As markets start to go forward in a direction that may not align with your business product, it is time to consider pivoting your business. Jay Gibb, the CEO and Founder of CloudSponge, has transitioned from failure to provide the single point of integration for address books and social network connections on the market. A technical leader with deep entrepreneurial experience, Jay reveals the hacks to planning and implementing the best strategies for your business to survive. Learn the way to find that pivot point and what do to scale your business.

Business Pivot Points: The Key To Survival with Jay Gibb

The truth will set you free. It’s not always the easiest thing to handle. It may frustrate you. It may anger you. It may embarrass you but it will set you free. The most important truth is the truth about ourselves. If you’re a business owner, one of the most important truths you must completely internalize is that failure is part of the journey to success. Without it, they may be no journey at all. Failure is simply stopping when things go wrong. Do you want to avoid failure? Pivot instead. Some of the greatest companies in the world would not be here unless they failed first and pivoted.

Take FedEx for example. It’s originally an idea for transporting check-clearing machines in airplanes to cut interbank processing times. That idea was doomed because the equipment was too heavy. The planes wouldn’t fly. The brilliance of Fred Smith’s plan was the hub. As soon as he realized that, pivoted and changed it to federal express as an overnight package delivery company, it became the beginning of one of the great American success stories. It was the pivot that did it. Our guest happens to be an expert at the pivot. He started his company, which at first failed to gain traction and pivoted to build his current platform, which has brought him great success. We’re going to learn a lot from our guest about what he did, how he did it and how you too can pivot into your most perfect business. Welcome, Jay Gibb, to the show. I’m glad you’re here.

Thanks for having me.

I gave you this whole buildup about your pivot. Tell us your story, Jay. How did you get started?

CloudSponge is a company that began as an entirely different idea. We had this thought back in 2009 that people would be interested in a tool or a service that would allow them to save their data that’s in the cloud locally. Nowadays, people are comfortable with leaving stuff in Google Drive or in the Dropbox. Back then, it was relatively new. We had this idea that there was a market. There was an appetite for consumers who didn’t yet trust the cloud and still wanting a way to save their Facebook data or their Picasa Albums or whatever data they were putting into these cloud services and maybe want to store them on a DVD or on a local drive at home. We started building that business. The first thing that we built was an integration with all of the world’s address books. We’re thinking, “It’s important data.” People’s address books are starting to be stored regularly in Gmail, Hotmail, Live.com, MSN, Outlook, Yahoo and all these other services that are out there.

We built a tool that we were planning on selling to consumers. It would sponge that data from the cloud and put it into something local so they could have it and keep it, in case those services went away or in the future, if they decided that they were going to change services and they’re going to switch from one to the other. They would have a raw copy of their data to work with to do that migration. The failure was we didn’t correctly estimate the effort to successfully build and launch that idea. By the time we had built the high quality that we needed for the sponging of the address books, the ingestion of the address books, we were 80% of the way through the budget that we had set aside for the whole project. We hadn’t done any marketing. We hadn’t made a website for it. We made a lot of amateur mistakes.

The good news was, as we were coming to terms with our runway that was clearly not long enough anymore, we looked at all the work that we had done and all the different tools that we’d evaluated or the different ways that we considered solving this address book integration problem. We reflected on that. We realized that there were hundreds of other developers challenged with the same problem. We were benefiting from all these conversations that existed in Stack Overflow, Google Developer forums, Yahoo Developer forums, or all these different places where there were conversations about how to integrate with these APIs and how they worked and all that. Once we acknowledged our imminent death and started to think about, “What else could we do with what we’ve built so far?” It became clear that we could sell what we had built in B2B Software as a Service model to these other people that were also in those same places and having those conversations in all those forums.

Long story short, that’s what we did. We gave up on the original vision. We wrapped an API around the thing that we had built for ourselves, made a website and put a price tag on it. We went out to all those different forums, groups and people. We started being helpful, answering their questions and casually letting them know that CloudSponge existed. Most of them were delighted that they no longer had to build this thing themselves. They started helping us get some traction and turn it into a real business.

Our readers probably have been through something like this themselves. The time between when you realized that you weren’t going to make it in your current form and the decision to pivot into this new possibility, how much time went by? Was it that day? Was it a week later? Was it automatic? Did it just come to you?

