This is a guest post by entrepreneur Bernard Moon

An important factor for new entrepreneurs is the ability and willingness to change your business model or product mid-stream. Most successful startups have pivoted, but it’s not as easy as it sounds.

It’s a humbling experience to admit your original vision and product was off or something went wrong. An entrepreneur might reflect on how they spent their investors’ money or their life’s savings into a black hole and revisit the highs and lows of their journey. Some entrepreneurs don’t reach this point because they are blinded by the same fierce determination that brought them there or have a hope that things will turn around.

Related: Check out Steve Blank’s suggestions for when to pivot, and when to hold the line

As a reference, here are some successful startups that pivoted:

• Burbn, a location-based HTML5 app –> Instagram.
• Game Neverending, an online video game (MMORPG) –> Flickr.
• Tune In Hook Up, a video dating site –> YouTube.
• PDA payments (Palm) –> Paypal’s web payments.
• Odeo, a podcasting platform –> Twitter.
• Animation tools–> Pixar’s animation studio.
• Memory chips –> Intel’s microprocessors.

It is difficult to decide whether your company should pivot or not. How do you know when’s the right time? I’m assuming a company is beyond the testing and tweaking stages and fully committed down a specific product strategy and design for over six months — or even longer.  There isn’t an algorithm or some magic formula for you to use, but it is important to keep an open mind and watch for these four signs:

1. You are constantly educating the market

During my last startup, GoingOn Networks, we were constantly educating potential clients on the benefits of social networking and open communications with customers. It was a B2B, white-label social networking and publishing platform that was a few years too early. I became burned out after three years of evangelizing (2004-2007) about the coming days of social media and two-way communications. GoingOn eventually focused on the education market and gained traction within this space.

There is a fuzzy line between being a first mover and capturing a new market and being chum for sharks in the ocean depths. If you’re constantly educating your target users and trying to create a market, then you’re probably too early. This is a long and arduous process that should lead you to pivot.

2. Your beta users don’t like your product

Listening to your potential users is good thing.  Ninety-nine point nine percent of us are not Steve Jobs, so you can’t say, “Focus Groups? Feedback? Who needs user feedback when I know what people want?!”

Being passionate about your product is one thing, but being hard of hearing and fiercely stubborn can lead you to the startup deadpool. If a vast majority of your users don’t like your product or don’t find value in it or just don’t get it, then pivot.

3. Investors you meet aren’t buying it

After dozens and dozens of investor meetings and dozens of rejections, if the feedback is negative on the product or target market, you should consider a pivot. The story might be different if they say you need to get traction first, that you’re missing a key team member, or that they don’t invest in that space, but if it is repeated feedback that your product isn’t compelling enough or the market is too small, then consider pivoting.

There are outlier stories of incredible perseverance, such as Pandora’s Tim Westergren, who was rejected by over 300 venture capitalists and suffered through two-and-a-half years of being broke, but for most people, the outcome will not be pretty. As my father once said, “”Bernard, business is like poker. You have to know when to fold.”

4. You’re being everything to everyone

This not so much a sign for your company, but more of a forewarning. Most startups that try to be everything to everyone fail because they are burning their engineering resources on developing products that are bigger than they should be. Focus is a good thing. Pick one target market and user base.

Going after everyone or almost everyone might confuse your users. Do they want me? Do they like me? Is this product for me? I learned this the hard way during my second startup, HeyAnita Korea. We created a voice portal service that tried to be a voice-guided information service for everyone (weather, news, stock information, sports, and so on). After some soul-searching, the company pivoted on entertainment news targeted towards teens, and this new focus led HeyAnita to profitability.

Passion, excellent execution, and a strong vision should be balanced with the ability to listen well, the flexibility to recognize better opportunities, and the willingness to pivot your company onto a more successful path.

Bernard Moon is the co-founder and CEO of web conferencing and sales platform Vidquik and co-founder of SparkLabs, a recently launched startup accelerator in Seoul, Korea.

[Top image credit: olly/Shutterstock]

Sept. 9 - 10, 2013
San Francisco, CA

Early Bird Tickets on Sale

This is a guest post by entrepreneur Roman Stanek

I’m a serial entrepreneur, accustomed to taking risks. Yet, I was never drawn to the more glamorous, winner-takes-all nature of the consumer startup. Which is why I’ve built multiple business-to-business (“B2B”) software companies, with steady, yet predictable outcomes.

Things have become a lot more interesting now for B2B entrepreneurs. With the consumerization trend gaining speed, SaaS and cloud B2B companies look more like consumer startups: They’re exciting, customer-focused — and for the victors, translates into big money. As a result, investors are flocking to B2B-focused startups capable of disrupting the IT landscape, attracted by increasingly large IPOs and buyouts (Yammer, for example, which was recently acquired for over $1 billion by Microsoft, or Workday, with a current market cap of $8 billion).

