The Art of the Pivot: Insights from Ayan, 2x Y Combinator Founder | EP 26
Description
In this episode of UNinvested, Sahil sits down with Ayan, co-founder of Dealwise, to discuss the intricacies of knowing when to pivot a startup idea. Ayan shares insights from his experience at Y Combinator, the journey of Dealwise, and the emotional and practical aspects of making significant business shifts. This episode offers valuable lessons for founders navigating the challenging terrain of startup pivots.
What we explore:
The signs and timing of when to pivot an idea
Ayan's background and the story of founding Dealwise
The journey through Y Combinator and the decision to pivot from their original AI infrastructure idea
The process of identifying a scalable solution and iterating on the problem
Emotional and practical considerations in pivoting and shutting down ideas
The value of accelerators like Y Combinator in providing tailored advice and networking
Ayan's perspective on balancing venture-backed ambitions with lifestyle business goals
Where to find Uninvested:
Website: https://www.uninvested.org/
In this episode, we cover:
[00:00:00] Introduction and the importance of knowing when to pivot
[00:00:02] Sahil welcomes Ayan and asks for an elevator pitch on Dealwise
[00:00:30] Ayan's background and the inception of Dealwise
[00:01:00] Experience at Y Combinator and the initial idea
[00:01:17] Realization of the need to pivot and the new focus on M&A advising
[00:02:02] The art and science of knowing when to pivot
[00:02:48] The process and timeline for deciding to pivot
[00:05:00] The current iteration at Dealwise and learning from customer feedback
[00:06:48] The difference between pivoting and iterating on a solution
[00:08:42] Common reasons for startup failure and the importance of iteration
[00:10:58] Emotional aspects of shutting down a startup
[00:11:50] Ayan's journey post-YC and working at Robinhood
[00:13:29] Transitioning from a job to full-time startup work
[00:14:50] The value of Y Combinator and the decision to reapply
[00:15:00] Addressing critiques of Y Combinator's approach
[00:16:24] Best, worst, and suggested changes for Y Combinator
[00:17:00] The trade-offs between building a lifestyle business and a venture-backed business
[00:19:00] The inspiration and drive to build startups
[00:20:24] The satisfaction and challenges of creating value from scratch
[00:21:24] Ayan's routine for maintaining productivity and balance
[00:00:00] Sahil: When do you know is the right time to pivot an idea?
[00:00:02] Ayan: Within a two month period or so, you should be able to tell if an idea is going to work or not, or whether it's going to be worth to invest more time.
[00:00:14] Sahil: Hi, Ayan . How's it going?
[00:00:15] Ayan: Doing great. How about you, man?
[00:00:17] Sahil: Doing good. To start off, do you mind just giving me a one minute elevator pitch on what you're working on?
[00:00:22] Ayan: Yeah, for sure. My name's Ayan . I'm co founder at DealWise. We are the best way to Find an M& A advisor for your business. Basically the best M& A advisor for your business is somebody who's sold a company similar to yours.
We've spent the past, you know, two to three months helping software businesses and, you know, tech enabled service businesses get acquired. That's really cool. But do you mind just giving me a little brief background on yourself and how you stumbled upon this idea for, Bit of context, my co founder and I initially, you know, worked at Robinhood and we went through the YAC batch back in winter of 2023, initially as an AI infra idea.
And during our time though, we realized that, you know, it was a bit too early for the idea that we were working on. But we experienced one of the companies in our batch going through the M& A process. They actually sold to an insurance company. And the thing that we realized is that there just isn't a lot of information available for founders that are, you know, Looking to get acquired.
There's plenty of content that you can read and learn about when it comes to, you know, doing sales or marketing or, you know, hiring, nobody really prepares you for finding a buyer for your business. And so we helped one of our batch mates go through this process. And so we realized that. You know, there's a lot of gaps here.
[00:01:45] Sahil: So I was doing some reading on DealWise and yourself, and you kind of talked about it there. You guys went through a pivot in the YC batch, but I guess I really want to understand when do you know is the right time to pivot an idea? You said you guys were a little too early, but I imagine you went into YC very, very excited about your initial idea and it must've been hard to move off of it.
