You Are Working Too Hard And Not Getting Anywhere

Continuing the case method on MBA Mondays, I am going to tell a story about a business model pivot that was not a full business pivot.

In the lull between Flatiron and Union Square Ventures, I made a few angel investments and the best one was in a company called TACODA that went on to become a Union Square Ventures portfolio company and in many ways directly led to the creation of Union Square Ventures. My partner Brad who I founded Union Square Ventures with had left the venture capital business temporarily and was involved in the creation of TACODA, having provided the initial seed capital to Dave Morgan, the founder of TACODA.

Dave had previously founded Real Media, one of the early ad server companies, and he had seen the need for better targeting of display ads on the Internet. His idea was to build a companion to an ad server that could collect behavioral data and target dispay ads to the people who actually wanted to see them. This became known as behavioral targeting. The intital business model was to sell the behavioral targeting engine to publishers who would then sell the behavioral segments to their agency customers.

The software cost between $10k a month and $20k a month and was sold as a SAAS service to publishers. TACODA closed a few big deals early on and got validation of the product and the market from that. But it got harder and harder to close these deals as publishers were wary of coming out of pocket big dollars on a new technology that they weren't sure would help them make more money.

After six or nine months of disappointing numbers, I recall a meeting with Dave where Brad pointed out that the team was "working too hard and not getting anywhere." Brad suggested that the company try a new business model in which it would operate the targeting engine in the cloud and sell the advertising in an ad network model and then share the revenue with the publishers. In effect, Brad proposed that we send the publishers checks instead of asking them to send us checks.

Dave saw the logic of Brad's arguments and slowly but surely pivoted the company into an ad network. And once the business model pivot was completed, revenue took off. In less than three years after the business model pivot, the company was doing north of $50mm in revenues and was bought by AOL for $275mm.

The moral of this story is sometimes you have the right product but the wrong business model. Fixing the business model can fix the company. It certainly did in the case of TACODA.

#MBA Mondays

Comments (Archived):

  1. awaldstein

    …sometimes you have the right product but the wrong business model.Truer words were never said.How you sell (and price)l it is as important as what it does.

    1. btrautsc

      “…sometimes you have the right product but the wrong business model/”imo one of the largest problems in the tech startup community. Especially as sexiness/ momentum swing to consumer to b2b…

      1. awaldstein

        Nothing usually fits worse than the incomplete consumer model waking up as b2b to search for a transaction.You aren’t b2b cause that’s where the money is but because that’s where the core value lies that is transactable.

        1. btrautsc

          amen, brother.

    2. Cam MacRae

      We burned quite a lot of cash in the process of discovering that pay per lead worked way better than pay per listing. Turns out the internet classifieds caper wasn’t such a bad idea after all.


      “How you sell (and price)l it is as important as what it does.”Ouch! ABS !!!!

  2. William Mougayar

    What a turnaround & great story. It also shows the wisdom of VC advice & entrepreneur flexibility.

    1. fredwilson

      dave and brad are very close and that helped a lot

      1. Dave Morgan

        A big reason that the pivot at TACODA worked is that Brad helped drive a “burn the boats on the beach” discipline to our move and we had a lot of trust between management and our investors. The trust that our COO Curt Viebranz and we had in Brad’s point of view helped us commit fully and not try to to it halfway to see if it was going to work before walking away from a multi-million dollar tech revenue stream. So many pivots fail because not everyone is committed.

        1. fredwilson

          thanks for stopping by and commenting dave

    2. bsoist

      I was thinking the same thing. IMO, that’s why one takes VC funds – for the experience and advice, not just the money.

  3. Richard

    Fred do you recall what tacoda tracked via its cookies? Has the technology advanced Much since 2007 ?

    1. fredwilson

      they tracked what topics you were interested in based on what websites you visited that ran their tag

      1. btrautsc


  4. JLM

    .Nothing to add other than — well played!Great story, great outcome. Great lesson.Further affiant sayeth not.JLM.

  5. Mark Essel

    I enjoy this story for a few reasons even though I’ve heard about it before.First the targeted ad startup is what I based my first startup idea on (contextual social ads). It didn’t work for me, but I continue to believe that this is the way ads will grow to become indistinguishable from search content.Second because TACODA was a big momentum win for you and USV’s inception. What happened to the technology and team? Was the acquisition a great buy?Third because of the jiu-jitsu business redirect which better matched the needs of the market with the resources of the business. That form of flexibility is admirable, even when it doesn’t work out so well. The “flow like water” adaptability is an essential technique for folks who need to deliver.

    1. fredwilson

      AOL broke up the team and the platform and messed up the acquisition badly

      1. Mark Essel

        sorry to hear that. I need to do some research on successful acquisitions (even to remove a competitor) and what was involved in that process for my own history lesson

      2. PhilipSugar

        You know what would be a great case study post? Ways that AOL and Yahoo fucked up acquisitions Except its negative, and I know you don’t like posting about that except anonymously (and I respect and agree with it)

      3. ShanaC

        how so

    2. Matt A. Myers

      Well, if you’re redirecting the stream like that then you’ll find out what pieces are more fixed than others. I can imagine it could take some time for all of the different parts of a business to transition – depending on how big of a redirect it is of course.

