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“Working Too Hard And Not Getting Anywhere” (avc.com)
187 points by dmarinoc 1676 days ago | hide | past | web | favorite | 24 comments

This is a great story. But perhaps a story of survivorship bias as well?

It would be interesting to know if this happened 3 months, 6 months, or several years after TACODA was working on their product.

According to this Rho ventures article, TACODA was founded in 2001. http://www.rhoventures.com/new-media-Tacoda-case-sudy.htm They raised 12M from Union Square in 2006. Fred Wilson states he was an early angel investor, and that this conversation occurred early.

My question is - Did they pivot because they raised a lot of money and were under pressure from investors? Or was it the right thing to do?

They certainly had a successful exit by selling to AOL a year later for a good chunk. Hard to argue with that.

But, then AOL shuttered it, and there's not much data on why (other than the "AOL are incompetent" trope)

So, did they sell AOL a time bomb? Or did AOL screw it up?

The pivot of TACODA occurred more than 3 years after launching the business and a lot of work in the product. We weren't pressured into the pivot. But, as Fred Wilson related, we were working super-hard at the business and only had a modest technology license business to show for it. Our board - Fred, Brad Burnham, Rich Levandov (Masthead/Avalon), Habib Kairouz (Rho) and Curt Viebranz (COO) - was composed of folks who were long-time VC's and very strategic and senior, so they were comfortable with the idea that we should try to go big. We knew that our clients couldn't exploit our platform as well as we could. So, when Brad pushed us to really evaluate whether we couldn't build a bigger (and easier) business doing what our clients weren't doing well - using our platform to deliver and sell better targeted online ads - it didn't take long for all of us to realize that we should take the chance and pivot.

As for post-AOL ... a lot was going on at that time that makes it hard to analyze without the advantage of hindsight. While most of the team didn't end up staying with AOL very long, the technology still powers most of Aol's targeted ad business, I believe, and the team has spread out and populate dozens of adtech start=-ups today.

i love it when the lead character in the post stops by and participates in the discussion

"Sometimes you have the right product but the wrong business model"

This is the 3rd time I've heard a variant of this in the past couple of days. Most of the time when I think of a pivot I imagine changing the product pretty substantially, but I think this seems more true to the analogy. I've seen some success in changing my business model as I started pitching again recently. People are responding much better to our new approach than the one we had a year ago. (Not that successful pitches are the same thing as real success)

The product changed, the widget didn't.

In other words, because TACODA was selling services, by changing accounting practices their customers saw a radically different product - one which made the person recommending it to their boss look clever.

The pivot more fully leveraged TACODA's expertise. Because their they understood the how and why and when of the data's value so much better than their customers, the fraction of their monetization sent to their customers was more money than their customers were ever likely to extract.

"How can I send someone a check?" is a counter-intuitive business model for most people. Even though it is used all the time.

Yes. We worked very hard for years to build, sell and service "tools to help web publishers sell more ads for more money." Once we pivoted, we realized that all publishers really wanted was "more money."

>> "How can I send someone a check?" is a counter-intuitive business model for most people

Great Point. This was the sole reason for Groupon's success even though were a lot of coupon companies before. Imagine what would have happened if Groupon charged small business to distribute their coupons instead of paying them?

The customers didn't see a different product. They completely changed the product.

I doubt you change from publisher saas model to be an ad network just changing your Billing contracts (like the little anecdote makes you believe), now they have to go after they agency and sell to them, and manage impression mismatch claims and what-not

In service industry terms, they went from self-service to full service. When the service provided is for business and revenue generating, just sending a check is as full service as it gets.

Their model reminds me of payroll services like ADP which are ridiculously cheap. They make their money on short term float and the larger the payroll they handle, the more money they make.

One might say it more closely played to the greed of their "consumers" (publishers in the article), letting them use the company's product without any real risk or even competence.

Instead of taking money from their customers, they gave money to their customers.

Now if I could only make Lamborghini do the same ...

One might say that, but I wouldn't agree. :)

They didn't so much target greed as they did reduce the initial investment risk.

Getting Lamborghini to take your money is trivial. Monetizing that taking is the hard part.

Most of the time when I think of a pivot I imagine changing the product pretty substantially, but I think this seems more true to the analogy.

Well... if you are an advocate of the @sgblank "Customer Development" approach, then changing the product is the last thing you do. The goal of Customer Discovery is to find a market for "the thing you are building" and you only change to a different "thing" if you can't find a market.

Of course, there are cases where the line between the "thing" and the "business model" can be a bit fuzzy. In the case of TFA, switching the business model essentially was a change in the "product" that was being offered. But the important thing is that they found product/market fit - even if they didn't follow the letter of some process in doing so.

I love stories like this..

I personally know of a similar story on a smaller scale, where a consulting team was developing custom web solutions for client after client (in the CRM space), and one day decided to turn their product into a SAAS offering instead.

They went from selling 3-4 sites a year to having several hundred clients in about 3 years, and even spinning the SAAS business out into it's own separate company that is now 10x the size of the consulting company (which they still run for other types of custom work).

So it's definitely true that sometimes the pivot is in the approach and not the product.

And isn't that basically the 37 Signals success story also? They took their custom products and turned them into SAAS offerings..

> And isn't that basically the 37 Signals success story also? They took their custom products and turned them into SAAS offerings..

Not quite; they spun out their internal tools into SaaS offerings while doing custom dev.


Decrease in productivity while multi-tasking has been very well documented in Book 1 of the Wealth of Nations more than 200 years ago. I think every software entrepreneur should read this Book 1.

Did you RTFA? It had nothing to do with personal productivity...

My worry, though, is how do you know you're reaching a local maxima? What's the tip off that the slow-going is a sign that you need to change directions and not just work harder?

I think successful "pivots" like this usually have to do with rebalancing the risk of the customers. In the article's example, the risk is shifted away from the publishers ("am I sure this software will be worth it?") to the startup ("we only make money when this works").

To my eyes, even the more traditional enterprise-to-SaaS model shifts that are happening reflect the same trend - trading the (customer) risks of big $$$ up-front, long implementation etc for the (startup) risks of needing to attract more customers to make the same amount of $$$.

Misleading title.. I was expecting to read something similar to that article on the programmer that completely lost it.

There's no reason that the same thinking can't be applied to one's individual strategy.

I think most seasoned experts (in their respective domains) have applied this approach in one shape or form to their individual strategy. Working smart instead of hard has to be learned the hard way though. It's very difficult to see the wood from the trees unless you're actually in a forest. A certain amount of trial and error is required before anyone can reach this point in my opinion.

Haha, so I'm not the only one...

Absolutely correct for an entrepreneur.

But If you are in good job but feel bored. here is my version

You may have the right job but the wrong working model. Fixing the working model can fix ur work life.

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