Don’t Freak Out When Part Of Your Original Hypothesis Was Wrong

If you showed me a bunch of random early stage startups and asked me to select the ones disproportionately likely to be successful, I’d bet on the teams which are able to turn a hypothesis into a test and a test into learnings with the greatest compounding velocity. This is not to be understood as suggesting great startups are the byproduct of sequential A/B tests. No, quite the opposite. But they do know where and when an intuitive insight should be pressure tested by reality. Or they uniquely understand the problem to be solved but use the first year of the company to chart the most effective path through.

And you know what often comes out of these virtuous cycles? Changes. Because that’s what startups do, they change. Adding people. Reconstituting the org chart. Abandoning one customer channel for another. Constantly changing during the early years.

When we fund a company it usually has just three things: a problem to be solved, a customer segment who has that problem and a notion of the product to be built. Then the team takes the funding and ramps up the work. And almost always they come back after a month, or three, or six and say “I think we need to pivot because one of those three things [problem, customer, product] weren’t correct.”

I say, GREAT! And it’s not a pivot. If you’re changing only one of these three aspects it’s definitely not a pivot. If you’re maintaining the problem statement but changing the customer and the product, I still think it’s NOT A PIVOT. A pivot is when you are shifting completely. Moving to a completely different set of problems, customers and product, not merely processing the learnings from your most recent efforts.

So you might ask me, Hunter, even if we buy into your definition, aren’t you being a bit pedantic? I mean who cares at the end of the day how a ‘pivot’ is defined by our industry. And I’d say… TWO REASONS. IT MATTERS FOR TWO REASONS.

Calling normal startup iteration a ‘pivot’ creates a psychological barrier to change

Even though we all work hard to remove any notion of shame or failure from ‘pivoting’ it doesn’t help to over-apply it. I don’t want founders to think that making changes to a roadmap is ‘pivoting’ because true pivots require a different playbook. The small but meaningful alterations to ones’ strategy should be done without delay, deliberation.

Pivots shouldn’t be cavalier decisions but ones which are accompanied by a vote of continued confidence among major investors and cofounders together

True early stage pivots shouldn’t be done cavalierly or just because the startup has some money in the bank and the current plan isn’t working. I’ve seen companies handicap themselves by pivoting into a completely unrelated business that, as a result of the journey, is underfunded, overdiluted and without the right investors for the journey. Sometimes an orderly shutdown (or offer to return capital) and a restart are actually better for everyone involved. More often than not if the investors have faith in the team they’ll agree to play it out. And if they don’t? Well, I’m not sure it benefits the founders to pull along a group of unwilling investors just because the wire transfer has already been completed. I think of pivots as ‘refounding’ where the cofounders should step back and honestly assess their collective interest in a new idea. Sometimes one cofounder will choose to step back because it’s heading in a direction that they’re not as passionate about. That’s fine and the self-awareness should be celebrated, not punished.

So that’s my rant on ‘pivots’…..