The time was probably a little bit longer because I was the one who’s paying attention to the money. I saw it coming before everybody else did. If I was having a record of the meetings that we had about this topic, it was less than a month for sure. It was relatively fast. We had worked for maybe eight months or so on this product and pivoted within a month. We didn’t drag our feet.

Acknowledge a pain point that lots of people have, and then react to it in an opportunistic way. Click To Tweet

The reason I ask is that first of all, I’ve been through exactly the same thing. When I built my first software company, we had created a tool that we were told was going to be important in the new world of personal computers. It turned out that by the time we were done programming it, the rulings related to the software that we were building were completely relaxed by the IRS. Our tool became completely worthless. We had built a tool to keep track of the time that the computer was being used so that you could deduct it from your taxes. That’s the ruling that the IRS relaxed later. We were stuck with a tool that does exactly what nobody needs. We had to go through the same thing you did. I’ll tell you about my experience. We were angry. We were irritated. We must have spent two hours throwing things around the room. My partner and I were screaming at the walls. We took it hard. A couple of hours later, we asked the same question you did, “What is this technology we built? How could it be repurposed in a different form?”

It was within 24 hours of brainstorming that we had come up with the idea for legal time and billing system called Timeslips. We weren’t lawyers. We knew nothing about legal time and billing, but we didn’t care. We knew that if we could keep track of time, there’s going to be a certain number of business professionals that needed that. That’s how we pivoted. In your pivot, you went from offering a service to creating a tool that people can bolt onto their websites. Since it’s a SaaS company, I assume it’s a licensed model on a monthly basis. Before you pivoted into the SaaS business, did you sell the tool? How was your pricing before you were a SaaS company?

Before we were a SaaS company, we didn’t exist on the market. We were in construction mode. This pivot that I’m referring to happened pre-launch. In the story you told, you had this external thing happen that’s forced you to pivot, which is a clear thing. I can see why you would have that reaction of being angry. In our case, it was lots and lots of little disappointments. We got into this thinking, “We’re going to be able to buy something off the shelf for this address book importing problem. Let’s start with that.” On the market, there was a tool called Octazen, which got acquired by Facebook. There were open-source packages such as OpenInviter and a few others. There’s a company called Plaxo. They used to have a widget that did this stuff. Plaxo still exists or maybe they’ve gone through some trouble. There were a few tools out there.

We were like, “Let’s do a vendor selection, figure out which one of these tools we can use, and we’ll move onto the next thing.” As we did that, we kept running into abandoned software that didn’t work. We had those angry moments that you had, but lots of little ones that turned into this realization like, “Nothing on the market for this works.” There are all these conversations happening in all these developer forums. People are frustrated with all the different solutions that exist and none of them being reliable. That was it. We were one of those developers at that point. We built it because we couldn’t rely on any of these other solutions. By the time we built something awesome, we were out of money. We didn’t have that one external moment that created anger. It was this frustrating path that we were on for a long time. We could see it coming after halfway through it where we were like, “This is a problem. Let’s figure it out.”

The hard part of our story was abandoning the original idea. It wasn’t so hard to identify the opportunity because we had been neck deep in conversations that people were having about how crappy all the other solutions were. Clearly, there was a market for that. Identifying that part was the easy part. The hard part was sitting around the table saying, “Are we going to give up on the thing that we originally decided to build?” We had to come to terms with, “That’s not going to happen. We don’t have the runway laugh. We can’t do it anymore, but we do have this other thing that we can do. Let’s do that.” It was still difficult but I wouldn’t say that anger was a part of it. We weren’t angry. We were embarrassed and still a bit depressed about it. We managed to find a way out of it.

FTC 147 | Pivot Points

Pivot Points: People are frustrated with all the different solutions that exist and none of them being reliable.

 

When you talk about this, it reminds me of a famous company that didn’t pivot and could have owned the world if they did. I’m talking about the Sony Walkman. Those guys refused to see the future, even though they built the platform. The idea behind carrying your music around with you in this little cassette player was revolutionary. I owned several. I loved my Sony Walkman. When MP3 players came out, it was such a game changer. I was waiting and thinking, “Sony will be all over this.” They would not shoot their own baby to give birth to the next level of the industry. Naturally, Apple was quite happy about that. They stepped in and did that. Readers identify with both of our stories. Talk a little bit about what you think is the way to find that pivot point in a person’s business. Be the coach.

