The Lean Startup - Eric Ries [64]
David decided to reduce staff and pivot again, this time attempting what I call a platform pivot. Instead of selling an application to one customer at a time, David envisioned a new growth model inspired by Google’s AdWords platform. He built a self-serve sales platform where anyone could become a customer with just a credit card. Thus, no matter what cause you were passionate about, you could go to @2gov’s website and @2gov would help you find new people to get involved. As always, the new people were verified registered voters, and so their opinions carried weight with elected officials.
The new product took only one additional month to build and immediately showed results: 51 percent sign-up rate, 92 percent activation rate, 28 percent retention rate, 64 percent referral rate (see the chart below). Most important, 11 percent of these customers were willing to pay 20 cents per message. Most important, this was the beginning of an actual growth model that could work. Receiving 20 cents per message might not sound like much, but the high referral rate meant that @2gov could grow its traffic without spending significant marketing money (this is the viral engine of growth).
BEFORE PIVOT AFTER PIVOT
Engine of growth Paid Viral
Registration rate 42% 51%
Activation 83% 92%
Retention 21% 28%
Referral 54% 64%
Revenue 1% 11%
Lifetime value (LTV) Minimal $0.20 per message
Votizen’s story exhibits some common patterns. One of the most important to note is the acceleration of MVPs. The first MVP took eight months, the next four months, then three, then one. Each time David was able to validate or refute his next hypothesis faster than before.
How can one explain this acceleration? It is tempting to credit it to the product development work that had been going on. Many features had been created, and with them a fair amount of infrastructure. Therefore, each time the company pivoted, it didn’t have to start from scratch. But this is not the whole story. For one thing, much of the product had to be discarded between pivots. Worse, the product that remained was classified as a legacy product, one that was no longer suited to the goals of the company. As is usually the case, the effort required to reform a legacy product took extra work. Counteracting these forces were the hard-won lessons David had learned through each milestone. Votizen accelerated its MVP process because it was learning critical things about its customers, market, and strategy.
Today, two years after its inception, Votizen is doing well. They recently raised $1.5 million from Facebook’s initial investor Peter Thiel, one of the very few consumer Internet investments he has made in recent years. Votizen’s system now can process voter identity in real time for forty-seven states representing 94 percent of the U.S. population and has delivered tens of thousands of messages to Congress. The Startup Visa campaign used Votizen’s tools to introduce the Startup Visa Act (S.565), which is the first legislation introduced into the Senate solely as a result of social lobbying. These activities have attracted the attention of established Washington consultants who are seeking to employ Votizen’s tools in future political campaigns.
David Binetti sums up his experience building a Lean Startup:
In 2003 I started a company in roughly the same space as I’m in today. I had roughly the same domain expertise and industry credibility, fresh off the USA.gov success. But back then my company was a total failure (despite consuming significantly greater investment), while now I have a business making money and closing deals. Back