Being a good DJ means making hard decisions

Betabeat covered the rise of Turntable.fm this summer and the pivot/restart founder Billy Chasen made from his previous company Stickybits. During the most recent episode of Founder Stories, he told Chris Dixon about how he came to make this hard decision and break the news to his investors and employees.

"I was looking at the health of the company, just a dozen different metrics, how are users liking it, where is the product at, and everything was just kind of a mediocre success. So I wasn't as excited going in, I was like, can I really see myself doing this for another year."

The big problem with StickyBits, said Mr. Chasen, was that it never found a way to get traction among users. "I had this huge missed connection how I thought things would run with brands. I thought we would deliver this awesome app that brands would use and they deliver the crowd. But really brands wanted to test it, and asked us to bring the crowd. So it was a Catch-22."

Turntable was the top idea on his list of companies Mr. Chasen thought would try to build at some point in his life. But he admits the decision to completely change course was still terrifying. "Knowing what the signs are and how to recognize them, so you don't become a walking dead startup, is really important.

Check out the full episode for some more cool insights.

Pivot Prof. Billy Chasen

There is no more overused and reviled word in the world of tech start-ups than pivot. Pivot. Pivot. Pivot.

It seems to capture the manic energy of the current tech industry, in which an idea can get millions in funding before building a product and, if the users never materialize, or the business model never emerges amidst all hype, simply change their direction and try something new.

No company better epitomizes this idea of second chances than Turntable.fm, a social music site, born out of the ashes of a failed venture called Stickybits. Founders Billy Chasen and Seth Goldstein raised almost $2 million for Stickybits and worked on the project for about a year. The idea was to leave little stickers on physical objects that contained links to stories, photos and video on the web. Big brands like Pepsi thought it was a great idea. Users, not so much.

With little momentum and cash running low, they decided to pull a monster pivot. Turntable.fm, which launched a little over one month ago, has already attracted over 300,000 users and the interest of top tier investors on the east and west coast. Suddenly a team that was running low on funds is being courted for a fresh infusion of $5-10 million at a $40 million valuation, Betabeat has learned from multiple sources.

Exclusive: Turntable.fm's #1 Spinner, DJ Woooooo, Shares his Secrets

Update: Fred Wilson, Kleiner Perkins and Accel in Bidding War Over Turntable.fm

“Pivoting is sort of unique to the tech world,” said Kevin Ryan, probably New York’s most successful serial entrepreneur. Doubleclick, the ad serving platform Ryan founded during the dot-com boom, was eventually purchased by Google for $3 billion, and remains New York’s biggest exit. “Most people don’t realize this, but that company was actually a pivot,” says Ryan, leaning back deeply into a leather chair at the offices of his largest current company, Gilt Groupe.

“We were an ad sales network, a media company, and maybe ten percent was dedicated to tech for ad serving. What we saw was that the majority of the company was not growing or producing like the sliver focused on tech. So we sold off 90 percent of the company, something like 600 employees.” He stops and take a big sip of diet Pepsi. “As far as pivots go, that was a double backflip with a twist, because we had already taken the company public, and while tech folks understand the pivot, hedge fun managers do not. People thought we were crazy at the time, but Doubleclick wouldn’t be powering Google today if we hadn’t made that change.”

Pivoting isn’t unique to the East Coast, but New York is the first tech center to institutionalize the pivot as strategy for creating internet companies. Betaworks, where Billy Chasen cut his teeth as an entrepreneur, began with a simple maxim. 100 days and $100,000 to get a company into beta, a working product that can be released to users for feedback. “If you can shrink the cycle between idea, scrawling on a napkin, and testing with users, that is the most important piece of the puzzle,” said betaworks CEO John Borthwick, seated in front of a green chalkboard, pushing his bushy hair out of his eyes.

“What that means simply is you want to get to market as fast as possible, test and trail and then pivot if need be. Because the moment you get into the process of fundraising you begin to lock yourself up, both literally with investors, and psychologically, that I am going to build a business around X. Because my experience is, once people actually start to use your product, that X can turn into Y very quickly.”

As one of the co-founders of betaworks, Mr. Chasen built a product called Firef.ly based on the 100 days $100,000 model. It began as a way for web site owners to see how users were mousing around their site. But seeing what people were doing in real time didn’t help publishers learn much. So when this failed to catch on, Firef.ly pulled a quick pivot, adding a feature that let users visiting the same web page chat with one another. Problem was, users ended up talking about Firef.ly, instead of browsing the site. So the team at betaworks changed direction again.

“It’s most aptly described as a 180 degree pivot, because we sort of turned the product on its head,” said Mr. Borthwick. Instead of showing exactly what users were doing, or letting them interact, betaworks created a product that showed website owners exactly how many people were on their site, where they were coming from and what they were reading. That product, renamed Chartbeat, now has thousands of clients around the globe and millions in annual revenue.