[00:02:03] Ayan: That's honestly a great question. You know, knowing what is the right time to pivot is honestly more of an art than a science. But I can tell you how we figured it out in our case. So what we were working on before this idea was kind of like Plaid, but for AI startups. So if an AI startup wants to connect to their customers, Google Drive or Zendesk and Confluence so that they can ingest that data for, you know, to power a customer support or some other kind of chatbot, that's where our solution would come in and let you.
Authenticate with your customers Google Drive, for example. And the thing that we learned is that we were able to get a couple of customers that loved our product. You know, startups that were doing AI customer support, they use our product all the time, give us great feedback, but at some point we hit a wall where we realized there's just not enough customers that fit that profile.
Most of, you know, the startups building AI didn't really have customers themselves. And so solving this problem was not a huge problem for them. And also, you know, they couldn't pay because they didn't have customers. Right. And so there's a couple of reasons why you would need to pivot, right? So one of them is the one that I mentioned, which is you're just a bit too early.
For the market, you know, you managed to get a couple of customers, but you've kind of just hit a ceiling and it's going to be a while before, you know, that market is going to mature. I know there are. The example is where you're just not getting any customers, right? You, you, you're talking to potential customers, you're telling them about your solution and then talking to them about their problem and they tell you like, Hey, yeah, that's, that totally sounds useful, we have some other priorities, we'll, we'll get to this maybe like in a couple of weeks.
And then they just keep pushing it back over and over. And that's when you know that you're not really solving a hair on fire problem for anybody. And so in that case, it's really obvious that you should pivot. There's also other cases such as you've managed to find a problem that people have, but the solution just isn't scalable, right?
And if your goal is to reach, you know, venture scale, well, then you got to change your ideas. If not, you're okay with pivoting. Running, you know, lifestyle business, then that's okay. Yeah. I mean, before I went through the whole startup journey, I didn't realize how common it was. And at the end of the day, it's because most ideas don't work out for one reason or another.
[00:04:36] Sahil: YC is always pitching. And for those of you listening, YC is the premier startup software tech incubator in the world. They get the top startups every single year and coming out of their batch, people raise millions and millions of dollars and they're always, they're always talking about this idea of pivoting.
And you mentioned why you pivoted, but could you really bring me through that mentality? Because when you have this idea that you so strongly believe in I imagine It's not just five customer calls later. I need to pivot. So really how long is that process? Like YC this accelerator program is about three months long.
How long did it take you to realize? This idea is great, but It's not scalable like we want it to be.
[00:05:18] Ayan: Within a two month period or so, you should be able to tell if an idea is going to work or not, or whether it's going to be worth the 10 baths wartime. You can't really figure it out in just like a week or so.
You can't just send a bunch of emails. And if nobody responds, you know, oops, I guess, you know, the. The idea doesn't work. You need to kind of go through the entire route, right? The entire cycle. Okay. Come up with the idea. Identify who your customers are. Do some user interviews with them. Actually to kind of build out an MVP.
And this is where, you know, being, you know, strong technically is useful because you can condense the, the MVP building down to a shorter period of time and then actually like make sales, right? If you haven't made a single sale, then odds are you haven't gone far enough into the idea because you don't really learn much until you get To pay money for that thing that you've built.
And that's where you get most of the learnings actually is like, once you actually have customers paying you and using your product, that's when you can actually draw conclusions around whether it's going to work or what's working. And what's not.
[00:06:34] Sahil: Earlier this week, you told me you guys were going through another small pivot on DealWise right now.
How many pivots have you guys gone through?
[00:06:41] Ayan: Good question. You know, like, you know, this latest one. I'd call it more of an iteration than, you know, a full, full on pivot, you know, a full on, you know, art pivot. I think we've maybe gone through maybe two or three but even once you've settled in on a problem.
So, you know, in our case, we've settled in on the problem of helping, you know, people. business owners get acquired, you still have to iterate on the solution, right? Because maybe you have the wrong solution. Initially we had a two sided marketplace. So just buyers and sellers. The problem that we do realize with that is that sellers typically want a broker who's going to, A, answer a lot of questions for them.
reach out to strategic buyers because strategic buyers these are, you know, your, your Googles, your apples, essentially your bigger companies that have like a corp dev team. Those people are not going to sit on a marketplace all day. And so it became pretty clear that you need a broker in the mix.
