The Art and Science of Pivots – Livestream with VC Chris Tottman
A Conversation with Chris Tottman on the Strategic Pivots That Built Category-Defining Companies
Chris Tottman is a partner at Notion.vc and has spent over 30 years building and investing in technology companies. He started his career trading options on the London Stock Exchange floor before founding multiple companies, including MessageLabs, which became Europe’s first major SaaS business before its acquisition by Symantec. Today, he invests in early-stage technology businesses while maintaining what he calls “a constant itch to create, collaborate, and work with people to help them build the best companies they can.”
Key Takeaways
On Discovery vs. Proving Yourself Right Great founders don’t over-index on proving their original idea. They stay in constant discovery mode, asking what problems keep customers awake at night and what users are actually doing with the product.
On Finding Problems Worth Solving Look for pain that makes someone bang the desk. Pain that makes them think, “If I don’t solve this, I might get fired.” That’s where innovation and the wave of adoption comes from.
On Market Definition “Uncomfortably narrow” is the goal. The smaller the market definition, the easier it is to target. Wide definitions like “enterprise, SME, global” become impossible to market effectively.
On Official Strategy vs. Revealed Strategy Your official strategy is what you tell investors and put on your roadmap. Your revealed strategy is what your usage data shows customers actually value. The gap between those two is where billion-dollar pivots happen.
On the Discovery Process Whiteboard out the whole value chain of a product, looking at where time goes and where money goes. Run B2B and B2C research. Have multiple minds working on it, asking “What if this is true? Is that also true?” That’s how you find the biggest, most pressing problems worth solving.
The Difference Between Good Founders and Great Founders
Michael Goitein: Chris, we started talking about pivots and that notion that when a company starts, they might have a vision, an idea. But what they ultimately become successful for can be miles from what they started out as. You have these incredible stories that I wanted you to share.
Chris Tottman: I think the good thing about the stories is that they show two different ways of trying to figure out what the company can potentially become and how to bridge from where you are today to a bigger version of the world.
What we find at Notion is that the difference between good founders and great founders is that great founders don’t try to prove themselves right to the end of the world. They have an idea and take it to market, but they don’t spend their time trying to prove that original idea is the killer idea. Even if customers are buying it.
What they do instead is stay constantly in discovery mode. They keep asking questions about what problems keep customers awake at night. What are users actually doing? What are they really getting value from?
From ISP to Europe’s First Massive SaaS Business
Chris Tottman: In the early ‘90s, I was working with a couple of my closest friends who were building the IP networks. They had an ISP with a proposition for SMEs, connecting companies to the internet.
To give you context on how early this was: the first two-meg leased line we sold cost £200,000 a year in 1995. Two meg. Companies were struggling just to connect a local area network within their building to the outside world.
We built technology so somebody could just plug in a box that had a mail server, some security, and web space all bundled together. Super easy. It was flying off the shelves. We had a tremendously successful company.
But here’s the key lesson. We didn’t just sell to customers. We spent significant time in exploration mode, really asking deeper questions about what was keeping them awake at night. What’s stopping them from being successful? How do they lose against competitors?
Three or four things started to come up. One was more sophisticated technology around websites. Another was blacklisting certain sites. And third on the list, almost as an afterthought, customers said: “You keep delivering us viruses.”
Two things were happening. I could see the engineers, just through their body language, really itching to get to that third item. And it wasn’t the first thing on the list. It wasn’t the obvious thing.
One of the founders said, “Is this a little bit like clean water? Back before critical infrastructure, how did you get clean water? You boiled it yourself. But now that’s all done centrally. The internet is the same. We have all this processing power. Since we’re responsible for delivering mail to our customers, should we be responsible for cleaning it?”
We decided to back that idea. We created an alpha over a few months, then switched this technology on so we could route our customers’ traffic through this security tower we’d built.
One of the engineers had put a bell on it so that every time we caught something nasty, the bell went off.
When we switched it on, a shriek emitted out of the terminal.
We didn’t know what it was. It was horrendous. We switched the terminal off. Then the poor engineer realized it was his fault. Every millisecond, we were catching something bad. We knew immediately that we’d hit this internet oil. This was a real gusher of a proof point.
That created a course of events where we had to internalize: what do we do about this? Because every email user in the world has this problem. Is it B2B? Is it B2C?
We created an entirely new company called MessageLabs. It became the first major SaaS business in Europe. We reached $150 million in annual revenue within about eight years and sold to Symantec.
But it came from that process. When you’re with customers, don’t just sell your technology. Spend significant time in exploration mode, really understanding what’s going on in their minds.
If you’re doing a really great job for customers, you probably have two or three businesses you could build on the back of that insider understanding.
From Social Postcards to Direct Booking Economics
Chris Tottman: This was around 2013, the early advent of social channels. The founders came to me with an idea in the hotel space. Wouldn’t it be great if hotel brands could use check-in and check-out moments to get user-generated content? They would provide guests with a digital postcard of their stay that guests could post on social media.