      1. Mark Essel

        “what pieces are more fixed”The parts that break.

  6. Mark

    Thanks for sharing! I love business models that either directly or indirectly through rock solid attribution “send a check” to the customer rather than asking for the check.

  7. kidmercury

    i am an expert in working hard and getting nowhere, it is a core competence of mine. not trying to brag but honestly i’m probably much better at it than most you goes back to that quote from edison or einstein or whoever, “i haven’t failed — i’ve just found a thousand ways that don’t work.” if you keep analyzing what’s not working and come up with meaningful answers, i think it becomes easier and worthwhile to continue evolving and putting in the effort.

    1. Matt A. Myers

      Hehe.I get stuck in the same loop, though it’s when I pull back and see the pieces that work (or must focus on; the simple leading metrics) – I suppose could call it analyzing – then the effort has actually moved along, it just hasn’t felt that way with all of the noise surrounding it – though yes, time does seem to go by more, however much of an illusion it is.

    2. falicon

      You and @ccrystle:disqus should join me at Dig Down Labs. Together we’ll def. get those projects into the wild…and eventually figure out a way to get the best of them at least ramen profitable πŸ˜‰

      1. JimHirshfield

        Fail together; learn together. cc @ccrystle:disqus @kidmercury:disqus

        1. falicon

          Most of my projects are at least ‘pack of gum’ profitable…none are ‘businesses’…yet. So lots of learning (and work to do)…not too much failure actually going on though πŸ˜‰


        But shouldn’t you just “ankle bite” a proven business? If you had three people programming to split returns then you’d beat everyone else on development costs. So, you could undercut them on price.

        1. falicon

          I would never personally get into something where I have to rely on winning deals or customers simply based on price (I’ve actually tried that approach long ago and it’s just a race to the bottom in my experience).These days I’m always in search of what unique value I can build or bring to the table and have be a large part of reaching the goal (whatever that is at a given time for a given project)…that’s where all my decisions really start now.


            Cool, so you’re playing Fred’s game. A numbers game. Throw out as many ideas as you can and see if any stick?

          2. falicon

            Somewhat – but not at all in a way I think he (or any investor) likes.In my mind, I’m not just throwing out products and seeing what sticks…I’m attempting to build brands around a few specific problems that interest me.Because of my approach, each brand is really just a small and focused feature or two that should be highly useful/valuable to a specific set of people. This generally means they won’t hit ‘investment scale’ quick enough but by keeping super lean and with proper targeting they can reach ‘comfortable profit’ pretty easily.When you buy a lottery ticket…do you always buy the one with the highest potential payout (regardless of the odds) or do you focus on the odds (and accept lower, but more likely, payouts)…everyone’s got their own answer πŸ™‚


            I always buy the one with the highest potential. Go big or go home!!!Besides why climb a hill unless it is practice for someday climbing a mountain?

          4. falicon

            Trick question…I don’t buy lottery tickets at all…instead I invest the ticket price in servers or marketing to build my own future.Why chance what you can control instead? πŸ˜‰


            Oh, I don’t buy them as an investment. They are a *game* nothing more to me. So the one or two dollars doesn’t really matter.But I’m all for the whole control approach.

          6. Matt A. Myers

            (Proper answer: Don’t buy lottery tickets, create your own odds)

          7. kidmercury

            yup, that’s the way to do it… since it’s always an uphill struggle, if passion for something besides money isn’t there, it’s easy to run out of passion


            “if passion for something besides money isn’t there, it’s easy to run out of passion”Huh? Were you drunk when you posted that?

      3. ShanaC

        That could be interesting to watch…do you all have enough overlapping interests to make it work


          Yes, they all have wanting to make a wheel barrow full of money in common.

      4. Matt A. Myers

        I’d enjoy being part of this somehow — I really like all 3 of you and what you stand for, your approach to things, and personalities. πŸ™‚ Reason to have an office in NYC too? πŸ™‚ Hmm..Edit: My plans are ambitious enough I figure I can / will end up having offices in multiple cities.

      5. Matt A. Myers

        @falicon:disqus @ccrystle:disqus @kidmercury:disqus – Are you all going to be in NYC for September meetup? I’d probably be ready by then to talk to you all about my bigger plans, if you wanted to get together and chat. πŸ™‚

        1. falicon

          Would love to catch up when you are in town…I won’t be at the Sept. thing because it’s on my anniversary…but I’ll be around town all the days around it if you stay for more than just the day-of. πŸ™‚

          1. Matt A. Myers

            A 1-day trip to NYC should be a sin… I will see how long I can stay. πŸ™‚


            “A 1-day trip to NYC should be a sin”It’s not.

          3. Matt A. Myers


        2. Pete Griffiths

          I think that kind of brainstorming with experienced guys can be extremely valuable.

          1. Matt A. Myers

            Definitely. I’m hoping I can perk some interest and/or creative thinking. πŸ™‚

    3. Max Yoder

      β€œI haven’t failed; I’ve just found a thousand ways that don’t work.”—Whoever

      1. kidmercury

        lol i need to get that on a shirt! πŸ™‚

        1. Max Yoder

          In Helvetica.

