Mailchimp originated from a web design agency, PayPal got its start as a P2P payment app, and a video game flop gave rise to Flickr. Pivots are hard roads to navigate, but they can lead to enormous success if done thoughtfully.
Saar Gur (general partner at CRV), moderated a discussion about making the decision on when and how to pivot alongside Hillary Lin (co-founder of Curio), Immad Akhund (co-founder and CEO of Mercury), and Max Mullen (co-founder of Instacart). The conversation explored when to shift gears in a company’s roadmap with a full pivot, and how to steer your team through it all while keeping your investors on your side.
What characterizes a pivot versus a change in trajectory?
The entrepreneurial journey is often marked by multiple changes in course and gear shifts. Slightly reevaluating your target customer or going up- or down-market — even refocusing on a slightly different industry — may not constitute a pivot. So what marks a true pivot in a company’s roadmap, compared to the natural process of evolution and adaptation?
According to Max, a pivot is no small detour or change in destination. “Refining your product, talking to customers, learning new things, changing your go-to-market — this is you driving somewhere,” says Max. However, “a real pivot is like getting out of the car and getting into a boat — it’s a totally different thing.” Your means of getting there? That may change too. “You might need a different team for your pivot because you’re building a different solution to the same problem, or you’re changing the problem you’re solving entirely,” he explains.
How do you know when it’s time to pivot?
A pivot is usually preceded by a problem. It could be that interest, adoption, or sales are flat. Pinpointing when to pivot comes with evaluating how close your business is to achieving product-market fit — and, if at its current rate, it will get there at all. When thinking back to the first version of what his team built at an earlier startup, Max had to ask himself, “Are we not growing because our product isn’t good enough, or because it doesn’t solve the problem well enough, or because the problem isn’t real?” He wondered about his distribution channels. “Are we not distributing it smartly? Are we not marketing enough?” He concluded that it comes down to product-market fit, as Sean Ellis characterizes it, based on a metric of how disappointed customers would be if your product didn’t exist. At Max’s previous company they ran with the one feature that was working — instant messaging — and saw 100x engagement. At Instacart he recalls, “People were trying to order Instacart from New York City when we only worked in San Francisco, calling us up and saying ‘I can’t get this delivery time. I need this delivery time’.”
Hillary, a physician and the co-founder of Curio, was inspired to start the business out of a frustration with the healthcare system. She’s come full circle in some ways through her pivots, chasing what she calls, mission-market fit. “I originally founded Curio as a wellness company because I wanted to be outside of the healthcare system and innovate in that way. But the first big pivot we did early on was to become a proper healthcare company. That comes with a lot more legal setup, regulatory risk, and requires a lot of money.” Hillary also refocused on a narrower segment, the cancer patient population and caregivers. “I went full circle,” she says, “I tried to leave healthcare and then came back around because you find that sometimes you have to do the hard things to make the impact you want.”
Immad cautions entrepreneurs from being overly tied to their original plan. He recalls multiple pivots he executed as the co-founder of Hayzap, a mobile gaming app. In retrospect, he believes they often came too late. “Generally speaking, entrepreneurs are pretty stubborn.” At Hayzap, he explains, “We stuck with what we were doing for two years, which at times might have been a year too long.” The company pivoted early on to mobile, when the Apple app store launched — making the mobile device the new home for casual gamers. It’s necessary to balance being passionate about your plan with asking yourself how well your solution solves the problem for its users. Immad also reminds founders that timing and the help of a market tailwind can be an enormous advantage. “It's just so hard to do everything right. And if you're in a market that's disappearing, that's really hard.”
What is the importance of timing in a pivot?
The founders are united in their belief that, while timing is important, dedication and subject matter expertise are what stand the test of time. They’re also weary of waiting for the perfect time. You want the environment to be primed for your solution, but taking too long can mean missing your turn. Imagine trying to jump in on a round of double-dutch without understanding the rhythm of the game.
Max doesn’t believe in trying to time markets. Instead, he suggests looking forward. The advice is “to try to live in the future as much as possible. Talk to the smartest people working on the most interesting things — on the edge of those things. Learn a lot early on, adopt as many things as you can, and at a certain point, you can read the tea leaves and just get a sense that over the next 12–18 months, XYZ-type things are going to be important to your potential customers. Then you can build toward that.” He warns against spending too much time evaluating markets. “You end up building in the rearview mirror and you could end up building something that is irrelevant by the time you're done building it.”
How do you keep your team in tow through a pivot?
