Jenna Wortham
New York Times News Service

Every entrepreneur hopes to start the next big thing. But sometimes the first try doesn’t go as planned. Bradford Shellhammer remembers the exact moment he realized his fledgling Web startup, Fabulis, a review site and social network geared toward gay men, was a flop. Last November, he and Jason Goldberg, one of his co-founders, flew to London, expecting to hold a festive party for their users there. Instead they found themselves among a sparse crowd at a tacky club in Soho, listening to an off-key singer doing show tunes and being served overpriced drinks by shirtless bartenders.

After that disaster, Shellhammer and Goldberg laid off more than half of their employees, threw out the code they had written and changed course. Six months later, they introduced a high-end e-commerce site called Fab.com.

Theirs is just one example of a startup that decided to cut its losses and pivot, choosing an entirely new direction in the hopes of transforming a dud of a business into one that might have a shot at success.

To pivot is, essentially, to fail gracefully. While the term has been in the startup lexicon for decades, it is coming up more often in the current Internet boom, as entrepreneurs find that many investors are willing to keep the money flowing even if a startup takes a hard left turn.

“Ideas are like lightning in a bottle, so if the company is small enough and didn’t seem to capture lightning on their first try, it makes sense to try again,” said Ben Horowitz, one of the founders of the venture capital firm Andreessen Horowitz. “The art of the pivot is to do it fast and early. The older and bigger the business, the harder it is to change directions.”

Horowitz speaks from experience: A decade ago, he went through a pivot of Loudcloud, a publicly traded enterprise services firm that he founded with Marc Andreessen, into Opsware, a networking software company. “That was very public and very scary,” he said. “We dropped down to 35 cents on the Nasdaq, and although we went back up to US$14, it took a while. When you’re a small company, no one really notices if you make a big change.”

Sometimes a pivot is necessary when the pace of Internet evolution has made a startup’s original plan obsolete. “The Web we were building for a few years ago is almost no longer relevant,” said Michael LaValle, the co-founder of Gojee, a recipe recommendations app. LaValle and his team pursued two different food-related ideas before settling on Gojee, which has attracted a quarter of a million users since its release in September.

For startups, abandoning one idea to try another is easier than ever, because the cost of building and running a website or app keeps dropping. But it is still risky. Entrepreneurs have to keep from burning through their funds and appease venture capitalists who may be unhappy that the money they invested in a photo-sharing site is now backing an online dating service for cats.

Most investors like to say that they are betting on people, not specific ideas, and are willing to wait while entrepreneurs iron out the kinks in their companies. But some put their foot down if the new idea is outside of their comfort zone.

Mitch Kapor, the software pioneer who is now a partner at Kapor Capital, which invests in early-stage startups, said roughly 15 per cent to 20 per cent of the companies in his portfolio have gone through radical transformations.

But when the founders of StickyBits, a company that made bar-code stickers that could be scanned with a mobile phone, told him and other investors that they wanted to use its remaining cash reserves to turn it into a social music service, he balked.

“It was outside the scope of our portfolio,” he said. “We don’t do music or entertainment startups, so in that case, we just said, OK, we’ll take back our remaining interest.”

That music service, Turntable.fm, became the viral hit of the summer, eventually attracting 1 million users and an additional $7 million in venture financing.

“It’s not absolutely clear that we made the right decision,” Kapor conceded.