My first meeting with this founder was in a beautiful London square. I like walking meetings. He was really compelling, but I didn’t like the proposition. I was thinking of the loop: I’m checking in, I’m checking out, I do this thing, I put it on social media, some random person sees it in my network. Are they likely to want to go to that destination?
It felt too weak. Too far away from a transaction.
But the founder was compelling. And he mentioned something intriguing: online booking agents like Booking.com and Kayak were starting to take significant percentages of booking revenue.
As I walked back, I kept thinking about it. Put yourself in the position of a young entrepreneur in the hotel space. You finance the building. You spend millions fitting it out. You assemble an incredible workforce. You open up, and you haven’t even taken a dollar in revenue yet. The CAC payback must be three to four years.
And then 15 to 20% of all revenue goes to a digital booking engine?
There was something there.
So we invited them into the office for whiteboard sessions. We mapped out the whole value chain of the industry. The journey someone goes through when booking a holiday. We looked at where time goes and where money goes.
They came with analysis showing that if you’re a small hotel with no purchasing power, booking engines were taking over 30 to 40% of booking revenue. Even big chains were giving up 15 to 20%. And the numbers were getting worse every year.
Then they did B2B and B2C customer research. What they found was fascinating.
65% of consumers had the hotel website open because it had better photographs, more detail. They felt more kinship with the hotel itself. But those same consumers also thought the online travel agencies (“OTA”) booking engine was cheaper.
The analysis showed that wasn’t necessarily true. And hotels could dynamically price against what was being offered online.
So they conceived the product: a pop-up on the hotel website showing three OTA prices alongside the hotel price, which was never more than the OTAs. A “never priced better” approach.
I gave them £250,000 to build that product. We launched three months later.
It went wildfire. The pent-up demand from hotels wanting to drive consumers to book direct was enormous. In the first two months, we sold to 250 to 350 hotels. Within a couple of years, we had about 1,000 at the mid-market, plus two of the eight biggest hotel chains.
The technology itself wasn’t thick enough initially. There wasn’t a big enough moat. So we knew we had to drive the price down to create more demand, more buyers, and then create more sophistication in the product.
But it was so interesting to see that process of mapping out the whole industry, having four or five different minds working on it, doing the analysis purely in pursuit of looking for a big enough problem, and trying to conceive a product that might solve the biggest, most pressing problem for those buyers.
That’s probably a $20 million revenue business today, serving most of the biggest hotels on the planet.
The Mindset That Matters
Michael Goitein: Just to toss a wrench into the conversation, we got a question about product-market fit. Once you’re starting to see traction, how do you drive toward it?
Chris Tottman: That’s the silver bullet question. We all argue about what product-market fit even is. It’s not something particularly stable. The hype cycle of establishing it, gaining traction, then losing it is happening faster than it used to.
We have a common phrase at Notion: “uncomfortably narrow.”
There’s a paradox when you’re pitching. The size of the market matters to investors because that’s how they decide whether they can make a return. The larger the fund, the larger the market needs to be.
But if you want to drive traction quickly and efficiently, you need a very small market definition. If you’ve got a very narrow market, it’s easy to target. If you have “we’re enterprise, we’re SME, we’re global, we do ERP and accounting,” that becomes impossible to market to.
First, you have to find a very large pressing pain. A pain that makes someone bang the desk to solve. One that makes them think, “If I don’t solve this, I might get fired. If we don’t have an answer by the next board meeting, we’ve got real issues.”
That’s the first challenge: finding that problem.
The second part is finding a solution where it’s easy to buy, easy to implement, the speed to value is very quick, and it’s really hard to get rid of.
90% of companies will not find product-market fit. They’re in the discovery period, constantly figuring out how to find the flywheel between a problem and a solution that fits. They’re looking for that moment when buyers and all their peers start thinking, “This is a new way we’re going to do business.”
Michael Goitein: I think that’s a nice addition. You see these opportunities just by getting out there and starting something. You see where you can take something in several potential directions.
Chris Tottman: It comes back to that difference between good and great founders. Great founders don’t over-index on trying to convince the world they were right. They over-index on trying to find a problem within the world they’re heading into and figuring out if there’s something ultimately much more significant they can address.
When they find that problem, they figure out how to address it in a way that’s 10x or 100x more economically viable for the buyer, which creates this whole wave of adoption.
The bigger the pain, the bigger the wave.
The Founder Who Missed the Opportunity
Chris Tottman: I had dinner a couple of weeks ago with a founder who ultimately wasn’t successful. The company did go on to be successful after he left, and we exited it. But he was brilliant. Just so brilliant. He came from e-commerce and was selling to big retailers with online presence.
He would sit down with people and give them this vision of the future.
I would say to him afterward, “Do you know what happens when you leave the room?”