Having a small team, an exciting mission you’re building toward, and being transparent about the shift, are all assets during a pivot. Ultimately, founders should take stock of the company they’ll be building going forward and evaluate what they need to arrive at that new destination.
According to Immad, “If you're a small team, you should be all hands on deck. It's relatively rare that the alternative works.” He learned early on, that foregoing false optimism can help inspire confidence. He prefers an authentic approach that lets the team in on the challenges and how they’ll be navigating them. “If you are much more honest about it, and say ‘hey, this isn't working, but we're not going to give up. This is what we're going to do next’ people can get behind that authenticity and honesty.” He believes your team will detect anything other than the truth of the matter and are more likely to get behind you by sharing the new roadmap.
Hillary advises keeping your team lean. “There's a certain point where your company is almost too large to move,” she says. “And it's also related to what I think is actually the most difficult part of pivoting — telling the narrative to your internal team. Of course, you have to tell the story to all of your external stakeholders. But that's almost easier because you can tell them whatever and they'll deal with it. But your internal team, you have to get on board and you have to motivate everybody at a very high level. You have to [have] an extremely good reason and narrative for why you're trying to pivot, which for all you know, might not be the right one. Everything's an experiment in a startup.”
Once you’ve chosen your course of action, evaluating whether or not you have the necessary team and tools to get there is crucial. “The most important thing after you’ve made the decision that you’re going to pivot,” according to Max, “is to take stock of what you have: how much capital you have, and how much runway it equates to; your team, and the skills they possess; what you’ve learned from the experiments you’ve run, and how that had led you to the conviction that this might be the path.”
Saar, a general partner at CRV, reminds us that what unites a team can be quite simple. “There are sometimes teams that come together because their main goal is to build a successful company,” he says. He’s seen startups completely change course and keep their team engaged — because they believed they were building something that would last.
How to communicate the news to investors
Honesty isn’t just the best policy when it comes to your team. As a serial investor, Immad advises startups to practice that same brand of authenticity with their investors and VCs. “I would much rather see one of the companies I invested in go pivot and try something new — especially if it’s exciting and they consult me — rather than bashing their head against something that is obviously not working,” he says. Immad finds it particularly discouraging when a company paints a rosy picture of their performance at every investor meeting, and then suddenly pivots, illustrating that they’ve been telling a very selective version of the story.
Keeping lines of communication open isn’t just about preserving investor trust. A pivot is an opportunity to get support. Max explains that “you could get help from those investors if you're honest, especially if you pick a couple that will really lean in to help you.” Ultimately your investors want to see you succeed. Max suggests leveraging their experience and asking them to collaborate with you and even workshop various scenarios for future outcomes.
Should you pivot to jump in on a hype cycle?
It can be tempting to want to force your startup’s path to intersect with a hype cycle — like the current one surrounding AI. However, founders should be strategic about even the most promising new tech, and look for opportunities to build on what their focus area is, rather than lose sight of their mission. About AI and hype cycles more generally, Hillary says, “I don’t generally like to follow the hype. [...] I truly believe in the utility of what [AI] is and for us, so we just went ahead and started using AI in our services and products and thought about how it could help us.” Be mindful of whether this hype is just a new trend or if it provides utility to your business and customers.
Max reminds us, however, that you can use the attention captured by a hype cycle in numerous ways — like jumping in fast-moving water. He explains, “You can make your company more productive. You can weave it into your product. If you pivot, you can consider pivoting closer to it since that's where investors and maybe customers are more interested.” The increase in attention and, possibly traffic, can give founders more chances to get their products in front of users, and test things and iterate more quickly.
Pinpointing the opportunity in the technology, according to Immad, is what makes all the difference in your business. He says, “If you have a unique insight and you really believe in it, you shouldn’t be put off by it being a noisy space. [...] In the next six to 12 months, the hype cycle part of it will probably be over and a lot of those people will not stick through it. If you really believe in something and you're willing to spend the next 10 years of your life doing it, you're in a unique position.”
Pivoting is no small feat, and deciding when and how to go about it comes down to your mission and which route you believe is the surest way to reach product-market fit. You’ll need to ask yourself hard questions along the way, like whether you should look for a new direction with your solution, your market, or your delivery channels — or some combination of them all. Leverage your investor network, who can act as helpful guides as you find a new way forward. Ultimately, your company is yours to steer, but being advantageous about how you lean on investors, your team, and new tech can give you velocity through a pivot.
Mercury