          1. ShanaC

            meh – different font, I’m over Helvetica

          2. panterosa,

            Big on Gill Sans here

      2. Donna Brewington White

        Or… I am 1000 steps closer to finding the solution. In learning to cold call in my early career the message I learned was that every no was one step closer to a yes.


          Cold calling? What’s that?

    4. takingpitches

      haha. So true. Work hard but it shouldn’t feel like hard work. Gotta feel the flow. If you don’t, you might be spinning wheels.

    5. Lucas Dailey

      I used to believe this but I’ve changed my perspective. Yes the data points of failures are useful, and the lessons valuable, but the greatest value is simply spending more time learning what works. Better to study case studies of success than mistakes.To paraphrase Tolstoy: Successful businesses are all alike; every failed business is failing in its own way.

      1. kidmercury

        yes i agree totally….cut the losses and double down on what’s working.

      2. Luke Chamberlin

        When you have millions of ways to fail, knowing which thousand won’t work is of little value.


      “i am an expert in working hard and getting nowhere…”Join the club. I’m trying to put together private email discussions to help us become more effective. Let me know if you want to sign up for the discussions.

      1. kidmercury

        i really would love to find a way to connect with other people with compatible skill sets.


          So, far there isn’t many on the discussion list. But, if you email me (visit my website the URL is my name on this post) then you can join in on the next new topic.


          Did you email me?

    7. Barry Nolan

      searing honesty kid.

    8. CJ

      Bah, I just think hard about working hard and get nowhere. I find it saves on the energy outlay until I have the one thought that will change my life.

    9. William Mougayar

      I heard from another entrepreneur today Ted Livingston (Kik) say that their list of things they are NOT doing is longer than what they are doing.

      1. panterosa,

        My list of what I’m not doing is mind-blowing. I’ve asked some new advisors to help me with that. There’s a lot of ‘dead capital’ in my idea drawer waiting to be activated.

    10. Carl Rahn Griffith

      Life is an iterative process. I think I will have it cracked a day or so before I die…

  8. JimHirshfield

    This story has a strong resonance for me. Been there, done that, gonna again.

    1. Matt A. Myers

      Yeah, I can sense this being an easy scenario to find yourself caught up in – such a simple flip to do, yet so simple it could be hard to wrap your head around after constructing everything with the opposite-business model mindset.

      1. awaldstein

        It’s never simple. Neither to realize and even harder to execute on with an existent customer base.When I worked with Umang Gupta (KEYN), he taught me the gestalt of the price increase as a positive act, creating more stickiness for your best customers while bolstering your core economics.Tricky. Powerful. Sometimes the right thing to do.

        1. Matt A. Myers

          Definitely a lot of “what if’s” triggered from the unknowns of what could happen.

  9. sbmiller5

    This blog properly highlights the #1 theme behind AdTech over the past 15 years. “Brad proposed that we send the publishers checks instead of asking them to send us checks.” For years, technology came out that would help publishers drive a premium for their inventory. But being afraid of the upfront or any ongoing cost, they wouldn’t adopt the technology.AdTech was forced to pivot to become a source of demand and instead of publishers being able to drive a premium off of new targeting they accepted a discount through bulk buys. Years of continuing to allow cheaper (ad network) inventory to get the best audience data as opposed to the direct sales (more expensive, less targeting available) has led to the current state of continuous dropping CPMs and continued inability of publishers to maintain profitability.

    1. fredwilson


    2. ShanaC

      this probably was a mistake – long term that sort of eternal drop is unsustainable

  10. andyswan

    “Writing checks” is a powerful business model. Aligned incentives FTW!

    1. Aaron Klein

      Huh, that model sounds familiar.

  11. Terrence Andrew Davis

    Highs and lows balance. God is perfectly just.

  12. Donna Brewington White

    “…sometimes you have the right product but the wrong business model.”Wow, that’s a doozy. I know that much of the AVC community represents tech startups but this statement can be especially true when your product is YOU. Harder to change the product in this case, so if something has to change it has to be the business model. I mean it’s gotta be the business model or else you’re sunk!I’m going to have to mull this over because I am at a bit of a crossroads. Good timing.The feedblitz email arrived in my inbox after a particularly long work session and in my weariness I thought you (Fred) were sending me a direct email with this post’s title as the subject. I’m thinking, “Wow how did he know? And why is he emailing me to tell me this?” That’s when you know it’s time for a break.

    1. Matt A. Myers

      Here’s a hug for you – *big hug* – and selfishly I got a hug I needed out of it too! πŸ™‚

      1. Donna Brewington White

        Thanks, Matt. I feel it. Back atcha.

        1. Matt A. Myers


    2. awaldstein

      Join the club!Building a model that sells your expertise one to one or one to few is a tricky thing.That’s why I built this new model ( Office Hours… ). Works pretty well as a pipeline tool and keeps me touching a lot of new clients, yet needs to be used with other types of engagements.