So our response to that was okay. What if we also act? As the broker and we acted as the broker for a couple of deals. And we have a couple of LOIs in progress right now, scheduled to close and, and you know, become closed deals in the next two to three months. And the thing that we realized there is that, you know, that part is not scalable, right?
The act of you know, being an M& A advisor, it's, it's fundamentally a You're doing a service and that's not something you can scale up with software because of that realization. We moved to The model that we're currently at, which is where we actually match you with the best M& A advisor for your business.
And so you could maybe call these pivots, but at the end of the day, you know, the problem statement is still the same, the solution is, is what changes. And as long as you are providing value to customers and, you know, getting things done, You're going to keep getting those learnings and you're going to keep, you know, iterating on the solution.
Hopefully you're not changing the problem every time though. That's where, you know, you, you kind of lose out on your learnings.
[00:08:55] Sahil: From what you're saying, it sounds like a pivot and an iteration. Is different than changing ideas as long as you're staying within the same problem. You're still tackling the same problem, just in a different way.
Is that what you're trying to get at?
[00:09:07] Ayan: I'd say so. Right. Because you're, you're keeping those customer learnings, you know, your learnings about the pain point. You're just changing your approach. Right. And I think in some cases, maybe you'll get lucky or you already understand this space very deeply. Maybe you'll get to that, that solution, the ideal solution on the first try.
Right. But odds are you're going to need to go through a couple of those reps where, you know, come up with the idea, do some user interviews, build and then sell, and then take the learnings from there and kind of loop. I think that the lean startup is like kind of a variation of this. But yeah, I think a lot of these startup frameworks that you'll hear about are, are all kinds of, you know, just variations of this.
[00:09:52] Sahil: So you see a lot of startups go through this process all the time. In your experience, what percentage of startups. In your network, startups you've seen have gone through at least one pivot just to give some sort of context to everyone out there.
[00:10:04] Ayan: Honestly, I think maybe the better question is like how many have it, right?
I've maybe talked to two or three that have just like, maybe like never pivoted, right? Maybe three to five startups that I've talked to that have never pivoted. But outside of that, everyone's gone through it at least once.
[00:10:23] Sahil: Out of thousands, I'm sure they've talked to. Cutting and diving into this point a little further.
When is it time to give up and stop pivoting, stop iterating?
[00:10:32] Ayan: You're saying like, you know, stop pivoting, stop iterating, and just, you know, like, shut down, you're saying?
[00:10:37] Sahil: Yeah, exactly.
[00:10:38] Ayan: Honestly, that really comes down to, in some cases, it's better to just get tired. And honestly, you know, like, the iterating part is not something you can really, you know, decide to just stop doing.
I think even if you're like a really big, even if you're meta, You still have to think about what the next iteration is going to be, whether it's, you know, VR or something else. And so I think you have to kind of, on some level, accept that you're constantly going to be iterating as like, your customers change, your markets change, you need to keep growing to the next level in, in some cases, right?
You know, if you decide kind of. Tired. And, and that's a, that's a pretty common reason why, you know, companies will shut down, is if Yeah. All at the end of the day, lake bro. Now, right? That's, that's a really common reason why companies will shut down. Another one is, you know, they just kind of blew up.
Internal politics, co-founder distributed, things along those lines.
[00:11:30] Sahil: So I was looking at your profile, and you've gone through YC now two times. So that means the first idea. I guess you kind of, you could say failed or you moved on. In your experience, why did you make that decision? Because that's kind of the theme of what we're talking about right now.
[00:11:44] Ayan: When we went through YC that first time, my friends from college and I. We did a startup and we all kind of agreed on some level that we wanted to kind of get some work experience, you know, understand what businesses want. Because the thing that we learned was that it was pretty difficult to understand, you know, get a good grasp on like B2B ideas.
And if you've never actually worked full time at a company before.
[00:12:08] Sahil: I do want to get back to that point about whether to go in a startup or work full time. Just to stay on the same topic, what are the emotions you go through, right? Because you're a founder, it's your, essentially your baby. So how do you emotionally get over that hurdle that maybe this one's not it, and you keep faith for the future?
[00:12:25] Ayan: You're saying like when you like shut down?
