The fundraising and engagement platform GiveGab made waves in January 2018 by purchasing one of its biggest national competitors. With the acquisition of Kimbia, GiveGab is one step closer to becoming the biggest charitable software program out there.
But that success would not have happened if the company hadn’t decided to completely change direction from its original vision of being a social network connecting volunteers and nonprofits. In 2015, GiveGab pivoted to focusing on helping nonprofits attract and maintain donors rather than volunteers.
The company’s CEO and co-founder, Charlie Mulligan, spoke with eCornell’s Chris Wofford about his “painful” yet highly successful pivot decision and to share tips on how to decide when it’s the right time to change strategic direction. What follows is an abridged version of Mulligan’s presentation, delivered as part of eCornell’s Entrepreneurship webinar series.
Mulligan: I’ve met thousands of entrepreneurs at this point. I think almost all of them would describe themselves as having a vision of what they want to happen and being very persistent. While I agree that these are really important traits, they can also impact the challenges of pivoting. If you really pride yourself on what you are doing, it can be very hard to have to admit that your vision was wrong. When reality hits, it’s sometimes like you suddenly realize you’re climbing the wrong mountain. It’s not a matter of changing little tactics. You have to change your entire strategy. That’s what a pivot is to me.
When you are starting out, there is really no way to predict the future. Yeah, some people get lucky but for a lot of startups you’ll find that the reality is different than what you envisioned so you’ll have to decide what to do. You can quit or you can be flexible and make a different choice.
Wofford: How do you know when it’s the right time to change direction?
Mulligan: It could come at any stage. When you’re starting out, you have this idea of what the customer wants. Well, you better talk to as many customers as you can and you need to realize that oftentimes you will hear what you want to hear so you have to be very careful and make sure that you start to listen before you get too far down the road. You might have to pivot very early once you’ve assessed the demand and done the research.
The key thing about a startup is a lot of times you’re trying to create something new or completely different, but when you’re doing research, the research is about old products or old ways of thinking. So you won’t really know for sure whether your new way is going to be right.
Wofford I’m sure the audience would love to hear the details of your decision to switch tactics at GiveGab.
Mulligan GiveGab set out to be the social network for volunteers, which meant that we were a connection portal to help volunteers and nonprofits find each other. We interacted with a lot of nonprofits and they were really happy to talk about this. They loved the idea and then as we built our product they thought it was great. We had a free product so we had thousands of nonprofits and hundreds of universities sign on. We passed 100,000, things were growing and moving fast and we were getting great press and great feedback.
But it didn’t take us long to realize that there was really low engagement. Nonprofits would sign up but then only come back like every six months to do something. It was really challenging to get them to actually post volunteer opportunities.
When I first started I thought it was going to be really easy to get nonprofits to post volunteer opportunities because they were consistently telling us that they need more volunteers. But we couldn’t get nonprofits to actually sign in and create volunteer opportunities. That meant that we were having a hard time matching the volunteers who had signed up with opportunities in their area. You know, a volunteer in Montana and a nonprofit in Minnesota don’t really match up.
That’s why we decided to go after universities to help build an ecosystem because a lot of times they have volunteers and nonprofit partnerships. The problem we found there was that it was a super long sale because we were talking to low level employees. We should’ve noticed this problem earlier but if you want to know what a nonprofit really cares about, you need to go see what the executive directors are doing. What the directors are doing is looking for donors, not volunteers.
Raising money is really what mattered the most and we weren’t listening to that. So we decided to go down a new path. We sat down and really looked at what the nonprofits were using their volunteers for. Almost always, the volunteers were being used as a direct or indirect way to get donors. It’s really about money for nonprofits and volunteers are a way to get donors more engaged. One of the things we kept hearing all of the time – and the research backs this up – is that only 19 percent of first-time donors ever come back. Nonprofits spend all of this time getting donors and then four out of five of them are gone and never come back. We were skirting around the edges with volunteering but the core problem was how to get more donors and keep them coming back. So that’s now the problem that we decided to solve.