      1. Donna Brewington White

        I’ve been meaning to ask you more about this. Another thing to add to the list for when we meet. πŸ˜‰

        1. Anne Libby

          I’ve done a little bit of this, too — not as an ongoing “product,” but as an occasional offering. I’d be glad to share anything I’ve learned…

          1. Donna Brewington White

            Appreciate this, Anne! Adding you to the list.

          2. Anne Libby

            Any time, Donna.

      2. LE

        Your site looks nice (I had seen it before but something changed).On that blog page I would make the link at the top and more prominent. It takes to long if you don’t have the time to read to get to the close (at the bottom). I actually read it, went back to your post, saw “office hours”, scratched my head (like Brandon does) and said “hmm I am missed something”. Then I saw it at the bottom.Also I would put a square with that on your home page, next to “consulting” and before “wine blog”. For that matter “wine blog” doesn’t really belong at the same attention level as the other two (assuming of course you are trying to do what you are saying above). Maybe below but that is much less important than having “office hours” on the home page (with a separate page explaining what that is not just the link to

        1. awaldstein

          Thanks….A couple of things:-Office Hours are an offering that was not created for Voomly specifically. It’s a channel for them.-I do need to create a new section for it on my site as you note but honestly, I can only handle a small number of these and people are finding me. A great value if I must say so myself ;)-Re: wine. A bunch of years ago when I started this generation of the site and both blogs everyone told me the same as you. Basically that I was nuts.I decided to ignore the advice and do what I do. A large majority of initial meetings, in board rooms even, start with a question like “that post on Colares in Portugal intrigued me”.I’ll never change this. It’s just who I am. You buy the whole package!

          1. LE

            Oh don’t get me wrong. I think the “wine” as well as the “new yorker” is a great thing. The “new yorker” is what differentiated you from the start when I began to read That and the wine gives you a uniqueness that has absolutely added to who you are and I can see the clear benefit in the same way that you should always try to find something that hits the hot button of someone (this works very well with dating profiles I’ve found). It gives you color and uniqueness. My comment is strictly about the prominence vs. the other objects. Which is why I said “doesn’t really belong at the same attention level” specifically. Glad to hear you have more than you can handle.


        I read your post, it’s a good one. Do you get paid based on outcomes?

        1. awaldstein

          Glad you liked it.Re: performance-based projects–I have and do.The more you get paid that way the more you want to have an influence on execution, so structure and compensation go hand in hand.

    3. fredwilson

      the headline worked

    4. Aaron Klein

      There is most definitely nothing wrong with the product. πŸ™‚

      1. Donna Brewington White

        Thank you Aaron. You are such a cheerleader!

    5. Lucas Dailey

      I had the same thought when I saw the email. But then I had sent Fred a link to a TC article I had published friday, I thought it was his way of saying I was barking up the wrong tree!

      1. fredwilson


    6. ShanaC

      yes, omg – but figuring out what is the right business model takes work

      1. Cynthia Schames

        Doing work takes work. It’s just a hell of a lot more satisfying when you’re swimming toward the shore instead of in little circles out past the breakers.

        1. panterosa,

          @ShanaC:disqus and @cynthiaschames:disqus I agree with both of you. There’s the work of getting it right, and the work to do once you know what right is, the inevitable work of work. Yes, do try to reduce the circle you swim in, because you still have to swim to shore.

          1. ShanaC


      2. Donna Brewington White

        Right.The more I’ve thought about this post, the more it dawned on me that it was Brad’s suggestion that was the breakthrough. The company didn’t figure this out.And what if the NEW business model didn’t work? How did Brad know that the new business model would work?What I want to know is how does a company get to the point of knowing that it needs a new business model and what that new business model should be?This post at least opens up the possibility in someone’s thinking that a new business model could be the solution. That’s a start.

    7. panterosa,

      Crossroads are very rich places Donna. Lots to chew on.

      1. Donna Brewington White

        Yeah, but if only they paid better!

  13. jasonpwright

    I’d like to see an avatar lockdown. I’m getting confused.Didn’t DHH produce Ruby on ten hours a week?

  14. JamesHRH

    Click. The last tumbler falls into place.A good example of why startups are hard – so many pieces.Great story.

  15. Nikhil Thomas

    I feel like this is a metaphor for my life right now. Timely post Fred, thank you.

    1. fredwilson

      a few people have said that to me this morning. that’s a great feeling to know you told a story that helped someone.

  16. Jack Barcroft

    It’s a great moment when one realizes that a pivot is the solution and it actually works. “Working too hard” there’s no such thing. You’ll work and flesh out a great idea, or a bad one but it takes work. There is working and growing a business and death. They are both absolutes.

  17. jason wright

    martyrdom is a strong and enduring theme in western culture.

  18. btrautsc

    I think the ‘lean startup’ methodology is typically prescribed as a remedy of this grind-without-results model (in tocado case, iterate/test revenue hypo)…we’ve undergone some similar drastic course adjustments, which I think when done in many small turns, will be really effective..Betting the ship on doing a 180 on the model is bold and takes cajones – for the team, investors, customers.

  19. Yalim K. Gerger

    Is it Karma that you are writing this post the day we are changing our business model?