However, despite the similarities, B2B-oriented startups have to contend with challenges that consumer-focused startups just don’t face. These include:

• Building products with the security, scalability and performance that businesses require.
• Facing high recruiting and retention costs for engineers and sales people.
• Convincing customers their products or services will enable them to save more while gaining a competitive edge.
• Re-assuring business customers that the startup will be around for the long haul.

Here are my three fundamental tips for startups, which are based on the lessons I have learned during my career.

Spend big on engineers

Long before a company can even dream of customers (and revenue), it has to spend — and spend big. It needs to hire an army of highly expert developers who understand business needs and are proficient at building modern, B2B-hardened platforms and apps that meet stringent corporate demands. This level of skill and experience isn’t easy to find, and those who possess these know their worth.

Competition to hire these engineers capable of building scalable apps and platforms is especially fierce in the San Francisco Bay area, where startups go head-to-head against behemoths like Twitter, Google and Facebook. Because of that local competition, a number of  companies prefer to recruit from other technology centers such as Austin, Portland, Ore., and Boulder, Colo., which offer substantial talent pools of  talented engineers.

Personally, I prefer to recruit from my home country, the Czech Republic, which boasts a good combination of technical talent and business acumen.

And one more point: It’s been my experience that the best way to entice talented developers is with the promise of incredibly interesting projects in a successful company. After all, great engineers — like great artists — want their work to be seen.

Invest in a sales team with the right skill-set

It also takes skill and experience selling into businesses’ often-labyrinthine purchasing departments. That’s because the sales rep has to know who inside a company has the authority to buy, understand how customers work with suppliers, and recognize how new services need to work with customers’ current products. Perhaps more important, they also have a deep understanding of customers’ industries, the problems they need to solve to better compete, and their biggest concerns. In fact, there’s a correlation between the complexity of the solution, its price point and the need for a sales organization.

That’s why today’s B2B-focused companies — startups included — still need dedicated sales reps who can demo a product, explain its value proposition, offer competitive positioning and know how to navigate customers’ different purchasing processes. And if you’re thinking cloud-based services don’t need a fully functioning sales organization, think again. For proof, consider Salesforce.com, which reported 4,700 new employees between January 2010 and August 2012, primarily in sales -— and those hiring numbers are proving to be even more robust as Q3 hiring data emerges.

Getting good sales people means showing them you’re on the right side of a simple decision tree: What’s my chance of success? Is the company good? Will I have an easy life or a tough life selling the product? Are the products selling well?

In short, recruiting a great sales organization means you have to show them the potential of making great money selling great products and services.

Demonstrate you are investing for the long run

Next, you need to convince customers they can rely on your company’s staying power. B2Bs instinctively try to buy from a small number of trusted vendors and being added to that list can be a major challenge. After all, no one wants to bet on a supplier — no matter how impressive its technology — that could disappear in a year or two. Clearly, I believe that the founder’s and management team’s experience running companies and solving problems play a huge part in this. But I also believe that a startup is judged by the company it keeps: namely, its investors and board. In Silicon Valley and the world at large, investors like Andreessen Horowitz, Greylock and Sequoia automatically confer a badge of honor that implies a startup’s star quality, stability and, yes, staying power.

That’s why B2B-focused startups need to be extra careful when deciding on investors. Sure, the size of the check matters — but even more important is the investors’ ability to bring in the board members, experienced management, customer connections and business networking best suited to the B2B market. The folks at Andreessen Horowitz, for example, help their portfolio companies meet potential customers and industry superstars, contact the media and even recruit top notch hires. That, along with their cachet, certainly attracted me, and I’m fortunate that they decided to invest in GoodData.

Building a successful startup is never easy. That’s especially true in the B2B market, given the upfront costs, experience and expertise needed just to meet customer requirements. But for those going into this market with the right funding, support and insight, the rewards can definitely outweigh the pain. Personally, I’m hooked on B2B.

Roman Stanek is the founder and CEO of GoodData, a company that offers a range of business intelligence software and reporting tools to help companies monetize big data. Prior to this, he was the founder of NetBeans.org, sold to Sun Microsystems, and Systinet, which was acquired by HP.

Follow him on Twitter @RomanStanek

Career success image // Shutterstock

---

Big Data and Predictive/Real-time Analytics startups: Are you looking to jumpstart development & accelerate market traction? Sign up for the SAP Startup Focus program to receive technology, support, resources and community to help you develop new applications on SAP HANA, a cutting edge database platform. Get started here, and enter promo code “VB2013″ on the form.

---

In April 2010 I received an email that said, “I’m an incoming Stanford student in the fall and working on a project that a number of people suggested I get in touch with you about.”

