How Founders Can Get Prepared for Pivoting
Entrepreneurship is like steering a ship on the ocean. Pivoting occurs when the captain decides to shift the direction to accommodate changes, be it a furious storm or an iceberg.
In the startup world, it’s relatively unrealistic to believe that your first approach to address the problem is the best way, underlying the fact that there are always fast changes happening in terms of the industry, customer preferences and technologies.
The “direction” that has been shifted always entails business strategies. But not every pivot costs a fundamental change to the entire company. It can be anything from shifting the target to another different set of customers, to deploying a different technology for building products, to adopting a new revenue model to get monetized.
Pivoting can also be much more complex and difficult in real practices. You are probably losing the only revenue stream since you are abandoning the old business model. And you may risk not being able to pay your team to support the transition.
What should you put into consideration before deciding to pivot? How should you plan it?
First of all…
Stay with your vision
Bonnie Roupé, founder of Bonzun, has a different understanding of pivoting, “for me, pivoting is a slight turn towards your vision, where the short-term goals or the tactics change drastically but you still stay true to your vision.”
Vision stands for your goal for tomorrow and what the future holds for your company. A vision is like a lighthouse that gives the direction and you need to stay with it even though you are changing what you need to do today.
Bonzun used to run an app to support pregnant women, with millions of downloads, backed by World Health Organization and UNICEF. Bonnie started the company with a vision of being at the forefront of women’s digital health. The vision, later on, motivates the team to bring the best and latest health research directly into the hands of women, but this time it would be the women who had infertility issues.
Startups are always in shortage of resources, no matter it’s about talents or capital. Bonzun was confronted with the same situation. In the end, they had to abandon the old model and just focus on creating and operating the world’s first personalized IVF (In vitro fertilisation) app.
“It’s just a way of being narrower and more niched choosing just one silver bullet”, as Bonnie said to us.
Will Fan, the founder of NewCampus, a lifelong growth and learning school for a new global generation of modern leaders, agreed with Bonnie, “the vision behind NewCampus and QLC has stayed the same. That is really helping people be the best version of themselves for the rest of their life.”
While the previous brand QLC, short for Quarter Life Crisis which aimed to help disgruntled millennials shift their career, the new brand NewCampus brought the lifelong learning opportunities to corporate professionals, government workers, and more people whoever are stuck in a certain mindset or industry.
There are three areas of focus that have driven their vision since the first QLC days: How can you help people build relevant skills for a changing environment? How do you help them get insights into industries or macro changes in the world, which are obviously now more important than ever? How do you build networks outside of whom you know?
A great company comes with a great vision. Find your vision and stick to your vision even when you pivot.
Pivot as fast as you can
Many founders encourage their fellow entrepreneurs to pivot as fast as they can, since no one could predict the future, as in the case of COVID19 that impacted most business and potentially bankrupted several others.
Wayne Kennedy, Co-Founder & Chief Product Officer at Goama, shared their pivoting experience, “the key driver for us was moving as fast as possible once we identified issues with our original model.”
When Kennedy co-founded Goama, the company was focusing on building “Netflix for games” and later they pivoted from a subscription model to a tournaments model, working with super apps. Goama is able to get access to an addressable market without spending much on consumer marketing and create additional monetization options around ads, sponsorships, partnerships and more.
The timing is definitely critical. It’s not a good idea to pivot when the market is not ready for it or to sell to clients when your new product is not yet ready.
Goama decided to fail faster and iterate faster when they still had a good runway, “we needed to ensure we had enough runway to give the new approach a chance to succeed.”
However, sometimes you just can’t control and have to be forced to make changes. The travel industry has been impacted badly by COVID19 and it will be more obvious to you if you check how Chinese travel giant Trip.com Q1 revenues plunged by 42% and the four biggest U.S. airlines lost more than $10 billion.
With the monthly revenue dropping from $2 million in January to $10,000 in March, TravelFlan experienced their worst moment in 2020, even with their fresh $7 million Series A raise. The company, which provided digital solutions for corporates to unlock the power of travel, was forced to find another way to generate revenue.
Fortunately, they started working with big corporates like China Mobile and Samsung before the pandemic and had a well-established platform framework. Just this time they were not selling travel services but local lifestyle products. They took the action very fast and started working with distributors, coffee shops, food deliverers, top restaurants and also coupon partners like 10,000Lab Coffee in Korea and Digital Glue in Hong Kong. As a result, TravelFlan’s revenue hit $1.2 million in July.