    1. fredwilson

      i sure hope so. i wish you great fortune with your new business model.

  20. LIAD

    Playing all the right notes…If the output isn’t what we want it to be we have no choice but to jiggle around the inputs. – Morecambe & Wise. (Christmas Special 1971).


    Now that we are set to release our mysimpleads saas ad server (though for a much different audience) in the coming months, this is certainly an interesting read ;-). Will have to keep things like this tucked in the back of our minds and we being to analyze our data. Thanks very much for sharing.

  22. Aaron Klein

    Boy, does this resonate with me. Last September, we were in a very similar situation, focusing our technology on individual investors. It just wasn’t the right piece of the network to start with, as it turned out.I hate the word pivot, but after a brainstorming weekend over Labor Day (that’s the day you labor twice as hard, right?) we flipped our roadmap on its head and started building Riskalyze Pro for advisors.Fast forward to now, and we add new customers every day and we’re fielding calls from some of the industry’s biggest players.The good news? We’d never have this traction without 2012’s validation of our technology by the do-it-yourselfers. But now our work is getting us somewhere. And that feels exhilarating.

    1. Matt A. Myers

      Excited for you. πŸ™‚ And I will live vicariously through that until I reach the same point.. πŸ™‚

      1. Aaron Klein

        Please do! I feel extraordinarily blessed that it’s working and we’re hitting our stride.

        1. Matt A. Myers

          This summer might end up being more relaxing than I expected it to be, so planning to focus on self-improvement items … will read a dozen to two dozen books I’ve been meaning to read + getting laser eye surgery May 1st – which I am sure will make life a lot better / easier. And then probably will end up in Halifax for 1-2 months.

          1. Aaron Klein

            Enjoy. πŸ™‚

          2. Matt A. Myers

            Thanks. πŸ™‚

    2. Tom Labus

      Congrats on your product success.People “trust” their financial advisors.and rely on their recommendations.

      1. Aaron Klein

        Often true. It’s a lot like the market for personal trainers. Advisors help us do what we know we need to do but won’t do for ourselves.I’m still a believer in empowering the self directed approach but it is a tough nut to crack.

    3. PhilipSugar

      That is a really good point. Sometimes have the wrong business model does have a blessing. It allows you to develop your technology without the pressure of tons of prime time customers.Of course it would be better to get it right the first time, but there is some value to staying alive and understanding what is working and what is not. That is why I don’t like the fail fast mantra. (don’t want to start an argument on that one)

      1. Aaron Klein

        Yep, it’s just one of those unintended blessings. Advisors just aren’t willing to test drive new technology with their clients.We’re able to tell them about the $2 billion in portfolios that users built on our platform, and the accuracy of our probability range (less than 1.6% broke below projected risk).

        1. JamesHRH

          Product proof is always the first step.Congrats.

          1. Aaron Klein


        2. Donna Brewington White

          Amazing how that worked out. No waste and a wealth of research.

      2. panterosa,

        There must be a failing to fast threshold, and a failing too slow threshold as well.

    4. LE

      “we flipped our roadmap on its head and started building Riskalyze Pro for advisors.”That’s great I love to hear things like that.How are you selling to them what is the outbound sales effort (direct mail, cold calls, only referrals, seminars)?

      1. Aaron Klein

        At this point, it’s almost all referrals. We’ve added a few advisory board members who are making warm intros. Only way to crack this industry…

        1. ShanaC


    5. Donna Brewington White

      That’s fantastic Aaron. Seems like just yesterday you quietly mentioned in the comments that you were on the verge of a launch. Wow, so much has happened since then! It’s been fun to watch.

      1. Aaron Klein

        Thanks Donna. Have always appreciated your kind words of support through this awesome and challenging journey that is a startup. πŸ™‚

    6. fredwilson


  23. Sebastian Wain

    It would be nice to read additional articles about things that seems contradictory like working hard without proportional results. For example, It sounds exciting to build a product that serves many market sectors because there is a huge business potential but sometimes you need to calm the anxiety and focus on a single market that is “attackable”, even if it is not a fancy one.

  24. Kirsten Lambertsen

    Good one. Lit up a few circuits in my head.Also, I always find it heartening to learn about the early challenges and hurdles faced by very successful companies. It’s encouraging! Nothing is less instructive than the story of a company that did everything right from day one.

  25. Elia Freedman

    I once had a friend tell me something is wrong when you are spending 100% of your time on 10% returns. Right on, Fred!

  26. andyidsinga

    this has got me thinking …great now I’m going to be distracted at work all day ;).I’ve been mulling over the business model for a product id like to build for artists for a while. Problem is, artists as a target customer don’t have a lot of out if pocket $ to pay for the product. …but now I’m seeing a diff approach πŸ™‚

    1. fredwilson


    2. sbmiller5

      Great. Now go build it. Everything will change once it’s built.

