A Brief Guide to Startup Pivots: Linking Your Thinking

A Brief Guide to Startup Pivots: Linking Your Thinking

Pivoting is a crucial decision that startups often face when their original product or business model doesn't yield the desired results. In such cases, founders have three options: sell the company, return money to investors and shut down, or pivot. While the first two options may seem like giving up, pivoting allows startups to adapt and find success in new directions.

When considering a pivot, founders often make the mistake of limiting their options within their existing market. They worry about the industry knowledge they have built and the sunk cost of their original product. However, this approach can lead to failure if there is a bad product/market fit. Andy Rachleff, founder of Benchmark Capital, famously 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." This quote emphasizes the importance of finding the right market for your product.

One type of pivot is to reposition or edit down your product. This involves identifying a specific use case or user base within your existing market that shows enthusiastic adoption of your product. By focusing all your attention on that use case, you can amplify its success and create a stronger product/market fit. However, it's important to consider the downside of keeping the original product alive. It requires significant time and attention from your team, and it can create confusion about your brand and the changes you are making. If your legacy business provides sufficient cash flow, it may be worth launching a new brand to avoid these challenges.

Another type of pivot is a market pivot or product repositioning. This involves launching a tool that you used while building your own company. Building something for others that you need for yourself is often a successful way to identify a real product or market need. However, this type of pivot requires rebuilding your team to be able to build the new product or sell into the new market. If layoffs are necessary, it's important to do them quickly and be as fair as possible to your employees who supported you in the past. Losing some employees along the way may actually be beneficial, as you need a core set of true believers to weather the storm.

In some cases, a pivot may require a complete restart of the company. This can happen when the co-founders of the company need to change or when investors no longer want to support the team and its new vision. In such situations, it's better to restart the company than to engage in conflicts over equity allocation or with investors who no longer believe. The key to managing a successful restart is to return any remaining cash to investors, form a new founding team, offer a new portion of equity to investors, and go after the new mission with a fresh start.

During a pivot, managing various stakeholders becomes crucial. Some employees may rally and go above and beyond to help the company through the transition, while others may become fearful or lose belief in the company. If employees are resistant to the new direction, options like company restart, buyouts, or selling the company can be considered. The key is to navigate the transition while letting go of the legacy past and focusing on creating a bright new future for the company.

Linking Your Thinking:

In the world of startups, it's not just about making strategic decisions for the company; it's also about nurturing the ideas that drive innovation. Various tools can help in this process, depending on your thinking style and the types of behavior you want to encourage.

For those who love to collect ideas, Evernote is an excellent tool. It allows you to gather and organize your thoughts, making it easier to revisit and develop them later.

If you enjoy building stories out of ideas, tools like Ulysses and Bear can be your go-to. These writing-focused tools provide a distraction-free environment to help you create compelling narratives.

If you're someone who thrives on connecting and organizing ideas, tools like Roam Research and Obsidian can be invaluable. Roam is known for its ability to connect thoughts and create a web of related concepts, while Obsidian combines the features of a connector and a writer.

By understanding your thinking style and leveraging the right tools, you can enhance your creative process and make the most of your ideas. Whether you're a collector, a writer, or a connector, there's a tool out there to support and amplify your thinking.

In conclusion, startup pivots are a critical part of the entrepreneurial journey. They allow companies to adapt, find new opportunities, and ultimately succeed. When considering a pivot, it's important to think beyond your existing market and explore new areas of potential growth. Repositioning or editing down your product can help you find a stronger product/market fit, while launching a tool you used while building your own company can uncover new market needs. In some cases, a complete company restart may be necessary to align with changing co-founders or investor visions. Throughout the pivot process, managing stakeholders and nurturing a positive company culture is key. By linking your thinking and leveraging the right tools, you can enhance your creative process and drive innovation in your startup.

Actionable advice:

• 1. Embrace the possibility of a pivot: Don't be afraid to explore new directions and consider pivoting if your current product/market fit is not ideal. Be open to change and adaptability.

• 2. Focus on market fit: When pivoting, prioritize finding the right market for your product. Look for enthusiastic adoption in a specific use case or user base, and amplify its success.

• 3. Manage stakeholders effectively: During a pivot, it's crucial to navigate the transition while keeping all stakeholders on board. Communicate transparently, be fair to employees, and consider options like restarts or buyouts if necessary.

Remember, a successful pivot can lead to a brighter future for your startup. So, embrace the possibilities, link your thinking, and take action to drive your company towards success.