As Abel Zhao, the company’s co-founder, shared with us, “we utilized whatever resources that we already have and then for whatever we don’t have, we need to very much proactively go to the market to find it.” TravelFlan is one of the first travel companies that started selling lifestyle products and COVID19 products in Hong Kong.
Don’t overthink. It’s better to make a fast decision than no decision at all. While you are not in a crisis, you have a chance to experiment with new strategies and models. As Kennedy believed, “you know in your heart when the existing model has issues that are fundamental. Give yourself a chance to correct issues.” But if you are unluckily trapped in an unfavorable situation, it’s more necessary for you to react fast for survival before you used up your runway.
Do your homework and make data-driven decisions
You don’t pivot just because of gut feeling and intuition. You are most likely pivoting to an area that you are not familiar with, where your intuition is not always correct.
It should be based on your experience and more importantly, data. Understand what you have on hands and what you can achieve within a short period of time.
TravelFlan has a good story to share. Back in 2016 and 2017 when TravelFlan just got started, they were running a B2C travel platform powered by AI and big data and the company served half a million people per month in Hong Kong and Taiwan. Therefore, when their investors encouraged them to tap into the mainland China market, they’d decided to pivot from B2C to B2B due to fierce market competition and skyrocketed customer acquisition cost.
“We already had the technology framework. We had the database… We thought we had something.” At that time, Zhao was aware of the gaps needed to be filled to be able to successfully transition a B2C company to a B2B one. But as a Hong Kong-based startup tackling the mainland China market, there were even more challenges and barriers needed to be overcame for Zhao and his team — longer sales cycle, business cultural differences and localization, just to name a few.
The terrible moment passed after TravelFlan fully abandoned the old B2C platform and concentrated on the partnership with China Mobile — the company had zero income for about seven months for the mainland China market, until the China Mobile project was launched.
“One thing we did not do really well was that we didn’t have much ‘bullets in the pocket’ before entering the battlefield, and bad timing that we were doing fundraising and business pivoting at the same time, which made the situation even more challenging.” Zhao learnt an important lesson from the past experience.
Fan holds the similar opinion. “Follow the calculated opportunities. We are not only just relying on our experience intuition, but also data-driven decisions and having the agile capability to move fast.”
Bonnie made the calculations more specific around the business model and their unfair advantages compared with competitors. Applying a B2B2C model to help women fulfill their IVF treatments, Bonzun has a stronger business model by providing values to three stakeholders, including patients, IVF clinics and the pharmaceutical companies. Compared to the previous B2C app, this new IVF project also provides a solid ground of revenues for them to live on. As one of the first movers in this space, Bonzun’s treatment solution is proved working based on the data from 6 countries and 43 clinics.
Earn trust from your team
“There’s always going to be that mountain that you have to climb. And it’s similar with your team. You need to earn their trust because you can’t just lead them blindly and you don’t want to lead them blindly.” said Fan.
It means, while you are taking risky decisions, you need to make sure your team is mentally and physically prepared to support the changes and then get the power from them.
It was not as smooth as the founding team thought about when NewCampus decided to adjust the model. The team was going through the times of unpaid for nine months. “There were times where the co-founders and I just didn’t sleep for days, because we were thinking, ‘Man, this is another month that we can’t pay our team’ or ‘man, you know, this concept is not going to raise money’, or ‘man, like, is this going to be the week that we call it quits and throwing that towel’.”
Sounds very stressful and painful, right? Well, in the end, 80% of employees stayed on with the founders. NewCampus is a company with a strong team culture, which they call “a venture backed family business”.
Working in a team, where everyone shares the same vision and treats each other as family members, helps founders earn the trust from the team members. And most importantly, the experience in NewCampus constantly helps the members grow their curiosity, skills, networks and personal brands.
Let your team understand the reason behind decisions, benefit from the experience and see a light at the end of the tunnel. That’s just something not everybody possesses.
The article is written by Eva Shi, Communications Manager at Chinaccelerator, an early stage venture capital firm with a focus of cross-border Internet, helping global startups run business in Asia and China through a startup accelerator. This year is Chinaccelerator’s 10th anniversary. Bonzun, NewCampus, TravelFlan and Goama are Chinaccelerator & MOX portfolio companies.
The article was firstly published on e27.
