Four Steps to the Startup Pivot, as told by the CEO of PetHub
“The patient dog eats the fattest bone.” - African saying
This old African saying probably has to do with dogs hunting in packs which, frankly, is not all that different from the way companies both compete and cooperate to gain success in a given space; PetHub was no exception in looking to make its mark.
The team created a go-to-market plan that eventually proved it was trying to be too many things for too many customers. “You’re trying to boil the ocean,” became a common refrain: direct to consumer, wholesale/retail, co-branding for other pet companies, veterinarian integration, pet licensing -- all were the channels being explored.
The most appealing channel, though, was being the modern pet ID tag for animal licensing. Unfortunately, labeled with the “startup” moniker, the company quickly learned government organizations rarely work with teams less than 5 years old.
So, PetHub remained focused on a push into retail -- otherwise known as “death by a thousand papercuts” -- which allowed for growth of its brand and refinement of the offerings.
As many who take the retail path learn, growth can be slow, frustrating and, above all, expensive.
Then, in 2015, after turning 5 years old, PetHub started sniffing again at municipalities...and this time, municipalities were ready to play.
Step 1 - Admit Failure
It’s a gut-wrenching, but critical, first step to a pivot.
One must begin this process by admitting things are coming to an end if things don’t change. The handwriting is on the wall, the fat lady has sung, and frankly, “that dog don’t hunt.” This is where PetHub was with its go-to-market approach pre-pivot. Retailers who understood and used PetHub’s products and services loved them. However, it was too expensive in time and money to educate the consumer.
What was Learned
With hindsight, here are some of the reasons the initial channels weren’t working:
Wholesale/Retail - in short, a product must be understood within 3 seconds of looking at it. Being able to help people quickly connect those dots is critical (for example, the pet activity monitor called Whistle was able to say, “It’s like FitBit, but for dogs!”) If someone has to think too hard, they’re moving on to the next item on the shelf. Retailers won’t spend time explaining your product that’s a one-time purchase versus a high-end pet food that will be repeatedly purchased
Co-branding - PetHub sold tens of thousands of tags to pet pharmaceuticals with the pharma’s brand and the link back to a PetHub pet profile. The sales cycle was long, people changed jobs, and reselling everyone about the idea was an uphill battle.
E-commerce - marketing to bring people to the site, paying for inventory and appealing packaging, and handling in-house fulfillment, were expensive. In a nutshell, growth was not fast enough for such an expensive channel
Step 2 - Take the Cookies when they’re Passed
So there they were, PetHub had a proven product and service that actually worked and was making a real difference in the world. But, it was too expensive to market, growth was slow, and distribution channels that were set up had little pull-through because shoppers didn’t “get it” for what it was. But then two things happened...
The Two Things
Timing and good fortune happened:
Timing - PetHub hit its 5-year mark, its name was known and respected in the industry, and, most important, it could prove that its product & service worked incredibly well
Good Fortune - one of PetHub’s investors said they would pay for the company to exhibit at a tradeshow directed at mayors and councilmembers
The response by the government officials was dramatic. They immediately saw the value of using digital pet IDs for animal licensing, and because they were the top guys in their communities, they made the introductions to local animal welfare leaders.
PetHub had to ensure it wasn’t a one-off and that this really was the pivot they needed to make. A whole new set of research had to be compiled:
Trade Shows - exhibiting at the government-focused tradeshow was critical
Face-to-face research - getting out and talking to the new customer-set allowed the company to learn the pain-points from the guys at the top on down to the people on the front-line
Pick-up the phone - in this world of emails, just pick up the phone and ask for advice and how you can help them with their pains
Watch/listen for that “ah-ha” moment - keep asking, repeating back what you’re hearing, and weaving it into your story, until you start to hear that “click” or see that lightbulb and you know they just “got it”
To have an investor step-up and offer to pay for you to (re-)explore a channel on their nickel is definitely worth taking them up on and taking those cookies when they’re passed. It can payoff as it did for PetHub.
Step 3 - Define Your Pivot
It was clear: the timing was right for PetHub to focus all energy on helping municipalities bring their pet licensing programs into the 21st century. Information gathering, meetings, phone calls, and quick stop-ins at different shelters was done over a period of 2 months to gather as much data as it could to make an informed decision.
Cut & Paste
Cutting away what’s not working and pasting together pieces that are working while staying focused on the mission isn’t always easy:
Retail - gone. The big retailers never came and the little ones were high maintenance. PetHub said goodbye to wholesales into retail stores
Partnering with startups - gone. Startups are all finding their way, they’re all pivoting, and what’s exciting one day may be a cut program another
Co-branding - greatly reduced, zero outbound marketing & sales. The sales cycle was too long and the return not big enough, though relationships with existing co-branders were maintained
Pet Licensing - keep! The product, service and company are proven, and now the pet licensing groups are knocking at PetHub’s doors
Spell out the pivot, get everyone -- investors and employees -- on the same page, and then stay laser-focused on it. No “shiny baubles” that can distract you from your core mission. You don’t have enough time nor resources.
Step 4 - Own Your Pivot
Everyone hopes a startup idea will simply take-off immediately, but, let’s face it: when it happens, it’s a unicorn. Everything evolves and needs refinements and the lessons that come with it are invaluable.
Attitude of Gratitude
The attitude to have when making a pivot is one of gratitude for those lessons that lit up the clear pathway to success:
Be humble - you should already feel humbled that you took it to the edge and were lucky enough to still have enough room to turn the right way
Own it - people like to see the lessons have been learned and embraced
Be thankful - be thankful for the investors that stayed with you, because not all typically do. Some want to write off a company to offset their other gains
Recognize - see the value you built pre-pivot. It came at a high cost of learning and it’s what’s bringing your new customers to you
Get going - this is your second wind. Feel energized, excited, and get going because you finally found the path
It is said that there are 5 stages of grief -- denial, anger, bargaining, depression and acceptance. You will certainly go through these when the end is near, whether you’re lucky enough to see a path to pivot to or not.
PetHub was lucky in so many ways: timing, support of its investors, and belief held by its team that the product & service were proven and that a real, positive difference was being made by the company in this world. They stepped-up and admitted the original plan wasn’t working, did their homework on what they believed would work, defined it and got buy-in from its team, and then owned it and charged ahead.
When 9 of 10 startups are doomed to failure, those 10% that can find that path usually have bumps and bruises that are badges of honor. From the African saying, “The patient dog eats the fattest bone,” that doesn’t mean a lazy or cowardly dog, it means a strategic and tactical dog.
PetHub is an award-winning software company helping pet owners manage their pets’ lives online. PetHub ID tags are officially in-use by over 250 communities and 20 states in the U.S as their government or shelter issued ID tag, and 98% of PetHub recovered pets are reunited with family without ever entering a shelter. The company has raised several million dollars in funding and is on pace to track and protect over 1 million animals by 2020.