  27. LE

    “After six or nine months of disappointing numbers, I recall a meeting with Dave where Brad pointed out that the team was “working too hard and not getting anywhere.””Mentioned the story before about the first thing I tried out of college which was trying to sell computer supplies (this was back in the “word processing” days) by going door to door. I had suppliers all lined up, a business location, all I needed was customers.I went out and knocked on doors for about 1 week and while people were receptive and took the literature I could see just from that one experience that it would take way to long to get to where I needed to go by doing that. [1] So I used the business location to start something else which immediately worked from day one. In fact someone knocked on the door before I even opened. I had also gone cold calling for this business from day one and got orders right away [2] even though I had no clue what I was doing “you’re the expert people said”. Everyone was receptive other than (as I’ve mentioned) Cramer’s father.[1] As opposed when I did car waxing I would walk into an upscale neighborhood and get a customers literally on the spot. The twist there was bringing my girl friend along to make the people less fearful of opening their doors to a young kid.[2] Business as I’ve said is simply filling the low hanging fruit of opportunity. A rising tide kind of thing you just have to pay attention.

    1. PhilipSugar

      Mine was before college. I wanted to mow yards, so I put out a ton of flyers. Nothing. So I went door to door. Learned people either mowed their own lawns or already had a service. BUT those that mowed their own lawns would love if I would do it while they were on vacation. They knew me and my family and had no worries telling me they were gone.So I put out a ton of flyers saying I’d love to mow your lawn while on vacation. What a huge response!Eventually I had five kids and had filled my Dad’s entire garage with commercial equipment.I perfected my pitch. You need your lawn cut the first week of August? Great! I could also cut it the last week of July when you are busy preparing to go. You’re back and I’m delivering your mail and getting paid the first day you are home (how about that for an added value service?). Hey I know you’re busy, want me to cut it next week? Full time customer.

      1. LE

        Burried up there was this nugget:”They knew me and my family and had no worries telling me they were gone.”Remember when things used to be like that? Parents worked hard for what they had and were deathly afraid of losing it. So were kids if you broke the toy you didn’t get a new one easily. I remember being scolded for playing with the power windows on my Dad’s new car lest they might break. (Before all those super duper warranties that we now have that are bumper to bumper).More importantly of course in your story is what you learned at an early age about human behavior and business in a real life situation dealing with people and money. That is totally discounted today with all the kids that are doing community service, band practice, sports or not having to earn any money at all (because things are given to them).

      2. Richard

        Great story…I remember doing something similar, telling neighbors to call me when their regulars dont show up.

  28. Neil Eapen

    This was a great info…Could you also write about the the ones where it did not work out with VC and founder or where even your advice did not save the startup

    1. fredwilson

      i have and i will continue to do so

  29. Patrick Dugan

    I’m going through something like this, I’ve been operating an online grocer/delivery service in Chile for the past couple months as a pilot, figured out how to get chains of customers through social referrals for a discount, figured out the net revenue at different levels of cross-sell and the min. order amount needed to not loose money. Thinking about scaling it guerrilla style across the US (doing a meeting-farmers tour these next two weeks, SF then NorCal, NYC then North East).I was at the Sustaintopia conference in Miami last week and spoke with a senior exec at a significant, middle-weight contender in this field, I learned how capital intensive customer acquisition and scaling can really be, so I’m pivoting slightly to a more lateral focus. The little distribution networks that our platform can support are going to be oriented towards support cashflow to amortize capex investment in the farms, and we’re going to build the DB and platform to map out all this investment and make it possible for the average person to invest in sustainably managed farmland (once that JOBS act regulation finally gets implemented). Much better than spending the next 5 years of my life fighting a land war in North America with millions spent on CAC. I like to use my capital for developer salaries and let the marketing happen organically through canny experimentation in invite and re-targeting mechanics.

    1. fredwilson

      yours is a capital intensive business and hard to make work. i wish you all the luck with it. you picked a tough one.

  30. Emi Gal

    There’s also the scenario where you’re working too hard on the wrong thing. I wanted to comment with a personal story on this but it got too long so I went for a blog post:


    Excellent post. Three cheers for the US Senate!

  32. LaVonne Reimer

    What a great story. As usual I’m loving the comment thread too. This resonates with me beyond the central point of pivoting as a way to truly unlock startup potential. Over at http://www.bothsidesoftheta… there have been a couple really interesting posts lately on what it takes to execute enterprise software sales. Meanwhile, in my own deal I’ve been experimenting (lean startup-style) with how my customers really want to buy. This is different than what I always believed to be true. If you’re already innovating in product, then try not to innovate in business model. I.e., sell what you have the way customers are used to buying. Now I’m not sure about that and the post sort of makes that point too. What is the easiest way for customers to say yes and would they like to buy differently than the same old way?

  33. Cynthia Schames

    I have actually been thinking about this a lot recently, not only because I’m a startup founder again, but because I was kind of blown away by Danielle Morrill throwing in the towel on’s original model. Her reasons were that it just wasn’t gaining traction fast enough and that revenue is king (a POV with which I actually agree, and found refreshing to hear from a West Coast founder). She’s terming this a pivot, but is changing the business model from an affiliate network to a blogging platform. To me, that’s not a pivot at all, it’s a whole new business in a whole new space. It’s basically starting all over from scratch, without any of the benefits of the work that’s already been done. As far as I’m aware, there’s nothing to indicate that people who liked making lists of their top 10 favorite business books in order to earn a few bucks will be in the market for a(nother) new blogging platform.Your example makes a lot more sense, because TACODA is still in the same general business: ad tech. They’re just offering a different and much simpler delivery mechanism that provides far more value to the publisher partners.Because I’m still so early in my own business’ life, I often have to point out to potential investors, partners, or even occasionally to customers that we may shift our focus in the future. But I don’t expect to be switching from apples to oranges. That’s not a pivot. It’s back to the starting line.