I’m not sure if I can answer you in a generic way that’s going to apply to everybody. I can tell you about what we did in my story. It was paying attention to pain. That’s when it comes down to. We were in these online communities and taking note of the fact that every single wall that we were running into, lots of other people also were running into those walls. It was reassuring that we weren’t stupid and we weren’t wasting our time. We’re challenged with things that are genuinely challenging. It also made it clear that this is a problem that lots of people have. This is a pain point that lots of developers and products people would most likely pay a few bucks a month to not have to deal with. That was the thing that made a big difference for us. It was acknowledging a pain point that lots of people have and reacting to it in an opportunistic way.

Give us a couple of reasons why it took as long as it did for you and the team to realize exactly where you were at.

It’s ego and hope. We had this idea. We were doing this thing. The whole team is facing the same direction. We have this vision. It takes time to acknowledge those things. You have that attachment to the plan. At some point, I started talking about this runway issue with everybody else. It took time. We had to stop hoping that we were going to get this thing done on time, swallow the pride, put the ego in check and say, “We’ve got to come up with a new plan because we’re going to throw more money into this hole. It’s probably not a good idea anymore.”

People have jobs. They were in careers. They made the decision to work with you to get this company started. There’s this sense of looming failure. In a way, you want to ignore it. I’m speaking from my own experience in ventures beyond my original software company. When I’m working with teams sometimes, it’s hard to acknowledge what may be right in front of you. It’s hard to admit that times are not going well, things are not going good, we’re running out of money and the market isn’t as easy to crack as we thought it would be. Yet, every day is one more day that we spend more money, push on and continue to develop the product. I was an investor in a small company that was building a tool for Adobe Lightroom. It was a brilliant tool. The writing was on the wall right after I invested. It’s too bad I had to wait that long. The writing was on the wall that Adobe was going to build this feature directly into Lightroom itself. Maybe this company’s product would be completely irrelevant. They pressed on.

Be good internet citizens. Be helpful first, and convert second. Click To Tweet

When I brought it up to the CEO, I said, “We have to acknowledge the fact that Adobe might do this.” Their answer was, “Adobe hasn’t said they would yet. There’s no reason for us to stop.” I said, “Why don’t you go speak to Adobe and see if they want to buy you?” The thought of giving up was much harder and created a huge barrier to seeing the truth. The truth did set us free in this particular venture. It was with a loss in this case. The other thing was the people involved. Some of them were being paid a salary. They didn’t want to lose that salary. Their argument was for why we should persist. It’s all these reasons, startups fail and founders keep going. We had a situation once where we had a startup that was going strong for six months. It completely ran out of money. There was no chance of bringing in extra money. Two-thirds of the employees kept coming to work. We’d go up to them and say, “What are you doing here?” They’d say, “Who knows? We might get funding tomorrow or something.” It was this failure to acknowledge or desire to acknowledge what was right in front of them. It sounds like you went through a little bit of that too.

Maybe a little. There’s probably a different story for each of the people involved. If only we could go back in time and have that conversation with our past selves. Some people might tell you, “I wasn’t worried about it because I trusted Jay.” I figured you would figure it out. It’s not my job. It’s not like everybody on the team is acutely aware of all the things that are happening in the business. People are working on what they’re working on. They’re taking instructions and leading teams or whatever it is they’re doing. They’re not all clairvoyant about all the dimensions that are affecting the business. I don’t think we had anybody on the team that felt like we are in a lot of trouble.

At some point, I started having conversations with them, saying, “We’re not going to be able to finish this thing. We’ve got to figure out what else we can do. Let’s talk it out. Let’s talk about the thing that we’ve all been fighting through for several months, which is this problem that we’re solving is ten times harder than we thought it was going to be. Let’s start talking about selling that thing.” After those dialogues started happening, everybody started getting on the same page. It was a slow acknowledgment by the group that we were definitely going to change directions and this was our best idea. I wouldn’t say that there was any point where everybody knew exactly what everybody else knew.

We are talking to Jay Gibb. He’s the CEO and Founder of CloudSponge.com. Jay is helping us explain and understand what he went through and what I call the art of the pivot. Jay, at the stage that you guys decided to go in a different direction, how long did it take before you got confirmation through the marketplace that you finally had chosen the right direction?

