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It is not uncommon for start-ups to pivot their product and / or business model a few times and the right pivot at the right time can determine success or failure of an early-stage company. The Startup Genome project found that “startups that pivot once or twice times raise 2.5x more money, have 3.6x better user growth, and are 52% less likely to scale prematurely than startups that pivot more than 2 times or not at all”. So how do you approach a pivot? Here are a few tips from pivots I have experienced in the past:
- When to pivot? Deciding for or against a pivot is a tough decision – have you given the current product enough time? Does the current business model just not work or does it simply need more optimization? If you are deep down in the trenches of a start-up, these are tough questions to answer so try to get as much outside input as possible from mentors and fellow entrepreneurs to rationalize the decision.
- If you pivot, stay calm and have a plan! Pivots are emotionally draining as you have to give up something you worked for very hard and the first gut reaction is to come up with a new direction asap. But I can only recommend to create and stick to a good pivot plan: give yourself and your team a defined period of time for reaching a decision about the new direction and follow a systematic approach to get to that decision (brainstorming, early validation, etc.). You only have so many pivot opportunities, so you better maximize your chances that your pivot is going in the right direction.
- How far should the pivot go? Some start-ups have raised so much money that they can take a green field approach when it comes to the pivot direction – the new doesn’t have to have anything to do with the old and the only assets you are building on are your existing team and the cash you have in the bank. But most start-ups have way less runway so they need to think about a new direction that is closer to what they have been working on in the past or otherwise the learning curve will be too steep for the runway left. So think about your assets beyond the team and the cash left: is there a piece of the market you understand better than anybody else? Are there elements of your products that could be applied to other (more interesting) verticals?
I have seen a lot of successful and a few unsuccessful pivots. I hope you remember these tips when you have to go through one.