Entrepreneur
Is your startup in trouble? Pivoting can be one of the most difficult things to execute, whether it’s in life or when running a company. It takes courage to acknowledge when you may be fighting a losing battle and when to cut those losses. The other option, however, is to go down with the sinking ship. If that’s not for you, then here are some tips.
The first time I had to pivot in business was in 2014, when after a few years of trying and just a few weeks of runway remaining, my team and I faced an existential risk — our ratings platform, Bugscore, had little adoption. We had spent years conceptualizing and building this global ratings platform. With a shoestring budget of just under $400,000, financed largely by us and a few angels, it was always a long shot — to allow anyone to rate anything (even people). There were some highs; for example, brainstorming at Home House members club in London with Wikipedia founder Jimmy Wales about integrating with his company, or bagging a multi-year SaaS contract for Bugscore 360 with Ernst & Young (Germany). Alas, these highs didn’t translate to enough revenue to sustain the vision.
In fact, they fed our confirmation biases associated with the project, delaying the inevitable. Holding on to a bad project isn’t dissimilar from holding on to a bad investment, something my former colleague at Goldman Sachs, Elsa Rocha, very aptly covers in her article on investing biases and relationships.
Our infinite thirst to succeed was met with the reality of dwindling financials, and by the summer of 2014, we had a few weeks of budget remaining before the lights went out. With stagnant user acquisition figures and risk of financial oblivion, fundraising discussions became almost impossible as the abyss drew us closer by the hour.
So instead of pushing ahead, we shut it all down and focused on solving a problem we knew well. Part of what was paying the bills on the side was financial trading. The sector was suffering a growing problem of broker fraud, and many clients in our shoes were getting fleeced. Our pivot was to repair that very problem, and it monetized quickly, paving the way to our biggest success yet.
Here are some lessons and tips.
Related: Knowing When — and How — to Pivot Is Key to Your Business’ Survival. Here’s What You Need to Do.
Embrace failure
Visionary management teams are good, but grounded ones are better. The statistical likelihood that your startup will succeed is under 10% over 10 years. Let that sink in; your first startup, for factors either in your hands or outside, will likely fail. You are taking the road less travelled, and many known knowns, known unknowns and unknown unknowns lurk. This is not to say close shop at the first sign of rejection, but if after a few years you are banking one win for every nine rejections on various KPIs, it’s time to consider if this idea is the hill you want to die on.
Life is short. It is okay to fail once, even twice, before finally succeeding. Don’t take it from me — take it from arguably the most successful entrepreneur of our time, Jeff Bezos. Whether it’s kozmo.com or pets.com, he knows a thing or two about failure. Lastly, the longer you wait, the harder it will be to pivot.
Communicate consistently
We kept all investors in our project abreast of all good and bad news regularly. Don’t sugar coat anything; there is no need for that, and it’s self-defeating. The more you inform and make people understand the headwinds you face, the easier it is to organically execute a pivot. If a pivot involves a new company and receiving new money, make your previous shareholders whole. Even if you don’t legally have to, morally you should, as they were your earlier backers.
Hedge bets
Focus is key when hacking growth. One product idea or service offering executed well beats being everything to everyone. That being said, if you’re backing the wrong horse, you’ll fail. If you are a young startup, cash-strapped and bootstrapping your way to break even, it may not be a bad idea to keep a lookout for solving monetizable problems on the side. For us, it was financial trading in an inherently morally bankrupt industry (FX). We turned what we did internally into a service for beleaguered traders, and it grew quicker than expected. Keep that third eye open for opportunities, as it could mean your survival.
Related: Worried About the Market? Here’s How Warren Buffett, Ray Dalio, and Harvard University Protect Their Portfolios
Pivot purposefully
Pivot with purpose and into something you know and are skilled at. Don’t pivot into another grandiose idea or, worse, just an iteration of your already struggling idea. Otherwise, you will run out of whatever money and time you have remaining.
Research and develop
Once you have pivoted and steadied the ship, it is a good idea to spend time and money on research and development (eg. today, we spend around 12% of turnover on R&D). Usually, this should be on something related to what your core revenue driver is. For us, it was studying smart contracts in the blockchain — something that was revolutionary in 2015/2016. Had we not done this, we wouldn’t have been able to take the company to the next level. In the 80s, Nokia was primarily known for selling rubber products, cables and consumer electronics. However, behind the scenes, they had an R&D division working on mobile phone technology. In 1987, Nokia launched the Mobira Cityman, one of the first handheld mobile phones. Everyone doubted them. Nokia’s then CEO, Jorma Ollila, decided to pivot the entire company towards mobile phones. The rest is history.
Prioritize health
Running a startup is similar to navigating a large city without GPS, without much fuel and in the middle of rush hour. It will test your resolve, patience, finances and emotional reservoirs more than climbing any corporate ladder. It is not a feat for the fainthearted. It will take a toll on your health in ways you may not imagine. Whatever activity brings you peace, may it be some sport, yoga or hobby, do it and prioritize it. If your health fails, everything you are working for is irrelevant in the long run.
My wake-up call on this front came in 2016. I would laugh at a friend of mine who would play the flute to relax. The joke, as it turns out, was on me. It took me almost seven years to recalibrate after burning myself out, using a combination of intense physical exercise, some martial arts and meditation. I had to do this while continuing to build, but I should have started much earlier.
Related: Stressed and Exhausted? More Than Half of Founders Say They Never ‘Switch Off.’
When we back entrepreneurs these days, we prefer those who have failed a few times, pivoted and survived rather than one-hit wonders who don’t know how to switch gears when the going gets tough. Those who have embraced failure, pivoted and survived are likely to be far more grounded and bankable, in our experience. They will likely have less ego, be quicker to pivot in future projects and far easier to work with. Ergo, more investible. Whether it is Netflix, Nokia, Instagram, X (formerly Twitter) or YouTube, all of these giants have had to pivot once to become what they are today.
So, if they did, what are you waiting for?
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