He’d say, “What do you mean?”
“When you leave the room, they go down to the company kitchen and chat with a colleague. The colleague asks, ‘Who was that guy?’ And they say,
‘This brilliant guy with this great vision of the future. I hope he does really well with it. But I’ve got this pressing project. If I don’t get it fixed, I might get fired.’”
He would miss the opportunity to really understand what’s going on in the minds of the people making decisions, the people he would be selling to.
It’s such an important lesson. We’re all guilty of it. We get an idea and we’re like, “This is what I’m doing, this is where it’s going, it could work like this or that.”
But if you map out the market, map out the key constituents, and take a completely different approach to asking deeper questions, trying to understand how they’re feeling about a particular problem, how they’re addressing it, what experience they have with different ways of solving it, whether anyone else is solving it differently, whether it’s solvable at all...
If you get in the habit of doing that, you’re going to start finding opportunity everywhere.
Loom’s Hidden Superfeature
Michael Goitein: Loom is a fascinating story. I do quite a bit of work with Atlassian, and they have a whole connected workplace strategy.
Loom had started as a set of connected developer tools. You could share chunks of code, do pull request reviews, really integrate collaboration for engineering teams. Video was one small part of it.
But what Atlassian ended up acquiring them for was solving the problem of meetings.
What Loom became, and what Atlassian acquired, was async updates. Now woven into the entire Atlassian fabric of every product, whether Jira, Confluence, or anything else, you can find a little video icon, record a short clip, and that gives context. You don’t have to be great at writing. You record a short Loom clip, and it travels with that work unit, giving people context without you having to be there.
That’s been hugely successful for Atlassian. But the acquisition happened not because of Loom’s original official strategy. It happened because of the revealed strategy, overwhelmingly driven by user behavior.
Chris Tottman: That’s interesting. It’s like a hidden superfeature that someone reimagined in an entirely different way.
Michael Goitein: Exactly. It wasn’t just quantitative data. When you’re early stage, qualitative data matters. Keeping close to customers, talking about their experience, watching them struggle with the product, seeing how they actually use it. That’s where the real magic happens.
Chris Tottman: You’ve got to have your receptors open, trying to think: What’s really happening here? What are they using? What does the data say? What are they saying? What are they feeling? Does anyone care anyway?
The Constant Reinvention Cycle
Michael Goitein: How many of the companies you’ve funded pivoted to success versus those that decided not to pivot and didn’t succeed?
Chris Tottman: I don’t have the numbers, but I think pivoting is an outcome from a forced mechanism. It’s saying, “This isn’t working. We need to figure out something else.”
Sometimes something you’re already doing becomes the new product. Slack would be an example. Twitter is an example. Sometimes it comes from deep discovery like the case studies we discussed.
But the mental approach of always having deep discovery going on is universal.
It’s rare that you have a single value proposition that carries you through the 5, 10, 15-year life of a technology company. Normally we’re operating in extremely dynamic markets with alternative competitive threats. That innovation cycle is constant.
At MessageLabs, our mentality was always that we had to reinvent the company every 18 months. When we sold, we had 20,000 corporate customers, a couple hundred people in the US, 650 globally. We had seven products.
Two and a half of them were significant. The others helped us win, but did customers really use them? Did they really transform them? Not really. We were carrying the cost of those products, but we got the benefit of holding our market position.
You have to go from single product to multi-product. From UK SMB to enterprise. From UK to the US, continental Europe, Asia. You find product-related issues, market understanding issues, go-to-market issues. The US was more indirect; we were dominant in the UK but number two in the US with two competitors.
All of these things you’re constantly synthesizing to continue growing quickly, fending off competition, and keeping your team happy because they love winning.
The number one drug in a company is that we’re winning.
And every year, people don’t just give up their markets to you.
Final Thoughts
Chris Tottman: Inside the hopes and fears and minds of all these customers and buyers, there’s a business somewhere. There’s a problem worth solving. And there’s a whole bunch of problems that aren’t worth solving.
Go mine for that.
Hopefully, people can strike some gold as they go through that process of discovery.
Michael Goitein: Thank you so much, Chris. You’re doing a tremendous amount of incredible thought leadership while being on the front lines with these startups. We’re grateful to have your knowledge and wisdom here.
Chris Tottman: Thanks everyone. Happy hunting out there.
Chris Tottman is a partner at Notion.vc [https://notion.vc] and writes “The Founder’s Corner” newsletter at the-founders-corner.com [https://www.the-founders-corner.com/]
Michael Goitein writes the “Product Strategy Decoded” newsletter at michaelgoitein.substack.com [https://michaelgoitein.substack.com/]
Get full access to Product Strategy Decoded at michaelgoitein.substack.com/subscribe [https://michaelgoitein.substack.com/subscribe?utm_medium=podcast&utm_campaign=CTA_4]
