Americans love a good reinvention story. Embedded in the American psyche is a requisite love for second chances—second acts, if you will. That’s why we love Silicon Valley.
Yes, trolly memes and scathing written critiques aside, we have to admit that we love Silicon Valley. The “scrappy startup” folklore that has emerged in the last half century is our modern version of those pixelated Oregon Trail pioneers (without the dysentery). We are glued to news of possible IPO filings, exposés of the inner workings of unicorns Way Back When, and of course, Guy Raz’s telling of how it all began.
Within these stories are now-humorous accounts of the original business plan. Air mattresses in strangers’ living rooms, a social network for podcasts, and wholesale espresso machines ultimately gave us Airbnb, Twitter, and Starbucks. But how? The answer is that each of these companies was able to pull off a second act—or, in some cases, a third or forth. In The Biz, we call that a pivot.
The question remains: why are we, a business that helps technology companies hire developers and designers, writing about second acts? Wouldn’t an obvious content strategy be centered around, oh, I don’t know, hiring in software? Marketers more seasoned than me may shudder at the missed opportunity. Hear us out.
Sometimes, the best ideas are hidden behind the half-baked ones that we’re afraid to scrap.
Leaders of failed companies will often look back and note the opportunities to pivot that they missed out of fear. The reality is that even if you have a flawless business plan that has yielded a profitable company, there is a 0.00001% chance that your original idea (and even it’s closest iterations) is the one that will rocket-launch your company to mythical heights.
The learning that is unlocked in those first few years of success (and failure) will write the map for your second act, if you’re brave enough to follow it.
We’re writing about second acts because we think you should take that chance.
In technology, there are two operating tenants that should always guide our work: first, we can’t be afraid to get it wrong, and second, we must always be open to the possibility of doing it better. I don’t want to get too cerebral, but the promise of technology is the forward progress of civilization. That’s a lot of pressure for those of us building it. In that sense, it’s easy to cradle our ideas and iterations for fear that their alternative is failure. But to truly progress, we need to genuinely covet and embrace our own second acts. That’s not just how we win as businesses. It’s how we march forward as a society.
(Pause for a tearful standing ovation).
Here’s what we aim to do with this blog: we’ll tell stories of famous second acts from the perspective of a company in the middle of their own (that’s us). We’ll cut out the glittery theatrical value, the skirting of important questions, and the perfect story structure miraculously complete with a denouement that are usually characteristic of such stories, and tell them how they really happened.
We’ll interview people who have led their companies through second acts and give you those stories in a podcast series (yes, The Frontier will be revived after a year-long hiatus!). Most importantly, we’ll do our best to give advice to companies who find themselves on the cusp of their own second act. We’re not experts, but we’re currently in the sh*t, so we’ll candidly share what has worked (and what hasn’t) as we navigate our most recent pivot.
We hope this candor will offer some support to those of you who want more for their companies and entrepreneurial dreams than what they currently see on the horizon.
Today, we’re raising our hand to go first and telling the story of our own second act(s): the good, the bad, and the ugly. I’ve been with Gun.io since 2018 and have had a front-row seat through several of our most recent pivots, but to get the full story, I interviewed Teja Yenamandra, our founder and CEO.
Faith: Walk me through our origin story—the quick version.
Teja: How condensed do you want it? After college, I was planning to take a year off in China to travel before going to law school. Instead, I joined a consulting firm, and subsequently followed one of my bosses there to a startup whose growth strategy was to acquire small Southeast Asian companies to scale. My job was essentially assessing these companies to see if they’d be good investments, along with other strategy work. Ultimately, that company was sold, and after that experience I knew I wanted to get into tech entrepreneurship.
When I got back to the US, I started working with my friend JP to see if we could start a business together. With each of these potential business plans, the problem we kept running into was that we couldn’t find good programmers to build out our ideas. So, I reached out to Rich, a friend of mine who was an excellent programmer, to see if he could help.
It turned out that Rich had an idea of his own: to build a network to help open source developers earn a living—so that they could continue to work on open source projects, for the betterment of us all. JP and I came on to help Rich grow the company-side of the network.
As we worked together on this first iteration of Gun.io, we realized that the problem was much broader than we had originally conceived of it being. Every developer had this problem, and so did every company.
