A pivot is a fundamental concept in the startups’ world, and one of the most challenging phases in a startup’s life cycle.
The term, occasionally used in basketball, quickly became popular in the startups’ world. When James Naismith invented Basketball, one of the main positions in a team was named a Center, or a Pivot. This position is usually reserved for the tallest player on the team who is often positioned near the basket. This term also describes the action a ball-handler can take by rotating around a pivot foot, avoid defensive players and find an opening to take a shot. Similarly, in business — a lot of startups are aiming for the same target, and sometimes a change in a company’s position can make a huge difference in its journey towards success.
In basketball teams, pivots are central players: When I was a child, strong pivots like Shaquille O’Neal and Kareem Abdul-Jabbar were truly disruptive (remember hook shots and the Hack-a-Shaq days?). What’s true about my childhood heroes, is also true about startups: having a strong pivot can be a game-changer. Understating where you need to be positioned to succeed is crucial.
Pivoting in the business world means applying that understanding: Shifting a strategy to test a new approach regarding a startup’s business model or product. Although it is a fundamental concept for fast-growing businesses, in reality, a lot of startups understand that they were formed to perform mini pivots along the way to find product market fit — but are often nervous when it comes to major shifts.
I know that this is indeed one of the scariest points in any entrepreneurial journey, but remember that without pivots we would never have been able to use the services of Odeo, Burbn and Tiny Speck, better known nowadays as Twitter, Instagram and Slack. Just try to imagine how our lives would look like if Android would’ve stayed an operating system for digital cameras, or if we would need to carry a Palm Pilot to use PayPal.
In this blogpost, I’d like to tackle these big, scary shifts and try to analyse who, if, why, when and how to pivot properly.
Who — Who should pivot? To be honest, if you decided to be an entrepreneur and hop into this exciting journey then the answer is… You! A huge amount of incredible, well-known companies had to go through major pivots in their journey towards global dominance. A great pivot is led by great managers. The rest of the team’s task is to provide management with the right data and opportunities to make this process a successful one, as well as understand, accept and work diligently to make the shift possible.
When my partner Dov Moran founded Modu he had the amazing idea of how to make the world’s first modular phone with a small form factor. The vision, the team and many other key components were spot on, but the timing wasn’t right. The iPhone just launched, the 2008 financial crisis was still in full force, key vendors went bankrupt and additional issues did not leave much chance for the original vision to materialize. Dov decided to pivot, and had the character to do it. Being the brave entrepreneur that he is, he had the courage to raise additional funds to back a plan of his to create an app studio for the Android era. Soon thereafter, he understood that the financial situation in the market at the time still would not allow him to fulfill his vision. With a heavy heart and significant cash in the bank — he decided not to follow up on his pivot intentions. Instead, he sold the company’s IP to Google. Understanding the business situation, keeping calm while making tough decisions and being able to lead the employees were unique characteristics that led to his success.
If — Should you go for it? Yes. Sometimes. Depends on the market’s response, dynamics and competitors. Here’s a story which emphasises how important it is to consider whether or not to go for a pivot: When Grove’s portfolio company 3DSignals first entered the market, with the unique value proposition of their acoustic-based predictive maintenance solution, the responses were incredible. With almost zero marketing expenses, the team got the attention of some of the world’s largest companies and quickly signed on a number of paid pilots. The challenge was converting pilot customers to paying customers. It took us a while to realize that our value proposition was not aligned with the market needs at the time. Customers were not keen on buying a predictive maintenance solution from a startup, rather wanted to purchase one from an established corporate. These were not easy times for the company: The company leadership had tightened budgets and cut off profitable projects that were not in the company’s defined main focus. Our thesis was that we need to simplify our value proposition by taking a sub-set of our current offering to create a new product: remote sensing-based digitalization. We decided to show our trust in the team and double-down on the company. In a non-trivial decision, as we believed in the human capital and their vision, we’ve increased our bet instead of panicking. After a few stressful quarters, we finally felt that this new direction was the right one. Customers fell in love with the new 3DSignals’ product and market feedback was exactly what we were hoping for.
When — When to pivot? When you are positive that you are on the wrong path. When your path towards designated goals is not going as planned. When you do not have enough financial oxygen in the bank to allow you to succeed and prove your value. Grove’s Venture Partner Lior Handelsman had an experience in the early days as the co-founder and head of Product, Marketing & BizDev of SolarEdge that made him understand how time is of the essence. SolarEdge had the intention to sell their optimizers to major solar panel manufacturers then market them through these manufactures. In 2009, global markets were challenging for solar panel manufacturers and SolarEdge had to find an alternate go to market strategy. In a brave move, they decided to reach target customers by selling directly to integrators. This shift required product adjustments and a reconstruction of the company’s Sales and Marketing strategy. After 8 complicated months, early success indicators were showing and the pivot was completed. As demonstrated, the question of when to pivot your business can be tricky. It’s important to allow enough time to achieve real success and decide based on internal and external circumstances.
How — How to pivot? Cut your burn rate to a minimum. Define clear milestones and specific success indicators. Be brave with what you bet on. Move super-fast. Make your company agile. Keep only the most talented, devoted, ‘commando’-type employees around. Explain the shift to your employees and gain their trust. Align expectations with your investors. Define success criteria as you move forward along the way. Focus on leadership and positive personal example. And most importantly, when you feel the yellow brick road under your feet and think that you’re finally back on track, allocate all the required resources to support your growth. That’s a great timing to raise additional funds which will give you oxygen and allow your company to continue on its journey.
Major pivots can be hard but often prove themselves as necessary for entrepreneurs who wish to succeed. Throughout the pivot process, entrepreneurs should give early warnings before crashing into walls, provide honest feedback and data to their board of directors and keep a positive attitude throughout the process. Remember, you are running a marathon, not a sprint. If you have the right investing partners, they already understand this, and will be happy to provide you with the backing, the courage and support for your team to succeed in its new path. With the right partners on your side, pivots are not so scary but rather an exciting part of the journey.
At Grove Ventures — we love working with brave entrepreneurs, equipping them to make the right decisions on their journeys towards success.