Ok, I get a lot of these. Is this some grad student or post doc who wanted to do some independent study?

The email continued,  ”The problem I’m working on is that many founders are either making uninformed decisions or inefficiently learning the new skills they need. The solution I’m exploring is a just in time learning methodology that accelerates founders’ learning curve by aggregating relevant content, peers and mentors.”

Hmm, now I’m getting intrigued. This sounded like one heck of an interesting guy and it’s a subject I care about. I wondered where he got his MBA from?

The email closed by saying, “The project is a hybrid between academic and entrepreneurial circles and I’d really love to begin a dialogue with people in the academic world also interested in solving this problem. Your name has come up a lot in that regard. Let me know if this interests you and if you have any time to speak.”

It was signed Max Marmer.

I set up a meeting and at Cafe Borrone some kid who looked 18-years old came up to me and introduced himself as Max. “How old are you? I asked. “18,” he replied.

Holy #&!*.

When I asked Max why he was interested in solving entrepreneurial education problems he replied, “I was always interested in big picture trends for where the world is headed. I spent time with organizations like the Institute for the Future and Singularity University. My conjecture became that the world’s biggest problem isn’t poverty or disease or any oft-stated major problem, but that we don’t have enough people engaged in trying to solve these problems. A big piece of the solution lies in the scalable impact of entrepreneurship and an increase of successful entrepreneurs. But potential impact consistently fails to be realized because of self-destruction.”

I don’t think I touched my sandwich. I tried to remember what I was doing at 18 and whatever it was I wasn’t this. Max continued, “That’s why I’m really interested in ways of optimizing the entrepreneurship ecosystem to allow more entrepreneurs to go from idea to reality. To do this requires: a methodology, tools and systematically reducing friction.”

I was feeling pretty old. Max set the record for smarts divided by age.

Max entered Stanford in the fall of 2010 as a freshman, took as many of the engineering entrepreneurship classes as he could and independent study with me. (He was part of the Sandbox network – a group of incredibly smart under 30 year olds.)

Max dropped out of Stanford after his first quarter.

But he left to work on what he told me he came to do - crack the innovation code of Silicon Valley and share it with the rest of the world. He set up Blackbox.vc, a seed accelerator for technology startups (and one of the tour stops for entrepreneurs from around the world.) They went to work gathering deep knowledge of what makes successful Internet startups.

Max and his partners interviewed and analyzed over 650 early-stage Internet startups. This week, they released the first Startup Genome Report— a 67 page in-depth analysis on what makes early-stage Internet startups successful. Here are some of their key findings:

1. Founders that learn are more successful: Startups that have helpful mentors, track metrics effectively, and learn from startup thought leaders raise 7x more money and have 3.5x better user growth.

2. Startups that pivot once or twice times raise 2.5x more money, have 3.6x better user growth, and are 52 percent less likely to scale prematurely than startups that pivot more than 2 times or not at all.

3. Many investors invest 2-3x more capital than necessary in startups that haven’t reached problem solution fit yet. They also over-invest in solo founders and founding teams without technical cofounders despite indicators that show that these teams have a much lower probability of success.

4. Investors who provide hands-on help have little or no effect on the company’s operational performance. But the right mentors significantly influence a company’s performance and ability to raise money. (However, this does not mean that investors don’t have a significant effect on valuations and M&A)

5. Solo founders take 3.6x longer to reach scale stage compared to a founding team of 2 and they are 2.3x less likely to pivot.

6. Business-heavy founding teams are 6.2x more likely to successfully scale with sales driven startups than with product centric startups.

7. Technical-heavy founding teams are 3.3x more likely to successfully scale with product-centric startups with no network effects than with product-centric startups that have network effects.

8. Balanced teams with one technical founder and one business founder raise 30 percent more money, have 2.9x more user growth and are 19% less likely to scale prematurely than technical or business-heavy founding teams.

9. Most successful founders are driven by impact rather than experience or money.

10. Founders overestimate the value of IP before product market fit by 255 percent.

11. Startups need 2-3 times longer to validate their market than most founders expect. This underestimation creates the pressure to scale prematurely.

12. Startups that haven’t raised money over-estimate their market size by 100x and often misinterpret their market as new.

13. Premature scaling is the most common reason for startups to perform worse. They tend to lose the battle early on by getting ahead of themselves.

14. B2C vs. B2B is not a meaningful segmentation of Internet startups anymore because the Internet has changed the rules of business. We found 4 different major groups of startups that all have very different behavior regarding customer acquisition, time, product, market and team.

———

I’m not sure I believe every one of the report conclusions – it just covers very early stage web startups, and the methodology is still shaky – but this is a landmark study. I think these guys have gone a long way to turn hypotheses about early-stage Internet startups into facts. And they’re just getting started.

I can’t wait to see what Max does by the time he’s 21.