It’s successes like that which have made changing ones mind and abandoning the original project a strategy without a stigma in the New York tech scene. Howard Morgan, the partner at First Round Capital who led the $1.6 million Series A in Stickybits, recently declared, “When we fund a company, we hope that we have picked the combination of a great entrepreneur and his/her team, along with a great product in a large available market. But sometimes it doesn’t turn out the way we all expected. Perhaps we need to modify the old adage to 'If at first you don’t succeed, try, try again. Then pivot, don’t be a foolish slave to the first idea.'” Knowing that Chasen had pulled off an acrobatic pivot of Chartbeat’s caliber was part of the reason First Round backed him in the first place.

Chris Dixon, who recently pivoted his new startup Hunch from a consumer facing taste engine to a platform for businesses who want to offer recommendations, thinks most entrepreneurs don’t pull the trigger fast enough. “The most common mistake is to pivot too late. You have sunk costs. You get sort of married to your project. I find a sign of a mature entrepreneurs is someone who can throw away original hypothesis, and some of the dreams around that. That is a difficult thing to do.” It’s the language of romance applied to a labor of love. Some entrepreneurs learn to settle for good enough, some keep chasing after that elusive Mr. Right idea.

Back when Billy Chasen was still working on Stickybits, he sat down with Mr. Dixon for an interview on TechCrunch TV. Talk turned quickly to the merit of pivots and how Stickybits was refocusing itself. ““If your not willing to fail fast, not willing to figure out what’s working and what’s not, you’re going to have to do something like completely shut down and start over or ditch the project entirely,” said Mr. Chasen, who ended up doing just that with his move to Turntable.fm.

The two entrepreneurs, handsome and casually dressed, chatted on stools inside the Stickybits office. “It’s a tough trade-off, because on the one hand its important to be iterative and listen to the market, on the other hand some of the greatest companies were formed by very stubborn people,” said Dixon.

“You kinda doubt yourself sometimes, because you had this vision for something, you’re like, how stubborn will I be, because you know there are people who are stubborn and then time proves them...” said Mr. Chasen, looking a little abashed, before Mr. Dixon cut him off, throwing up his hands in agreement.

“Steve Jobs is an example, he doesn’t listen to the market at all, just decides what its gonna be!”

The stubborn success of Silicon Valley visionaries like Mr. Jobs haunts the agile New York entrepreneur. With all the emphasis on capturing user feedback and moving to where the market seems ripe, local techies have yet to build a true titan on the scale of Apple, Facebook or Google.

“I don’t know if I would have done the same thing as Mark Zuckerberg, with introducing the news feed,” said Mr. Chasen. “When they first did that everyone cried privacy—‘This is an infringement, this is horrible this isn’t what I signed up for.’ He said, 'you’ll get used to it and you’ll like it.'”

The streaming music service Pandora recently filed for its IPO, giving hope to a young company like Turntable.fm that a big payday awaits at the end of a tough road. But Pandora was unprofitable for the better part of a decade before finally coming into its own with the emergence of mobile apps. Things would have turned out very differently if founder Tim Westergren had been a student of the pivot, instead of stubborn perseverance.

Having executed its graceful pivot, Turntable.fm seems well situated. Investors are looking to cut the company fat checks, and Facebook is sweating about the platform’s viral growth while struggling to get its own social music app launched with Spotify. But a little further down the road—if, say, the users stop signing up in droves, or the major labels start sending out their lawyers—Mr. Chasen will face a stark choice. Should he dig a little deeper and push on despite the challenges, or keep on running and gunning, moving to meet the market and every so often stumbling into success.

For the average entrepreneur, the best strategy for success is to fail, to learn and to change. But what if, like Jobs or Zuckerberg, the rest of the world just doesn’t understand, and the only way to make it big, really big, is to just ignore what the market is telling you, and follow your gut instead. The central paradox of the pivot is this: how do you know if you’re a visionary?

Alternate headline: Productivity Plague as Turntable.fm Sucks in Start-Up After Start-Up!

StickyBits is now Turntable.fm, and while we bet that makes some investors very, very happy--namely First Round Capital, Polaris Ventures, and Mitch Kapor, who gave the company at least $1.9 million--others must be smiling through their teeth. "Biggest threat to productivity today: turntable.fm," tweeted FastSociety's Andy Thompson. Foursquare's Tristan Walker called it "WAY too dangerous." There are rooms for Foursquare Zynga, Twitter, Facebook, Formspring, TechStars, YouTube, Chartbeat, TicketMaster, Zaarly, Uber,  and Google Wallet, plus the Coding Soundtrack room, which at time of writing had 137 listeners and at one time was speculated to be open in the browser of every developer in Silicon Alley.

So what is Turntable.fm? It's a browser-based chatroom that streams music based on the choices of a rotating cast of DJs drawn from whoever is in the room. There are up to five DJs at any one time who create playlists; the station cycles through the playlists one song at a time, moving from one DJ's pick to the next, as the room votes on how "lame" to "awesome" the track is. A (sometimes fast-moving) discussion takes place in a chatroom on the bottom right of the screen. DJs get points for picking popular songs and if enough people think a song is lame, it skips to the next. You can upload songs or search through the Medianet-powered library to create your playlist when it's your turn to DJ.

