Successfully Pivoting a SaaS Business:
Brian Litvack, CEO and Co-Founder, LeagueApps
Introduction: Successful pivots are the stuff of legend in the technology world. Evan Williams pivoted his failed podcasting startup, Odeo, into a micro-blogging platform that became Twitter. Stuart Butterfield created the highly popular internal communications tool Slack, currently valued at over $5 billion, out of a failed online gaming business called Glitch. Groupon was initially created as a side project by Andrew Mason and Eric Lefkofsky. After their social media platform The Point went nowhere, they pivoted the business toward the group buying market.[1] Even Paypal, one of the largest payment companies globally, had to go through two pivots before finding a business model that worked.[2]
But not all successful pivots are as improbable, or as seemingly haphazard, as those of Slack or Groupon. In fact, most successful pivots result from a set of targeted learnings acquired by an entrepreneurial founding team that is iterating on a specific customer set and product area. This focused process of trial and error eventually leads the founding team to a product and value proposition that resonates with the customer.
These are more targeted pivots, which may be described as focused variations on a theme. These experiments may result in a deeper understanding of a customer pain point, which leads to identification of a new product that can better address this pain point. Other experiments may also lead to discovery of a new customer pain point addressed by a particular product, perhaps a different pain point than was originally intended.
LeagueApps is a great case study of a SaaS company that made a successful pivot after acquiring a deep understanding of a different customer pain point than it originally intended to solve. Today, New York-based LeagueApps is a thriving SaaS company that powers sports organizations around the world (mostly US and Canada), enabling these organizations to manage registrations, facilitate payments, organize schedules, communicate with coaches, players and parents and, perform reporting, and manage e-commerce. The company has facilitated more than 7 million registrations across thousands of organizations over its history, and has grown to 70+ employees. It is backed by several leading venture capital firms, including Scott Birnbaum of Red Sea Ventures, Contour Ventures, and 645 Ventures, as well as several leading firms and individuals in the sports industry.[3]
Before LeagueApps there was Sportsvite, a social network and community that aimed to connect individuals who shared the same interests in sports activities. CEO and Co-Founder Brian Litvack and CTO and Co-Founder Steve Parker ran Sportsvite for four years. Over that time, the company had several key learnings that led the business to its successful pivot into becoming LeagueApps.
We interviewed Brian to learn about the early days of Sportsvite, why that business was not successful, and how he and his team decided to launch LeagueApps. This interview helps to answer the following questions that many SaaS entrepreneurs wrestle with as they are building a business:
· When is the right time to pivot a SaaS business?
· What should you be hearing from customers to help guide the decision to pivot?
· What are the sacrifices required to make a successful pivot?
Summary: LeagueApps is a SaaS provider of league management software for sports organizers around the country with a mission to influence the future of youth sports. LeagueApps’ software platform enables league organizers to stay organized, increase revenue and registrations, connect with league participants, and grow their programs. LeagueApps has thousands of league organizers as customers.
Founders: Brian Litvack (BL), Steve Parker
Year Founded: 2011
Interview with Brian Litvack:
Q: Can you talk about how you guys first got started? What were the early days like?
BL: The business started off as Sportsvite, around 2006. We first were a consumer product for sports participants. We were basically a social network for people who were interested in recreational sports, and we connected people who had the same interests in their communities to play sports together. That business preceded LeagueApps.
Sportsvite got to reasonable scale in terms of users, but we found it difficult to market a consumer product and monetize the online community. We couldn’t achieve a critical mass desired by advertisers. We started to realize that despite building out aspects of a successful online community it would be difficult to build a real consumer-based business in this market.
In the process of building Sportsvite, we saw that there was a b2b opportunity. In order to help develop the Sportsvite network and connect individuals with similar interests, we had created a directory of sports organizations, and we had thousands of these organizations signing up to be part of the directory. The organizers were the super-users in the Sportsvite community.
We started focusing on the directory, and also focusing on the needs of sports organizations. We started thinking about how we could power their sports leagues.
Q: So you decided to pivot the business at that point?
BL: We decided to pivot in 2009. It’s a tough decision because we had invested so much time, money and focus into Sportsvite. We knew that it would take at least 6 months to build a new product and we’d be practically starting from scratch. It’s a real gut check and it took us a few months of deliberation internally for us to pull the trigger. We didn’t like the term pivot — we said it was an “evolution”. It was important to us that our mission was the same — to impact and influence how people play sports.
Once we released the initial product in the fall of 2010, we knew we were onto something and could sense the product/market fit. There was a day in December of 2010 where we processed $14,000 (LeagueApps made a few hundred off of that) that was the point where it felt like this was really going to work! We didn’t even realize at the time that we were building a SaaS company. We just knew that sports organizations were willing to pay for the value they derived from the LeagueApps functionality.
Q: How did you pivot the product, and what did the first few deals for LeagueApps look like?