That was fast. As soon as we made that decision, we wrote some messages to some people that we knew were in the middle of struggling with this problem. We said, “We’re going to make an API for this. Do you want to use it?” We had several people say yes. That was part of the reason why it was an easy decision. It was because we were able to get some initial customers and some relatively biggish ones. One of our first customers was called Causes. This is back in 2010. Facebook has this feature built into Facebook where you can donate your birthday to a cause and tell everybody, “Don’t buy me a gift this year. Donate some money in my name to the American Heart Association or whatever.” Causes may have been acquired by Facebook. I’m not sure if there’s a relationship there. It was called Causes.com. They use the CloudSponge product so that when you wanted to tell everybody this news, that you were donating your birthday to a cause, you would use the CloudSponge product on Causes.com to select people from your address book and send those emails.

FTC 147 | Pivot Points

Pivot Points: Get into communities with people that are solving problems and get involved in the conversations.

 

We were proud of having Causes as one of our first customers. They’re a big deal. They were in the news at the time. That was a great validation for us. Within a month, we had ten or twenty customers. It didn’t take long for us to get some initial cash coming into the bank account, even though it was only $500 a month or something like that. It was enough that it puts some fresh wind in our sails. It gave us some logos to put on the homepage and some testimonials to post. It was enough to be able to get the traction we needed to justify continuing on that path.

You were a wily band of scrappy entrepreneurs, hoping to get your first sale and in one month, twenty customers. Let’s talk about scaling. A month later, you have twenty customers. You realize, “We’ve got a real company here. We have something to sell.” What did you do at that point to start scaling the business?

We did the obvious in our case. We got these communities with people that are solving these problems. We went into these places. We got involved in these conversations. We answered people’s questions about the Plaxo thing that sucked, or the OpenInviter thing that sucked or the Octazen thing that was impossible to install or the whatever thing that was too expensive, and all the different solutions that we’d already gone through and we knew everything about them. We went to all these conversations and answered everybody’s questions with CloudSponge as a signature. When it wasn’t too shameless, we would directly mention like, “By the way, we have a solution for this if you want to come and check it out.” We crossed the line a few times there. We got blacklisted in a couple of places. It wasn’t perfect. We are trying to be good internet citizens, be helpful first and convert second. We did a lot of that. Even nowadays, if you search for the right keywords, those old posts from a few years ago will still show up. They still pay dividends because they’re in the memory of the internet forever. That was time well-spent.

The other thing that’s an obvious extension of that is organic keywords. We’ve got people going to Google, pasting an error message that they’re getting from another product, trying to figure out what to do about this error message. We would make a page on our website that describes the error message. We tried to rank that page on for that person who’s looking for that solution, the long tail. We are able to look at all these problems, look at all of these conversations, create the best resource, either onsite or offsite, for these people. Relatively quickly, we ended up getting all the traction that we needed. The flywheel started spinning on its own. We ended up having a little bit of luck. The company called Octazen, which was two guys in Malaysia. They had built this complicated piece of software. It was acquired by Facebook so it disappeared from the market. That left a void for us to fill. It gave us the opportunity to start writing, start answering questions about it and start receiving those customers that would otherwise have gone there. It’s vanished and they need a new home. We made sure that we had a comfortable home for them.

Plaxo had this address book widget as well. For anybody who doesn’t know it, Plaxo was a smart address book. It was a place where you would use them for your contacts. They would enrich the data for you and keep it updated automatically for you. They ended up failing. I don’t think they’re doing very well. As a side thing, they had an address book uploader widget thing that was bad. The product managers at Plaxo reached out to me and said, “Do you want all our customers? We don’t want this thing.” They said like, “This thing is so far off from our main business that it’s causing pain. We’re not able to support it the way it needs to be supported. Our customers are getting angry. We don’t want to continue using it. Can we direct all the traffic from here into CloudSponge?” They did. They shuttered the product. They made a big blog post saying like, “Everybody, go over to CloudSponge.” It was a piece of content they wrote and put on their own site. It was driving traffic to us.

If you search for the right keywords, those old posts will still show up. They still pay dividends because they're in the internet forever. Click To Tweet

We ended up not only filling a hole for people who had the problem but also filling a hole for people who had tried to solve the problem and realized it was a tedious problem to solve. We ended up doing that. We chose this painful thing, this problem that we’re solving and we ended up being the only solution on the market. There are a few competing solutions that have the same problems they did several years ago, but we’re the solution now. It’s such a niche-y thing. It’s such a specific feature that there’s not a lot of need to compete with.

When you look at your website and customers who come to your site, you have dozens of address books that you link to not just one or two. You also have some fantastic endorsements from great companies. What was the first employee that you brought on board, other than maybe an assistant for secretarial work or admin work? Who is the first hire for the company?