The app is also, presumably, making money by helping people discover new music socially. Mouse over a song you like and click "add to iTunes" to buy it.

Even though the app seems ubiquitous in Silicon Alley/Valley, it's actually still in semi-closed beta. Users need to connect with Facebook and will be allowed in if a friend is already using the app. As TechCrunch's Alexia Tsostis joked, it's now a useful sign of how well connected your company is. "New hot startup metric: The # of listeners in its Turntable.fm room."

StickyBits/Turntable.fm, now down to just three employees on the seventh floor above Dogpatch Labs, where they got their start (and their Polaris funding), feel they're not ready for prime time yet. Betabeat ambushed the CEO, Betaworks veteran Billy Chasen, and developer in the office last week, hoping to score the first exclusive interview, but we were politely told the company is not ready for interviews yet as they're still working out bugs with the app. And while the Valley has clearly gotten the memo--Mr. Chasen splits his time between coasts--not everyone is in the know. "What is this magical turntable.fm that I am not allowed into?" pouted Cheezburger CTO Scott Purad today.

So while we're still waiting for the full story on how StickyBits, the database of barcode-based messages, pivoted to a music start-up--one of the toughest industries to start up in thanks to its outmoded attitudes regarding copyright laws--we do know the company has been working on Turntable.fm since January, its userbase is growing fast, and it's available outside the U.S.--or at least in Germany, where it went similarly viral after a music blog discovered the site and blew it up.

(We just stopped by the Twitter room--"What's Golden" by Jurassic 5 was playing. "Can I get a job at Twitter here?" user @lay2000lbs asked in the chatroom. In the meantime, betaworks co-founder Andy Weissman noted on Twitter that "Turntable.fm is growing so fast there are now back channel chats going on in some rooms." Programmers with great taste in music just got a new way to land the perfect gig.)

We have heard some bug reports since we started trolling the rooms of Turntable.fm, including repeated errors when uploading songs, sound problems and "a weird black box" that flashes over the screen, so it would seem Turntable.fm has some work to do before it can open to more users. Maybe when it rolls out in public it will have added some of the most requested features: the ability to let others see your uploaded tracks, and the ability to throw drinks at the DJ.

UPDATE - Mark Zuckerberg and Ron Conway were among the 100 + avatars chilling in the coding soundtrack room this afternoon.

AMUSEBALLS. When Color came out, Jimmy Fallon used it to give out tickets to his show. Mr. Fallon, who periodically features gadget maven Josh Topolsky on his program and does the occasional bit about iPhone apps, wants to be the next actor-investor a la Ashton Kutcher, Betabeat heard today. Mr. Fallon heard a pitch from a local founder recently about first-round investing in an iPhone game, we're told, after the founder's pre-launch app got a bunch of mainstream press. Dude follows Gary Vee, Fred Wilson, Leo Laporte, Kevin Rose on Twttr. Any other start-ups talking to Jimmy? Admit.

WEIRD THAT THERE IS SO MUCH CELEBRITY+TECH NEWS TODAY, but we hear Lady Gaga is going to release a Chrome extension. It would be an official Google-Lady Gaga Chrome extension, we're told, and some New Yorkers are in the running to build it. Right now there is an unofficial extension that displays all Ms. Gaga's tweets. Our minds! They are blown!

HIDE YR PUTERS. A cautionary tale: One entrepreneur who rents dedicated office space at General Assembly had his laptop stolen off his desk a few weeks ago, a friend of the victim tells Betabeat. "It concerned me to hear about the incident but I'm not interested in damaging the reputation of GA," source said. But, he said, "I don't mind the general public knowing they should be careful, even in friendly atmospheres."  Fortunately, the solution is simple!

SPEAKING OF THE ASSEMBLY. The Annex has been annexed! Start-ups including, we hear, Food52, Jibe and Easel moved downstairs from their secluded 7th floor outpost. "They were leasing it from another company in the building and the lease ran out sooner than they thought, I believe," a source told us.

CAN'T STOP TURNTABLING. Turntable.fm is the latest, greatest addictive thing to hit Facebook-only beta from New York. "It's like a sugar high," one developer said this morning (he was also referring to the attendant crash). The company formerly known as StickyBits downsized and started working on turntable.fm in January, Betabeat learned upon ambushing the company in its Union Square office. Things are going well, they said, but they'd like to work out the bugs before doing any interviews. The Silicon Alley-born Coding Soundtrack room was until recently the most popular; now it's some random room in Germany, we're told, due to a write-up in a German music blog, and over-Skrillexing by the New York coders.

LUCKY STARS. TechStars announces 30 finalists tonight. That's out of about 1,000 applications. Yep. Good luck.

FREE INTERNET WEEK? We're seeing and hearing VIPs slangin' free Internet Week passes left and right. How many of these things are there?