Reid Hoffman: Surviving the Pivot

One of the issues that entrepreneurs at an early stage often have to deal with, and you mentioned flexible persistence, is a point in time where the prospects of their startup does not look so good and the need to pivot. I was just wondering if you could share. Maybe you've never had that experience, but I wonder if you could share with Your experience at PayPal and LinkedIn what that moment felt like and what the hindsight was.

Well, so every startup has. Well, yeah, although almost every startup has what I call a valley of the shadow moment, which is there's some moment by which the founders and the early team are sitting around looking at each other, going, why did we think this was a good idea? Right? And so the PayPal moment of that was August 2000, where the company spent $12 million in one month. We didn't have a dime of revenue and the burn rate was accelerating. So we could tell you the hour at which we would run out of the hundred million dollars that we'd raised a couple months earlier. And we're like, okay, well, that was the definite valley of the shadow moment. And we basically decided that we had one. We had a chance to do one thing that would fix the course of the business. Peter, Max, Luke and I did an off site where we talked about it. We came up with, said, look, we have to do mass merchant business because we have to have the real exponentia in cost line was credit cards, free credit card processing. So we have to have a revenue model that matches that. We got to try it. A lot of people thought we were going to die because people had tried to do Master merchant on ebay before and it hadn't worked. And so we generated every idea to make it work and we tried it and that's what we ended up being successful rather than a smoke cloud. And then at LinkedIn, it actually started from a fairly early day because one of the things that was interesting is as I recommended to people, that you go out to your network and you get intelligence from them. I was taking the LinkedIn idea around to some of my smartest friends, and all of them were saying, well, not all, two thirds of them were saying, you're out of your mind, this is a dumb idea. Right? And I was like, well, why do you think it's a dumb idea? And they said, well, the whole value is people in a network. So first person on the network, no value. Second person on the network, no value. Third person, network, no value. Until you get to some size of the network, there's no value for anybody in the network. So how are you going to this will never go anywhere, it'll never launch. And I said, well, I've got some ideas for how virality and other things may be able to pull us together. And even though a small percentage of people go, ooh, I want to try this, this is interesting, I think I can grow to the right size. If I wasn't right about that, my plan Z was basically to shut the company down or try to sell it and then be done. And that's the reason why we launched as early as we could and we were focusing on that, the network growth as a part of it, as a way of making it happen. And the months between we launched May 5, 2003 and then to December was all pretty white knuckles because until we actually got the growth and network going the right way, we basically knew the alternative was a fairly immediate and messy death.