  34. Pete Griffiths

    Great point.I suspect that one of the trickiest aspects of selecting a business model relates to scale because models are scale dependent. If you have a very small number of users you had better be selling them something valuable. If you have a huge number of users you can sell them. If you have an established business with some sense of scale then it is much easier to pivot as described than it is to pick the right model at the outset, before one has discovered what kind of scale is attainable.

  35. Friv 2

    I would suspect a bit but probably not enough to justify the effort in sucking less. They are not Starbucks vs. Dunkin Donuts or McDonalds.

  36. Saurabh Garg

    I may not be qualified to answer this bur I believe the post does not do justice to the title. One of the lesser posts on avc.

    1. fredwilson

      thanks for the criticism. i appreciate it.

  37. BillMcNeely

    The headline sums up why I left the car business Saturday.

  38. StartupBook

    All the “serial starters” commenting should follow Behance and Scott Belsky.

  39. startupstella

    We started a series called MBA Tuesdays where an MBA responds to Fred’s MBA Mondays post. This week: Economics Explain Why Pivots Are So Hard

  40. startupstella

    Sometimes it’s hard to pivot because of sunk cost. We wrote a response to this article (written by an MBA in response to MBA Monday) here:

  41. Vinish Garg

    Quite an insightful post. It has certainly given me good food for thought for our planned launch over next 6 weeks. Thank you for sharing it.

  42. Guest

    Hey Fred – I just published my startup’s own take on this – Based on our actual MBA experience.

  43. awaldstein

    I think about this constantly. It’s so tricky and always a leap.The opposite of charging though is not necessarily free. There needs to be a transaction somewhere.I struggled with this issue in this post:Going short on free, long on transactions

  44. fredwilson

    my goal is to make sure folks like you don’t take a break from commenting!

  45. Donna Brewington White

    “There needs to be a transaction somewhere.”Yes. That idea was causing some cognitive dissonance for me as well.

  46. PhilipSugar

    That was a good post. I have been saying that for a long time. If you go someplace and you aren’t making a transaction, you either need super huge amounts of people or you need to make money for the value you are providing.If you can get in the middle of the transaction then you can share revenue.

  47. awaldstein

    True…going from free to paid with the same population is tricky. Going from free to create a network that drives transactions around it makes sense but is a rarity to actually happen and magic when it does.

  48. fredwilson

    you and me both.

  49. Aaron Klein

    Just because you’re wrong on some things doesn’t mean you can’t be very right on others. (Tongue very firmly in cheek!)

  50. awaldstein

    You and I both Charlie on that issue.

  51. Cam MacRae

    They don’t cross oceans too well either.

  52. kidmercury

    i love it. the senseless beefing, the irrational emotions, tempers flaring, comments that will be regretted, people shouting and no one listening…….fun for the whole family! πŸ™‚

  53. Matt A. Myers

    Could it be the definition or viewpoint of how you’re seeing a transaction?

  54. Matt A. Myers

    Einstein too maybe in a different form? Or maybe I’m mixing up great thinkers / inventors whom’s name start with E..

  55. LE

    How do you feel that the success of chilisoft has changed the way you spend your time (both because perhaps the $$ allow you to -or- because of that early reinforcement keeps you going after the bone that is teasing you under the door?)


    Awesome. I think a “Meeting of the Mindless” for all us serial *starters* could be a huge event.

  57. PhilipSugar

    You as the bartender should know one of the first rules about conversations in a bar: Never talk about religion or politicsTwain has some great quotes around this.

  58. falicon

    I get much more out than I put in and enjoy the time and process on each…so I would never think of that as failing.I could make a lot more money consulting or being a dev at a big co…and prob. spend less time learning, improving, and locked in front of a computer…but that doesn’t excite or challenge me in the ways that allow my happiness to thrive.Ultimately I think just don’t have the same goals as most of the other people around here – and I believe the ‘goal’ is what you must judge success and failure against.I actually think the word failure has become a bit weak and a bit of a cop out…what I think people need to do is focus less on failure and accepting failure and focus a lot more on setting proper, attainable goals…or even better milestones. And if /when they come up short of those milestones, acknowledge it, adjust, and improve…just don’t give in to the failure mantra :-)Wherever you are right now is the starting point from which to measure your future…

  59. LE

    “But what drives me is usually some sort of justice issue–customer justice.”See now this is why distonic partnerships (if you can survive them) are so important. I’d whip you right into shape with all that touchy feely stuff. And when I’m not around Andy Swan can.Actually even though said in jest there is truth there. There needs to be balance in thinking and getting perspective. I’ve certainly enjoyed things that you’ve said and learned from them because you do and undertake things that I don’t really care about. (Because I know my wife isn’t going to care if I don’t bring home the bacon. Even though her job of saving people pays for the healthcare.) But I find myself thinking and understanding them more.

