. You don’t just stick with something because you bought a whole pile of really bad lemons and now you need to make lemonade.”
YUPIQ’s pivot was anything but panicked. When the team recognized it was necessary, they proceeded as rapidly as they could, because they recognized the need, not because it was forced on them. The pivot was researched, planned, tested, and executed effectively. The experience of ensuring everyone participated allowed the team to reposition and grow, while providing everyone involved with valuable lessons.
“I find pivots to be very rewarding. You are trusting a group of people who you trusted enough to back in the first place. And you really did trust the people and not the idea so abandoning the idea should not be that big of a deal.
If you’re doing your job as an investor, that means you’re keeping on top of the company, you’re keeping on top of the results. If you’re providing the company with good guidance when you’re worried, then they know that something is wrong because you’re giving them enough feedback.
You’re involved enough in the company to understand how they’re doing, that they’re on track or they’re not, and you’re giving them feedback without barking at them and without being overly aggressive and telling them what to do.”
The amount of experience that investors have will dictate the level of involvement in the companies they’ve invested in. Knowing what success looks like, and being able to tell whether or not a team or company is heading down the right path is critical. A critical error some investors make it to solely blame the founders when problems arise, and not provide adequate guidance to help find solutions.
“You guide them to ask questions, to analyze their customers, and understand that there is an opportunity if they look carefully and study what’s working and what’s not working.”
Alacrity recognizes that it takes a lot of time and effort from investors, mentors, and company founders to form a strong relationship. Having a relationship built on mutual trust is one of the most important aspects of investing. That trust is critical to both parties Allowing teams to be able to trust the feedback and input provided by the investor, while also having the confidence to speak up when they sense that perhaps the direction is wrong. Teaching founders and teams to trust in themselves and their own knowledge because they are closest to the market is key. Often, the entrepreneur has information and perspective that is pertinent that an investor doesn’t have or overlooks. The right corporate culture means all perspectives are shared and considered in a relationship built on trust and support.
Timing and an open culture are what attributed to this pivot’s success.
“I think they did it at the right time. They put enough energy, heart, and soul into their initial concept. If they did less, I might have been more critical that they were abandoning too early.”
An open and trusting relationship between the team members and the investors helped them communicate effectively, subduing the sense of anxiety that might have otherwise been prominent.
“The time was right, the approach they took was right, it was evidence-based. If there was a textbook example of a well-executed change in strategy, they would be it.”
Through some great decision-making, sustained support, and an open culture based on trust, YUPIQ’s pivot to Referral SaaSquatch was exactly what was needed for the company to succeed.
By investing in the people and not the product, Owen, the investors, and the Alacrity Foundation was able to retain a team with tremendous potential through a process that often breaks companies. Successes achieved since the pivot have proven to be worth the time, effort, and investment over and over again.