When you think of the two biggest pivots or decisions you’ve had to make over the last eight years, what are they?
In 2016, I remember sitting at Bongo Java with Tyler [our VP of Operations], and on a sheet of computer paper we wrote out basically the entire unit economics of the business. At that time, we were growing, but we were barely profitable. That’s when we decided to pivot from being a job board to more of a white-glove concierge service for companies and developers—we saw that we'd lose money on transactions if we continued down the path of being a job board, even if we only spent $10 per new customer. I think that’s a lesson from most of our pivots, actually: they are the culmination of a tremendous amount of intuition, and punctuated by fast decisions, not a lot of analytical work.
Second is moving from a concierge approach to a platform approach. This happened just in the last two years, when we realized that we could impact more people if we had more scale and automation than just hiring more personnel could provide. There was a lot of hesitation with platform-izing the business, but to grow, you have to be willing to change who you are.
Walk me through our most recent pivot—from an entirely services-based company to a product-based one. How did you think about technology investment? How did you determine how much investment would be appropriate, and what would likely pay off?
The thing about being a services business is that you can pretty easily model out what growth could look like: your material costs, how those can generate revenue, and so on. There’s a lot of confidence in that kind of math. There’s just not that kind of confidence around investment in technology, because there’s no guarantee that what you’re building will ever even cover the costs of building it. So much of the work that your engineering team does is contingent on the successful work of sales and marketing to sell the thing that you built.
What precipitated the need for product investment, for us, was that we invested heavily in personnel, and growth flatlined. The alternative was investing heavily in technology, which is riskier, but has the potential for exponentially more payoff down the line. Tech investment yields nonlinear returns, which can be both good and bad.
We were in a place where we were trying to induce growth by changing words on a sales call. We had to take a step back and admit that strategy was never going to yield the kind of growth we wanted. Advice: if you find yourself in that position, you f***ed up a long time ago.
So, part of determining your initial investment in technology is instinct and personal risk tolerance. I asked myself, how much am I willing to risk on unproven results, to pay off later? I looked at everything we could possibly invest in and thought, a year from now, which has the most potential to have a positive outcome on everyone at the company?
What do you think is the biggest compromise we made with our most recent Second Act?
Definitely the ability to have a personal relationship with everyone who we work with—specifically, developers and clients. We’re able to positively impact a lot more people, but I used to know everyone who worked on the platform, and I think that was meaningful.
What are your thoughts on navigating a pivot or Second Act as a bootstrapped company like us, versus a venture-backed one?
Man, being bootstrapped affords us so much flexibility. I love it. The bad part about staying bootstrapped is that I think I do my best work with lots of pressure on me, which doesn’t happen when you don’t have a board of investors holding you accountable. I hack that by considering myself an employee of everyone who works for the company. I hold myself accountable to them, and take that really seriously. If you’re a bootstrapped and profitable company, you have an infinite runway to try new things and pursue all of the second acts that you want.
What is your advice to other companies in our shoes, whose second act will be their first foray into building technology and leading engineering teams?
First, for business leaders, I’d say stay close to the product from the beginning. It’s important that the people who are doing the selling conversations are staying really close to the product and have a voice in the roadmap. As a services business, you’re customer-centric by default. The market and the voices of your customers drive your decisions. But as a product-based business, it’s easier for the engineering team to work in a silo, detached from the things that could really solve customer pain and unlock revenue.
Second, understand that your product build will never be done, and that doesn’t mean that you should stop investing in it. When it comes to technology investment, I say invest the max amount that you feel comfortable spending. It’s a bet worth taking.
Last: the worst thing you can do at the beginning is to try to save money on engineering. What you should do is hire the most talented engineer you can find, who is excited about your vision. Trying to cut costs by hiring someone on the cheap, especially if you don’t have engineering DNA in the business already, is the worst way to start out. You want really solid footing from the jump.
Teja and I both agree: it’s one hundred times more fun to grow a software business than a services one. If you’re on the cusp of a pivot, or maybe launching a new business all together, we’re always around to talk shop. You can find Teja on LinkedIn, or drop him a line at firstname.lastname@example.org.
Posted by Faith BensonLinkedIn Twitter Website