BL: We put a lot of focus on league registration and payments. We knew that these functionalities were a major issue for local sports organizations. Leagues needed to be able to register participants, and they also needed a way to collect fees online for their programming.
We focused on leagues that we had a relationship with through the Sportsvite platform. Wee began to understand their needs by asking them (this was a much more direct than trying to understand the needs of the B2C community). Our first deals were small. They came out of friendly conversations that we had with sports organizations that we already knew. But they were paid deals. And our transaction fee model has remained consistent since then.
Launching each customer was such a thrill and a huge victory. When you’re a startup, every time you get someone to pay you, that is huge.
Q: What were the previous experiences of the early team members at LeagueApps? How experienced were your first hires?
BL: We didn’t have a huge track record, but we learned together from our experiences building Sportsvite. We had early investors who were supportive — for example, 212 Media and a few key advisors that helped us along the way.
Q: How did you build a sales team?
BL: First we did it ourselves. We emailed and called leads from Sportsvite. Our first sales hire was Jeff Maier, the Yankees fan who is remembered for catching a ball from the stands in the 1996 ALCS. He had a name in sports and people recognized him. He was working for a software company and was relentless in calling us to pitch his platform to us. He was relentless. We were intrigued by the potential for him to sell LeagueApps. He was really aggressive from the start; he started signing up sports organizations with all different kinds of crazy tactics. We teamed Jeff with a former intern and that was our sales team. We didn’t have a VP Sales in the early days.
Wiley Cerili and Adam Leibman (at SinglePlatform at the time) were generous with their time in sharing their Inside Sales processes. We didn’t even realize we needed sales at the start, but we learned quickly.
Q. What is your sales model and sales process today?
BL: We have a direct sales model where we focus on building direct relationships with sports organizations. We aim to get prospective customers to a screen share where we can demo our platform. We convert a percentage of prospects after the screen share.
Q. What does your sales organization look like today?[4]
BL: We have a sales team that is the heartbeat of our NYC office. There are different roles within sales and we have both a sales development and account executive team. We segment sales by sport, geography and organizational size. We try to use as much technology and data as possible to make the process more efficient.
Q: Were there key metrics that you used to track the performance of your company in the early days?
BL: I first started reading the Bessemer Ventures and Matrix SaaS reports. However, I found that when you’re running a very young company, those metrics don’t always translate into the day-to-day operations. A startup’s sales figures are so small and limited in time that those metrics aren’t so helpful.
It’s all about getting customers to the table; you’re not worrying about LTV to CAC ratios. You’re just trying to sell a product to a customer who is willing to pay. Those benchmark metrics become more relevant when you get to critical mass.
Q: What metrics were most important when you raised your company’s Series A Round?
Revenue and revenue growth were important. Our ability to show 6 figures of monthly recurring revenue was important, as was our rapid growth. Revenue retention has always been a strength in our business leading to higher lifetime value. Our team’s experience was somewhat important. We knew that we have some holes in our management team, but we are growing and improving.
Key Learnings from Brian Litvack and LeagueApps:
· Don’t be afraid to migrate from a consumer-focused to an enterprise-focused business. LeagueApps made a pivot from a consumer-focused social network to an enterprise-focused software company. This pivot made sense, because LeagueApps discovered that the leagues were the group that really had the pain. As a SaaS founder, your mission is to identify the most acute pain point, and this may require changing your target customer based on market data.
· Look closely at what customers are adopting, even if they are adopting something different than what you are currently selling. When they were running Sportsvite, Brian and his team discovered that they had greatest adoption for a product they weren’t actually selling: their directory of sports leagues. This rapid adoption spurred them to begin analyzing the needs of sports leagues themselves, rather than their original target audience. This is a key lesson for SaaS founders. SaaS founders should look closely at what customers are demanding, even if that product is very different than the initial product that is being sold at the time. This process may lead to identification of a product that solves a deep customer pain point that was not initially evident.
· Successful pivots take time to pay off. LeagueApps had to make a decision on whether to make a nine-month investment into a new enterprise product, then put in additional required time and money to market and sell the new product. These decisions are not easy, in particular because a business that is pivoting has very scarce resources. These pivots are often high-risk, high-reward moves, that require an entrepreneur to bet the company on a new direction. Founders need to allow the necessary time to determine whether a pivot has paid off, and it may not be obvious immediately.
[1] “Inside Groupon: The Truth About the World’s Most Controversial Company,” Nicholas Carson, at http://www.businessinsider.com/inside-groupon-the-truth-about-the-worlds-most-controversial-company-2011-10.
[2] “Reid Hoffman on PayPal’s Pivoted Path to Success,” Fast Company, at https://www.fastcompany.com/1837839/reid-hoffman-paypals-pivoted-path-success.
[3] 645 Ventures has been an investor and supporter of LeagueApps since 2015.
[4] This interview was conducted in late 2016. The LeagueApps team has grown considerably since that time.
