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Published by Ivaylo Simov, Partner at Eleven.
Pivoting is probably one of the most annoying buzzwords in the startup world and often used by entrepreneurs as an excuse for failing with nothing (substantial) to show as traction from their previous round. It was a term popularized by Erik Ries in his Lean Startup (which you should have read), so no need to repeat the theory or the ways to pivot here.
A pivot is a change of course for a startup in either its product, market or business model. The opposite is arguably perseverance. But actually they are not mutually exclusive. Quite the contrary, the most passionate and persevering of our founders are usually the best at pivoting early and boldly.
I’d like to focus on the few lucky ones that help pivoting look easy and turn it from a useless wandering about to something that actually has a direction.
The first is the curious case of cult following
Whenever I think of pivoting, two exceptions from our portfolio, where the pivoting has been minimal or less obvious than elsewhere, come to mind. Both are fundamentally based on well-established management methods with ardent fans. One of these companies is Businessmap (Kanban), and the other is Gtmhub (OKRs). What distinguishes them from the rest is their clear vision from day one on automating the respective method for the corporate world. Being themselves believers in the respective “cult”, it’s easy for them to speak the same language and take advantage of the millions of followers of the said movement worldwide. It doesn’t mean they are not pivoting at all, they are, but any of the adjustments they make inevitably brings them closer to the nirvana the fans seek out.
Another similar cult-like exception is when pivoting is hidden behind numerous failed attempts (like Angry Birds). Then all of a sudden everything clicks. It doesn’t mean that the founders didn’t pivot, however, they first learned inside out their domain by experimenting a lot before finally nailing it. Good examples from our portfolio are SMSBump (already exited) and Nitropack, which reached from zero to a few million ARR with minimal investment, zero marketing, and basically word of mouth from their customers and influencers in the field.
The second one is having a grand vision
This has been already emphasized by a number of articles on the subject, but they usually focus on the vision rather than its grandness.
The “grand” ones are trying to create a totally new market or serve an existing market in a totally new way. From our portfolio, these would be Dronamics (cargo drones) and Printivo (bioprinting of organs). In both cases, they are doing a lot of exploratory work on the technology in search of the best solution. However, I wouldn’t call this pivoting, but classical R&D. Still both companies have also gone through a number of business models, which could fit the market – this last one is indeed pivoting, but pivoting with a clear purpose. Ultimately, the grand visionaries that are good at what they are doing can create a cult following and attract both funding and human capital to push the frontiers.
It’s now somewhat obvious that a pattern is starting to emerge – a startup can either follow a cult (which is a pretty clear vision in itself), or create one. If you don’t believe me, think of Elon Musk and Tesla and SpaceX.
Most startups have a vision, but it’s rarely grand and it’s even rarer that the startup can achieve genuine following.
So what can a startup do?
It’s a cliche, but startup founders need to be inspired and follow their inspiration with passion. Choosing a paradigm that you believe in, even if it’s a bit more obscure, helps. As an example, we are currently making an investment in a fintech startup that uses in its solution a “profit first” methodology, which we had never heard before, but that has a big fan base and chapters in a number of countries.
You still need to light the fire to a cult following in order to sell it to the world. It helps if your product is an order of magnitude (10x) better, faster, cheaper. Actually it should be two of the latter – better and faster cannot be cheap. Having money to fuel your grand vision usually helps, but it’s a chicken and egg type of problem, as VCs flock when the signs are already there.
Last but not least, you should never stop pivoting – even the biggest companies are doing it in order to stay relevant. To name a few, think about Apple and the iPhone, Google and Android, Amazon and AWS, Facebook and Meta.
Now if you have figured out your vision or cult, there are a few practical tips to consider
There are some important but less talked about pivots that you should be aware of:
1. Team pivot – “divorcing” among founders is one of the most common reasons for failure but could be seen also as a fresh start. We have ourselves done it at Eleven, whereas a founder was replaced and two more partners joined the team subsequently, which brought us from the brink of closing shop to two unicorns in the making from our portfolio and more to come.
It’s usually one of three main reasons that precipitate a fallout among the team: lack of commitment, differences about the strategy, or lack of funding. They all boil down to lack of execution on a clear vision. A quick check if you are on the right track is whether you can attract top notch people to your (advisory) board, even if you don’t have money. Two or our portfolio companies have nailed the last one – Dronamics and BeMe.
2. Funding pivot – VCs are quite dogmatic and picky (including ourselves). While VC funding prevails today, there are more options to choose from, including crowdfunding, grants, debt, crypto/decentralized options, small caps market segments for IPO, etc. For some of our hardware startups the latter has proven to be a very interesting option.
At the cross section of team and funding pivot is your lead investor and usually most active board member. The best analogy to this relationship would be as the one between an athlete and a coach. In your kid years you may have one coach, but you will likely have a number of coaches as you progress to a more professional field. That’s why ideally you should choose wisely your lead investors (at each stage), as they can influence your game in many ways.
3. Forced pivot – Even if you’ve hit the holy grail of product market fit, the platform you are on can change the rules of the game and destroy overnight all the value you thought you had created. Facebook periodically wipes out the virality of thousands of apps and games running on its platform, just by changing its display algorithms. There’s little you can do in this case, but start from scratch, unless you manage to pivot in advance in anticipation of such backstabbing by your “partners”.
Finally, you should notice when your vision is not working
- Identify the signs that you need to pivot early and act swiftly – in most cases this would be evidenced by slowing sales, higher churn, lackluster customer feedback.
- If you are constantly fundraising in distress, this likely means you have been pivoting in circles in the past.
Ultimately, successful pivoting is the outcome when either a team with a grand vision creates a cult following around its vision, or when a determined team captures a cult. Both are easier said than done.