[00:12:27] Sahil: Yeah, exactly. When you shut down the first time, what are the emotions you're going through?
[00:12:31] Ayan: It's not happiness, you know? Like it's definitely like, it's definitely tough. You're, you know, a little, a little bit of a defeat. But at the end of the day, right there's There's really not much you can do like it really all you can do is just pack it up and try again another day Look at how a lot of you know, the biggest companies got started, you know It's a lot of you know Second time founders
[00:12:54] Sahil: After you go through YC and you end up quitting this first idea of yours you go to Robin Hood Where's your mentality going to the company?
Is it? Oh, maybe I'll make a great career out of myself or it's I'm just looking for my next idea And maybe the experience and what I'm learning at Robinhood, one of the fastest growing fintech companies will teach you a lot.
[00:13:13] Ayan: I think when you're at a fast growing startup, you get to see a lot of the, a lot of the challenges, right?
A lot of the problems that pop up if you're at. It really, at a much larger company that's more, you know, stable or stagnant, you don't necessarily get to see those gaps. And one of those was actually customer support at Robinhood where, I don't know if you remember the whole, you know, GameStop thing, but, you know, for the couple of months after that, there was just like a flood of customer support tickets.
And so when we started working on, you know the initial idea for, for this startup, we were kind of adjacent to that problem space.
[00:13:53] Sahil: Basically you're in and out, kind of find your next idea. You find the problem, you solve the problem. So they're really just nights and weekends. You're building up this side hustle of yours.
When do you make the leap then?
[00:14:02] Ayan: My co founder, Jason and I, we definitely did, you know, a little bit of nights and weekends for a couple months, but. Yeah, the, the leap, to be honest, we made towards the end of, I want to say, yeah, towards the end of 2022. That point, you know, we had been kind of working together for a little while.
We were both, you know, second time founders at this point. We realized we can kind of like. A build things and like, we can kind of like get distribution.
[00:14:27] Sahil: So is it more just a feeling or was your product finished? Or did you have some like letter of intents from customers? What was the spark?
[00:14:34] Ayan: We definitely had like, you know, a couple LOIs, but you know, in hindsight, LOIs don't mean that much.
But so I think really what matters more is just your intent, right? Like, like, what are, what are you looking for? And like, How do you feel? And like, do you feel like you can kind of make this work? And so I think that was really more of a factor than like, you know, whatever LOIs we have had, because in hindsight, right, those LOIs didn't matter too much in the end.
[00:14:58] Sahil: So then you leave this job, you're working on this product with your co founder, you then apply to YC now as the second time you've already done YC. Why do you apply to YC again? Did you feel you learned everything before?
[00:15:08] Ayan: Oh, one of the most valuable parts of YC is actually the advice. When you're going through.
This process of like ideation and testing ideas, advice is really valuable because they really tailor. Their advice to your team specifically and and they also just have a lot of data around like, you know, what kinds of ideas of like work in the past, what kind of strategies have worked in the past.
I remember, you know, for example, one of the, one of their suggestions when we were working on the data connectors idea was to go to open source. And it turned out that that was actually a really great distribution strategy.
[00:15:44] Sahil: The YC application just happened a little bit ago, and I was actually seeing this.
Alternative view on YC where YC is almost very selfish and doesn't care much about the founder where they take all these founders and tell them to the analogy was keep digging towards the center of the earth until you hit either rock or gold but at the same time that's not the best deal for the founder potentially because like you were saying maybe it's time to jump ship way earlier move on to something that's better you Whereas YC might tell you to keep building.
[00:16:14] Ayan: Yeah. At the end of the day, if you're doing a startup, you're digging for gold, right? So I don't think it's necessarily like, you know, YC pushing you to like dig for gold. And I, I think typically it's, you know, as a founder, that's, that's what you're looking for where you're looking for essentially, you know, PMF, right?
That's, that's what gold is, right?
[00:16:31] Sahil: Staying on this YC trend, what is the worst aspect of YC? What's the best aspect of YC? And lastly, what's one thing you would change about YC? Three questions in one, but hopefully, hopefully they can all be kind of related.
[00:16:46] Ayan: Best is like, you know, by far honestly, yeah, like both the advice and just like the network are, are like pretty, pretty unparalleled where if you're getting advice from a lot of startup experts, it's typically not very good and not very tailored to what you're doing.
