Elizabeth Yin speaks to me on a Friday morning out of Palo Alto from the Hustle Fund office, her VC firm that invests in “hilariously early-stage startups.” Her primary focus is on those fledgling, rocky days when the groundwork for companies is laid.

Yin emphasizes that, yes, founders should move fast and break things, but remain cognizant of what they’re choosing to break. “Whiplash is a big thing when you’re pivoting at the early stages, especially when you’ve hired a team,” she explains. “This can be dangerous. If you pivot too much, your team will have a hard time seeing where they’re going. Their valuable work is thrown out the window. It’s hard to grow a company from there.”

My parents were not in tech. They weren’t entrepreneurs, but I had two major things happen to me. The first was in high school. My friend Jennifer in the ninth grade asked if I wanted to help out her cousin Tony Hsieh (the late CEO of Zappos) during winter break. I didn’t even know what a startup was. The company was called Link Exchange. They were one of the very first ad networks. Back in the 90s, people clicked on ads like crazy, so they made a lot of money.

What year was that?

1996. I’m dating myself. But this was the beginning of the rise of the dot-com boom. I had nothing going on during winter break, so I said — fine, let’s go and help him. We took the train up to San Francisco. The office was just a chaotic mess, pizza boxes strewn everywhere, computers that people were setting up. We built some tables and chairs and put together some ethernet cables. I knew then that I wanted to start a company.

So you were just really into this excitement of building something from scratch with your friends.

I don’t know, during my parents' generation, work was a very stodgy thing. Dress up, go in all formal, clock in, and clock out.

But at startups, young people were working alongside you. You could eat all the pizza you wanted, you could wear a lot of different hats and build something together. I didn’t even know how Tony’s startup made money, but it didn’t matter. Fast forward two years and they’d sold their company to Microsoft for a couple hundred million.

What an exciting thing for a young woman to see, the very early start days of something when it’s messy, when you don’t even know what will emerge from it.

I think when people read about these success stories, they can feel very buttoned up. But now, having seen a lot of startups, nothing is buttoned up in the beginning.

So that was the first thing that happened to me. The second thing that happened to me is that I started a company with my friend Jennifer, the same friend I went with to Tony’s office.

So, your timeline is something like this: you graduated from Stanford, then MIT with your MBA, you were working at Google as a product marketing manager, and you wanted to start a company.

Yeah, I left in 2008. I had read a TechCrunch article on a letter that Sequoia had sent out to all of their companies saying: Batten down the hatches, WE’RE NOT INVESTING IN ANYBODY NEW. I read that article and thought, damn, am I making a big mistake by leaving? And then I thought, well if I don’t leave now, what am I even waiting for?

I’ve heard you talk about whiplash in early-stage startups and this constant, roving need to pivot to a new idea. You’ve said a lot about how it can impact a company and morale. Did you face that at LaunchBit?

We were smart about handling whiplash at LaunchBit. I’ll give you an example. After reading Eric Ries’ initial writings, we decided that we’d start with no product. We would not build anything. And, we just started selling ads. We manually brokered deals with publishers and advertisers and took a cut in between. We got our customers by emailing people and setting up the copy and links ourselves. People would pay me through my personal PayPal account.

It was only when we realized we were onto something that we started building technology to remove bottlenecks. Some of our bottlenecks were in making mistakes with advertisers’ copy or in manually getting advertisers the analytics they needed.

Initially, we were selling ads for a flat fee. Along the way, we heard customers say, I’m not going to come to buy another ad because the outcome for this ad made the ad-buy too pricey. I wish I could pay for clicks.

So we pivoted the model then to cost-per-click. That meant getting rid of our flat-fee ad model entirely. We had to throw out a lot of work.

Oh wow.

Even when you have just two people, this type of pivot can be hard. I was the business founder and she was the technical founder. I think it’s a lot easier for the business founder to say, OK, we’re doing this other thing now. The technical founder who spent all this time building, now we’re throwing it out, and that’s always just hard.

This was after your seed, right? I’ve read your comment that this is kind of an expensive moment to pivot.

I was talking with somebody about it this morning. There’s this startup, not one of ours in our Hustle Fund portfolio, that raised $3.5M at just under $20M post-money valuation. They’ve been pivoting like crazy for the last three years and haven’t found anything that’s worked, and now they’re trying a completely new idea.

They still have another 1.5 years of money. They have to build a new product, launch it, get customers, and get significant revenue traction. Expectations are high because they’ve already raised a fair bit of money.

In some ways, it’s better to raise $200K, test an idea, and shut down the company if it doesn’t work. But people are afraid of failure and what investors think.

How long did you stick with LaunchBit?

Over three years on the cost-per-click ad model before it was acquired by BuySellAds.

Later, I reflected on everything — on how I could improve as a co-founder and what I was passionate about personally. I realized that ads were not my life’s work. I spent the next several years soul searching. I wanted to find a problem that I wanted to spend the rest of my life on. And then one day, it dawned on me — I’m passionate about helping startups and that I knew about startup problems super well from both my own life experience and through the eyes of so many founders I’ve met along the way. Startups have problems with three things — acquiring capital, knowledge, and networks.

So by 2014, you joined 500 Startups as a partner. You went on to start Hustle Fund in 2017. You’re probably seeing lots of pivots, lots of young Elizabeths.

Haha. I would say that on the whole, most of the founders we back are way savvier than I ever was. Even the first-time founders. By now, everyone has read Lean Startup, whether it’s the book itself or seen YouTube summaries. People have leveled up in understanding the best practices and philosophies on how to do things.

Do you expect founders to tell you when they’re pivoting?

My founders often do tell me, because I understand so clearly what they’re going through. But pivoting can also create investor whiplash. If you’re still experimenting, you don’t want to create extra whiplash for your investors. You don’t want them to think you’re lost. If you tell them you’re working on X and then next month you’ve decided to experiment with Y, that doesn’t sound good, even though the reality is that you will have to meander a lot before you come up with something concrete.

I often advise my founders to leave the details of little experiments out of their updates and just say that they are figuring out a change in direction and will update soon.

What’s a little experiment versus a big one?

Here’s an example. One of my portfolio companies has a certain number of customers. They’re at this moment where they’re questioning whether to continue down their path or to find something new. Let’s say they land on a new experiment. What should you communicate?

You say: “I don’t have clear answers for you yet, but we’re figuring out what the new direction is going to be.”

You don’t say: “Here’s this experiment, here’s that other experiment.”

What about companies that haven’t pivoted yet and should? Do you have a lot of those?

The thing is, statistically, if you continue long enough with the same idea and if you have to pay customers who love your product, you will make it work. The question is when the payout will happen and for how long and for how much. It’s more of a question of whether it was worth it to you after all that time in the end.

Worth it in what sense? Emotionally? Financially?

Both. Both. I’ll give you an extreme example. Three friends of mine in college started an ecommerce company. I can’t reveal the idea, and nobody had any business experience, but it was a low-value item. Fast forward to today, it does eight figures of revenue.

Damn.

I know. But the company has been around for 15 years. The two co-founders took regular jobs, and one of them was working at the company full-time. They rotated the CEO a bit, so people could make money elsewhere. They would probably tell you by this point that it’s worth it. If you keep putting your foot forward day by day, you will get somewhere. It’s just a matter of how far and in what period.

I guess startups are not a monolith. Everyone wants different outcomes, everyone’s looking for different answers.

That part is really important. During frothy years, everyone has high expectations to get rich quickly. The reality is that you can make money from startups, but you’re probably looking at a decade’s worth of work, if not two decades. So it’s most important to pick a problem you like and will want to stick with.