The origin of the company is engineering. The first hire is still the CTO of the company. That’s Graeme Rouse. He cut the first line of code. He’s been a part of the business ever since.

Beyond programming and beyond development, was there someone that was important for you to bring on board as one of your first key employees? Was that a salesperson, a marketing person or maybe a management person? What was your first employee other than a developer?

FTC 147 | Pivot Points

Evolved Enterprise: An Illustrated Guide to Re-Think, Re-Imagine and Re-Invent Your Business to Deliver Meaningful Impact & Even Greater Profits

It’s mainly marketing because that was a major blind spot for the rest of us. Digital marketing and copywriting was the first additional role we had. After that, it was probably the role that we still have, which is called a customer concierge. It’s a blend of support sales and customer success. It’s a person that is responsible for making sure that all of our customers are getting what they want from our product and from our team. Those are the two most important roles internally.

They’re probably the two most important roles with any company, a marketing person and a concierge, someone who onboard your clients. That was a great choice and a good pointer to where others should go. Jay, thank you for that. We are at a point in the show where we have some questions for you, Jay. These are questions we ask every single person who is a guest on the show because we love to hear what they think. Who, in all of space and time, would you like to have one hour to enjoy a walk in the park, a quick lunch or an intense conversation with?

It’s my dad. He’s missed out on my kids.

I also know what it’s like to lose a dad as well. That’s a great choice. Your dad would have been so proud to see everything that you’ve done. Maybe he might have had a little bit of fatherly advice as well. Jay, here’s the grand finale question. What is it that you are doing or would like to do that truly has the potential to change the world?

Climate change is a big issue that we should all be thinking about. Anything that I can do that is going to encourage more kids to take a path of science to be able to go in and contribute to that problem is interesting for me. I’m trying to steer all my decision-making in that direction.

Give us an example of some of the things that you do either daily, weekly or monthly, anyway that you contribute to solving that problem?

Climate change is a big issue that we should all be thinking about. Click To Tweet

One of the things that I’ll do is make special deals with CloudSponge customers that are in that area. A lot of our customers are in the eCommerce or subscription box areas, or they’re building communities and mailing lists. If there’s somebody who’s in that area that needs a price break or needs some engineering help or needs some extra time on the phone, I’ll do anything that I can do to contribute with what I have, the tools that I’ve got available to me, whether that means giving them a discount or giving them a few months for free or help them get off the ground. Those are the things that I can make those small, easy day-to-day decisions and steer my decision making in that direction. We may be able to get into some more deliberate campaigns and things that are doing that in a more intentional way, rather than on an opportunistic way. CloudSponge isn’t going to help with the climate change problem directly, but there are lots of little things that I can do. It’s direct decision making that way. Maybe if we get to a place where we’ve got a big budget to try to do some PR stunt or something like that, I can guarantee that it would be somehow inspired by that direction.

We interviewed a gentleman named Yanik Silver, who is the author of Evolved Enterprise. Yanik is on a crusade to help businesses convert their entire focus to a particular cause and help people. What Yanik has found in his research is that companies that stand behind a major project or charitable activity find that their businesses increase rapidly. It sounds like you’re on that path. It might be a good book for you to pick up. At the same time, create an evolved enterprise out of CloudSponge. Imagine if for every month of payments that CloudSponge collects, you donated a dollar to a particular cause that supported your mission. Sales could go up as a result of that. That’s what Yanik talks about. I love the path you’re on. I would love to be kept in touch as this progresses for you. I feel passionate about the same thing as you do. He’s a friend and someone I look up to. He’s changed the way I think about companies and the way I’ve been building my companies now too. Jay, it’s been a real pleasure chatting with you. I did mention that you have something free for our audience. I understand it is a fairly lengthy free trial. Can you tell us a little bit about that?

Our system is mostly self-serve, but we do have the customer concierge that I mentioned. If any of your readers sign up and decide they want to use the CloudSponge product, they should mention your podcast to the concierge. We’ll give them a 90-day period for free to get up and running without having to worry about paying us.

I know that readers will very much appreciate that. Jay, thank you again for being on the show. I can’t wait until we get a chance to talk again next.

Thanks very much for having me, Mitch. It’s been great.

Resources Mentioned in This Episode:

Results Breakthrough

www.ResultsBreakthrough.com

Use the Event Code: WINNER for free access.

 

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