Startup Pivot Stories #1: How TokBox Changed Its Business Model

After reading lots of posts on ‘lean startups‘, listening to Eric Reis in Seedcamp and devouring Steve Blank’s “Four Steps to the Epiphany”, I wanted to see real examples of companies that went through a pivot process. By definition, a Pivot, is a change in the company’s strategy or business model when things aren’t exactly working out according to the business plan. The goal, is to find a scalable and repeatable business model (in other words, a way to consistently make money over the course of time). Rather than jumping to a whole new vision and tossing your existing product/code, the idea is to change direction while staying grounded with what you’ve learned. Eric Reis introduced his definition on this post from 2009, which is still very much relevant.

I’ve leveraged social media tools to gather stories from startups who went through a pivot in the last year and over 25 companies wrote back, eager to share their stories. This series aims to inspire and help startups that going through tough decisions. The first post in the series is on TokBox, a startup that went through a business model change and managed to generate significant value as a result.

TokBox launched a no-download consumer video chat/video conferencing service in 2007, but in November 2010, changed its business model to allow any business that wants to engage consumers on their site in completely new ways to do so, via mutli-way video. The new premise is: Group video chat made simple. This new platform is  called OpenTok. Interestingly, TokBox is letting its user community know today that the TokBox video chat/conferencing services will shut down on April 5 through a post on the company’s blog titled “breaking up is hard to do“.

OpenTok allows businesses and developers to weave video throughout  content on a web page or site — making content the main attraction and allowing video to complement it. You can place up to 20 video participants on a Web page, and open the site to thousands of “watchers,” bringing to life an entirely new set of possibilities for media, messaging/communications, social networking, gaming and advertising/marketing businesses, as well as for developers working on their own apps or apps for their companies.

The response has been amazing — in just over 60 days, OpenTok has attracted 28 partners, ranging from social networking, to online news to gaming.

TechCrunch just ran a story on the company:

For now, OpenTok is free but the company plans to add premium services in the API (which apparently there is a demand for from current customers). Another revenue stream, says the company is advertising within video streams. And TokBox says that a number of well-known brands will be using the API in the near future.

Based on this new vision and traction, TokBox raised $12 million in Series C funding from DAG Ventures, Sequoia Capital and Bain Capital.

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