A Brief Guide To Startup Pivots: Building for the Future

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Jul 29, 2023
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A Brief Guide To Startup Pivots: Building for the Future
Introduction:
Starting a startup is a challenging endeavor that requires founders to constantly adapt and evolve. There may come a time when the original product or idea no longer resonates with the market, and founders must make the decision to either give up, shut down, or pivot. In this article, we will explore the different types of startup pivots and how they can lead to success.
Pivot Inside Your Existing Market:
When founders consider a pivot, they often focus on their existing market instead of exploring new areas to work in. They worry about the sunk cost and the industry knowledge they have built. However, it is crucial to remember that bad product/market fit is one of the main reasons why startups fail. Andy Rachleff, the founder of Benchmark Capital, once said, "When a great team meets a lousy market, the market wins. When a lousy team meets a great market, the market wins. When a great team meets a great market, something special happens."
Reposition or Edit Down Your Product:
If your product is seeing enthusiastic adoption in a single user base or use case, it might be wise to focus all your attention on that particular area. By amplifying or focusing on the behavior that is already working, you can ensure better product/market fit. However, it is important to consider the downsides of keeping the original product alive. It may demand a significant amount of time, attention, and resources from your team. It can also create confusion about your brand and the changes you are making. If your legacy business is providing sufficient cash flow, it might be worth keeping and launching a new brand.
Market Pivot or Product Repositioning:
Sometimes, launching a tool that you used while building your own company can lead to a successful pivot. By building something for others that you need for yourself, you can identify a real product or market need. However, the hard part of this type of pivot is rebuilding the team to be able to build the product or sell into the new market. Layoffs may be necessary, but it is crucial to be fair to your employees who have supported you in the past. You may lose some employees along the way, but it is important to have a core set of true believers to weather the storm.
Managing Stakeholders and Transition:
During a pivot, it is essential to manage the various stakeholders, including co-founders, employees, investors, and customers. Some employees may rally and do whatever they can to help the company make it through the transition, while others may become fearful or lose belief in the company. In such cases, it is important to propose a restart of the company, a buyout of investors who no longer want to be involved, or even consider selling the company. The key is to let go of the legacy past, focus on creating a bright new company, and manage the transition with clarity and transparency.
Billionaires Build: Making Something People Want
In the world of startups, it is not just about making money or exploiting people. Y Combinator, one of the most renowned startup accelerators, looks for founders who understand a specific group of users and can make what they want. Their motto is simple yet powerful: "Make something people want." The partners at Y Combinator have to guess whether a startup has discovered a real need and whether it has the potential to satisfy it. They are professional guessers, evaluating whether there is a path to a huge market.
The Importance of Larval Markets:
A larval market refers to a small but growable market. It doesn't have to be something that a lot of people want now, but it should have the potential to expand. Y Combinator partners look for founders who are living in the future, at the leading edge of some kind of change, and building something they themselves want. A larval market can also be regional, starting in one location and gradually expanding to others.
Understanding User Needs:
To convince Y Combinator partners that people want your product, you need to have a deep understanding of your users' needs. The most convincing answer to the question of why people want your product is "Because we and our friends want it." Building a prototype and having your friends use it, even in its crude form, can be a powerful validation. Talking to your users and finding out exactly what they are thinking is crucial. The partners value founders who are thoughtful, honest, and have a genuine understanding of their users' needs.
The Qualities of Founders:
When evaluating startups, Y Combinator partners don't need outside domain experts. They can use the founders themselves as domain experts if they can convince themselves that the founders know what they are talking about and are not lying. It is important to be transparent about your competitors, your relative strengths and weaknesses, and to be thoughtful in your responses. Seed investing is based on promising hypotheses, and the partners expect founders to be thoughtful, honest, and have a clear path to a big market.
The Motivation to Keep Working:
The path to success in startups is not just about money or appearing cool. It is about finding genuine interest and passion in what you are building. The founders who become really successful are the ones who keep working because there is nothing else they would rather do. Founders who are solely motivated by money or the desire to seem cool are unlikely to succeed on a large scale. The key to success is to genuinely care about what you are building and to keep working towards your vision.
Conclusion:
Startup pivots and building something people want are two essential aspects of startup success. By considering new markets, repositioning products, and understanding user needs, founders can navigate the challenges of a pivot. Similarly, by focusing on genuine interest, motivation, and a deep understanding of users, founders can build something that resonates with people. Remember, it's not just about making money or exploiting people; it's about making a positive impact and creating something meaningful.
Actionable Advice:
- 1. Continuously evaluate your product/market fit and be willing to pivot if necessary.
- 2. Seek feedback from your users and understand their needs to build a product they genuinely want.
- 3. Stay true to your passion and motivation for building something meaningful, rather than solely focusing on external rewards.
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