Wofford How big was your organization when you decided to make this pivot?
Mulligan We had 90 employees and we had a lot of funding. We had dozens of investors and so I had to go back to all of them and admit I was wrong. Then we had to let about half our company go. These were really good employees so that was a very painful day.
For a lot of people, ‘pivot’ is just a word, just a strategic choice. For me, it’s a painful memory. It was necessary and I’m really glad we did it, but it was painful.
We had to totally re-brand. We were the social network for volunteers so we were highlighting happy volunteers and like things like that, which makes no sense for a fundraising platform. So conceptually we had to change everything. Then we had to build it and go back to our development team and say, “Ok, we’re starting from scratch, let’s learn how to do this.”
There are also laws around fundraising so there was a lot of work in just making sure we were doing things the right way.
Wofford That sounds really challenging.
Mulligan It was, but one of the great things about pivoting is that if you’ve built a great team, as we had, then you’ve already figured out how to work well together. In our case, the employees we were left with were great, so we got a second shot at something and the second product looked a million times better than the first product because we really knew what we were doing by that point and we had a system in place.
There’s also a certain amount of incentive in a pivot situation because maybe you’ve run out of money, so you know that this could be your last lifeline. So you better make progress and you better make it quick. There is nothing like the gallows to give people focus.
As an entrepreneur, it can be very challenging because you have told a lot of people about your vision and you’ve been very persistent and then you have to go and tell them, “OK my vision sucks but now I have a new one.” You’re asking people to buy into this new idea even though your first was wrong.
Wofford That must take a certain humility.
Mulligan Sure, and you also have to make some super painful choices. Like I said, we had to let employees go. We had to go back and talk to investors and let them know that all of their investments just went backwards. Nothing about it is fun but you have to just face it head on, so I just owned it. I think that approach was super helpful.
You have to pick your new course of action and then you have to forget the past. Pick your new vision and just sell that like that was the only one you ever believed in. And of course you’ve got to somehow get everyone to buy into this one as much as they we’re into the first one. These are all way harder things than I think people realize.
Wofford It certainly sounds hard. Was it a challenge to keep morale up?
Mulligan Well, when you’ve just let half your workforce go, keeping morale up was already a challenge. People’s workloads had doubled and then it was like, “Now let’s do it over.” I think what helped us is that we spent a lot of time making sure that our new course of action was picked by everyone, not just me.
Wofford Everyone needs to be on board to make a pivot work.
Mulligan Right. We had conversations with the people that we were going to keep and said, “Look, if your heart’s not 100 percent in this, you need to let us know because there are people we are letting go whose hearts are 100 percent in this.” That wasn’t a threat, it was just the reality. I think people really appreciated the openness and transparency. When we let people go, we really supported them but we also sat everyone down and said, “OK guys, we’ve got to forget about it. There is a lot of pain here, but we need to just move forward.”
When we did our pivot in January 2015, we had five nonprofits raising money on GiveGab.
At the end of the year, we had 700. All paying customers, so we were making money off all of them. We are currently on pace to potentially have well over 20,000 nonprofits by this year. We also have 10 states using us as their statewide giving day platform later this year. So the pivot worked.
Wofford Wow, it’s very impressive. Congratulations.
Mulligan We’re really excited and of course relieved. We saw the bottom and that makes you appreciate it more when things are really working.
So much of the startup ethos is ‘vision and persistence’. I think you need vision and flexibility. You can also think about it in terms of the difference between persistence and resilience. Persistence is putting your head down and running into the wall. Resilience is putting your head down but looking around a little and realizing there’s a door over there and you can walk right through it.
Wofford Charlie, thank you so much for sharing your experience and giving such great advice about changing strategic direction.
Mulligan Thank you, Chris. I enjoyed being with you.
Want to hear more? This interview is based on Charlie Mulligan’s live eCornell WebSeries event,The Startup Pivot: Changing Strategic Direction. Subscribe now to gain access to a recording of this event and other Entrepreneurship topics.