But you know, when it comes to YC partners, they actually do an amazing job of that. And then, you know, the network is, is really important because Hey, you know you're, you're talking to your batch mates that are kind of going through the same struggle with you, the same process, and so you can kind of bounce ideas off of each other.
And you can also, you know, and if there's any, you know, specific problem that you're trying to solve, whether it's, you know, a people problem or. You know, a technical problem. You can probably like find the answer to the YC network somehow. Worst, I'd say definitely like, I think a little like on the shorter side, which I think is both good and bad, right?
Like the, the, the two, sorry, three months before demo day. It can definitely mean that, you know, like you have like a really limited amount of time to, you know, prove something out before you get, before, you know, you hit demo day. But on the, on the flip side, right. That can also be a good forcing function because now you realize that like, okay, I need to have, like, I need to prove that something's working by like the next two months, which I think that's just useful for a startup in general, because you all You actually always, always have that timeline, right?
You already have that timeline of like, Hey, like at some point, you know, the, the, the money is going to run it out and I have to have something that's going to work. Last part was the, the change. What would you change about it? Make it maybe even like a, like a recurring thing, right? Like I think. That kind of experience is really valuable.
Even when you're like further along in your startup journey.
[00:18:35] Sahil: And one thing that really comes out of demo day for Y Combinator, YC in particular, is everyone gets a lot of funding, you know, after demo day. And it's like, why'd you grind so hard to get to demo day? But what is your thought process? You alluded to this earlier, talking about building a lifestyle business first, building a business that could be venture backable, because your goal then is to make a billion dollar business, even when we 10
Sounds pretty good to a lot of people.
[00:19:01] Ayan: So, I mean, that's really just the trade off that you kind of have to make. And I think as you are trying to build a lifestyle business, like you can actually just bootstrap that, right? You can kind of be an indie hacker. I think Peter Levels like does a pretty good job of those where he kind of has.
Kind of has like a bunch of businesses that are each making like a couple hundred grand. And then that leaves a pretty good lifestyle business versus the, you know, VC path is different, right? You know, you're, you're shooting for like kind of the billion dollar outcome and like the probability is low, but you know, expected value might be Not too far off from like the other path, because you're trying to, you're specifically, you know, filtering for ideas that can kind of get to that scale.
And to be honest, you know, building a bit of business is just a lot of work, no matter what you're doing. And so I think, I mean, my thought process is if you're going to go through the struggle of building a business, Why not pick the idea or direction that's going to lead you to the biggest possible outcome?
[00:19:58] Sahil: I do love Levels, follow him on Twitter. Big fan of what he's working on. Always has a lot of cool ideas. Always inspires a lot of people. Kind of moving in a similar way, why are you so inspired to build? You can easily go get a job at Google, you know, any of the fan companies. Very, very cushy job. Very safe job.
With your background, with your experience. But why do you just have this desire to continue building?
[00:20:18] Ayan: There's just like a different kind of satisfaction of building. You know, actually creating value from, from nothing. Yeah. The other side is like, you also get to see the value that you're creating.
Cause you're actually talking to the customers that you're building for. You get to see that the value that you're creating versus you know, bigger company that you're many degrees, like separated from that.
[00:20:41] Sahil: Completely agree. I think the satisfaction from building is. I'm like anything you can get from a normal job and you kind of have to be crazy to do it given the failure rates up there at like 95%.
[00:20:53] Ayan: Yeah, exactly. Right. I think there's like, you know, a certain type of person that kind of self select.
[00:20:58] Sahil: My last question that I ask everyone I interview, has there been any routine that you've maintained throughout the years, throughout your career? Entire experience building
[00:21:06] Ayan: getting up early there, like early morning, I think pretty valuable for, I think just kind of getting a headstart on the day.
So I think that's maybe the only like kind of routine I can think of
[00:21:17] Sahil: early morning gets the word, right? Isn't that the same? Exactly. I, and I really appreciate it. And I just want to say thank you for coming on invested, but with this. My name is Sahil.
[00:21:25] Ayan: My name is Ayan. And this is UNinvested.
[00:21:27] Sahil: Thank you.
