At some point it may make sense to either (1) give up on your original product and to sell the company, (2) shut down what you are doing and return money to investors, or (3) to pivot.

1. Pivot inside your existing market, without clear new signal.

In general founders worry too much about sunk cost and the industry knowledge they have built. So when they pivot, they pivot inside their market instead of considering new areas to work in. In general, startups tend to fail due to bad product/market fit

"When a great team meets a lousy market, market wins
When a lousy team meets a great market, market wins.
When a great team meets a great market, something special happens." 

• Andy Rachleff, founder of Benchmark Capital

2. Reposition or edit down your product. Find behavior in existing product/market and amplify or focus on that (Instagram, Twitch).

If your product is seeing enthusiastic adoption in a single userbase or use case, it might make sense to focus all your attention on that use case.

The downside of keeping the original product alive is the time and attention the product and its customers demand from your team. It may also create a lack of clarity and confusion about your brand and the changes you are making.

If your legacy business is providing sufficient cash flow to fund a new business it is probably worth keeping and launching a new brand.

2b. Market pivot or product repositioning.

3. Launch a tool that you used while building your own company (Yammer, Slack).

Building something for others, that you need for yourself, is often a successful way to identify a real product or market need.

In the case of reconfiguring an entire company, the hard part of this sort of pivot is to rebuild the team to be able to build the product or sell into the new market.

If you need to make this transition and do lay offs, do it quickly and be as fair as possible to your employees who supported you in the past.

You may lose employees who no longer believe along the way, but that may be a good thing - you need a core set of true believers to weather the storm.

if the co-founders of the company need to change. Or alternatively, investors no longer want to support the team and its new vision. In this case, it is better to restart the company than to fight how to allocate new equity or with investors who no longer believe.

The two biggest ways early stage companies die is by running out of money and founder conflicts.

During a pivot some employees may rally and do whatever they can to help the company make it through a rough transition. Other employees may become fearful or anxious or lose belief in the company.

If they drag their feet and are truly unhappy with the new direction, you can propose a restart of the company (see above), a buyout of investors who do not want to be involved anymore, or try to sell the company.

The key is to manage the various stakeholders (co-founders, employees, investors, customers) through the transition, let go of your legacy past, and focus on creating a bright new company and bright new future.