  60. ShanaC

    what exactly is customer justice

  61. andyidsinga

    cheers to your 2nd paragraph!

  62. PhilipSugar

    I think most people here actually have the same goals as you do. Now if you’re into reading a breathless gushing vacuous description about a “hot” company’s last fundraising round, you don’t go here you go to Techcrunch. (how was that for a driveby?)

  63. ShanaC

    i find that the most difficult part of knowing what to do with oneself is setting goals that are reasonable/ it takes a lot of introspection to know when a goal is reasonable – and most people set themselves up for failure but not having reasonable and progressing goals

  64. falicon

    You’ve built at least 2 startups into real businesses that fit the mold you are talking about (that I know of — and I think you might have done it more times than that)…so you’ve got the template and the experience to repeat at will…but I suspect that there was something missing from both of those paths and that is why you are still searching…the question is, is the missing bit revenue driven or meaning driven for you?


    The problem we all face is funding. If we all had unlimited funds we could build all the great things we want to build.

  66. takingpitches

    love how you think about things Charlie. it’s customer/supplier justice, empowerment, helping them lead their lives better, etc — a wide variety of motivating stories

  67. LE

    I’m triangulating your statement “customer justice” with my knowledge of what you do in the community (and what else I know about you) to come to the conclusion that I did. So my interpretation of you using what customer justice meant came from that.You are right of course about the iphone. Just not seeing the phrase “customer justice” as being intutive to that situation.

  68. falicon

    +100 πŸ™‚

  69. falicon

    Awesome list!Based on that, don’t spend *any* of your time coding or building stuff right now…spend it networking and getting to know more and more people (like are doing with your startup meetups efforts)…make your mission to build the team (and set a core mission for that team)…hacking away on stuff (released or not) will not advance you on any of the three fronts you mention (without a one-in-a-million lightning strike I mean).

  70. LE

    You know the saying. “Why does a dog lick his balls?” Because he can.Verizon sucks (as well as comcast) because they can suck. In the end what do people care about, the public that is? They care about price and network primarily. Ask yourself this question. How much could Verizon or Comcast move the needle if they gave better customer service? I would suspect a bit but probably not enough to justify the effort in sucking less. They are not Starbucks vs. Dunkin Donuts or McDonalds.Actually more importantly forget Verizon for a second. How much could an existing also ran in cellular (or a new startup) make a dent by making the customer experience better? The fact is you only interface with that sucky CS infrequently. What you care about is that the phone works all the time and you can make calls.

  71. LE

    “hail mary perhaps”Once again if I understand the point that you are making I think that will be really difficult for tmobile to pull off.Tmobile has the same level of attractiveness for employees as a best buy.Tmobile is no Apple which can attract slackers cut from a certain bolt of cloth that are “higher” quality in their dedication to working for Apple with almost “moonie” like dedication, youth, and hipster appeal. Same difference between working for Starbucks and working at some other job which is equally paying certain people will choose to work for Starbucks.So my question is what can and will Tmobile do to attract better people on the retail front to work in a Tmobile store?Coverage maps attached below showing tmobile in my area vs. verizon and att. YMMV but I think this is pretty typical.

  72. awaldstein

    Thanks!In your comments you have a keen sense of this and I listen.I’ve always believed in following the transaction not the money. The farther away you are, the less you share the dynamic.


    “and that’s what happens when the great developer thinks he can code his way into a business, and the entrepreneur thinks he can code his way out of a wet paper sack”WOW!!!! That’s a real good assesment of today’s startup world.

  74. panterosa,

    @ccrystle:disqus and @falicon:disqus I can join you in the huge archive of unseen work. It’s just not code πŸ™‚


    Have you ever looked over history to see how many inventors ended up broke? Someone else usually ended up making all the money. Kinda’ makes you wonder.


    I think that’s when you get charged too much on your receipt. But then the manager fixes it.

  77. ShanaC

    sadly, that that is a good description

  78. ShanaC

    that’s ok -neither do I


    Those were the good ol’ days. I can remember way back when I’d be leaving a store and the cashier would say thank you to me for making a purchase.


    I remember when investors and bankers would come around and tell you they would appreciate the *opportunity* to help you grow your business.

  81. ShanaC

    nice icon change btw

  82. fredwilson

    these conversations wear me down but i also think they are important to have

  83. panterosa,

    As some one neither religious nor political, I vanish when they are the topics.

  84. fredwilson


  85. Matt A. Myers

    Not a bad idea – you’ll have a bunch of people likely who each are / have been repeatedly stuck at certain places – and can either help each other out, or have specific things to learn.

  86. PhilipSugar

    I actively try not to comment. I cannot help myself.

  87. Luke Chamberlin

    Or more likely you will have a bunch of people who express initial interest in the event and then lose interest and never follow up.

  88. Matt A. Myers

    Possibly. πŸ˜‰