Thinking about a startup pivot? We did, and we have 4 insights

Thinking about a startup pivot?  We did, and we have 4 insights

By: Oren Chernoff

Pivot in the world of business and entrepreneurship is the situation in which a certain company decides to change the purpose for which it was established, and moves to focus on a new topic. This is how she actually changes the direction she started with. In March 2022 we made a pivot, and as a first-time pounder, I was quite worried and doubted whether it was indeed the right step. After all, it arrived after 9 months, seed recruitment and a team of 20 employees. The decision was not easy, and in fact we finally arrived at it only after focusing on the dry data and filtering out the surrounding noise. Happily, it turns out that the decision was very necessary when thinking about the good of the company.

In the process I worked according to four steps, which I recommend to anyone who thinks their company needs to change direction.

Making the decision to pivot

Several considerations faced the decision to pivot. On the one hand, we were a team of 20 talented and experienced employees after raising $10.5 million, hundreds of customers in the pipeline, 3 weeks before coming out of stealth and a planned announcement on the main stage at the world’s largest e-commerce conference held in Vegas. Apparently, it seems that we are at our peak.

On the other hand, it would seem that our product does not provide strong enough value, and that there is a substantial risk due to dependence on a single integration for one particular platform.

And yet, I still wasn’t sure pivoting was the right decision, was our direction really bad? Maybe we are just ahead of the market and see something that others don’t see yet? The feeling was as if we had to choose between “we are on the verge of a huge change and building a huge new category and only we see it right now” and “we have to listen to the signals we get from the market, the product does not meet our expectations, so let’s take the remaining money and the amazing team that we have and find another direction “. For those who are not inside I will say – this is a very deceptive situation. On the one hand, you haven’t completely given up on the idea yet, so you look for signs that will show why it is good, and tend to give them too much weight. The fear that there is still no other new direction pushes you to stick to the existing path; And on the other hand, the data and the customers show you that the current direction is not good and it would be irresponsible to stay in it.

After putting the ego aside, we freed ourselves from thinking about the investment we had already made in the existing product, and silenced all the irrational noises, and only then were we actually able to look at the data and facts objectively. Before founding the company, I worked at a venture capital fund for 5 years, and therefore, from the experience, I was able to examine the situation from the eyes of an investor. The conclusion I came to is that I, as an investor, would not invest in the Fundo in the initial direction it started, given the data and the signs from the market. My co-founder, Will, came to this conclusion much more quickly and easily. Apparently a PhD in machine learning teaches you to be more faithful to data and rationality. It took me a few more weeks to finally internalize it.

Finally, we came to the conclusion that we should give up the current direction when we still don’t know what we are doing instead. To make it “official” and start moving the move we need to communicate it to those around us (families, team, investors)

How to tell that a pivot is being made

the team

One of the biggest challenges for us was to tell the staff that the young startup with the excellent idea they joined is not progressing as we expected, and that we need to make a change of direction. What helped us to do this well was to mediate it in a transparent and participatory way from the beginning, and to give them confidence that it was the right move. Telling the team from the start helps build mutual trust. We explained to them why this was the right move and assured them that we would keep them informed and that they could always pull more information if they felt they weren’t getting enough. This constant effort to make a transparent and inclusive process was a great management effort, which was very important to us, because in the end we succeeded in the process without any employee leaving us. Another example that proved to us that the way of transparency is the right way, is the fact that on the day of the announcement of the “beginning of the pivot process”, there was a new employee, on his first day in the office, who decided to stay with us to this day.
In addition, I had a lot of help from a mentor with experience as a founder and a really strong product person, who helped me face the challenge of leading the team during such a period alongside personal difficulties that accompanied that period of uncertainty.

the investors

From my personal experience as a former employee of an investment fund, and after real-time implementation in my company, I can recommend that the update to investors should be done in a personal way, while announcing that we are making a “pivot”, as a final decision, not “considering” or “examining”, but doing.

In the same update, it is necessary to refer to the steps taken in order to conduct ourselves with budgetary responsibility in light of the new situation, it is ideal to show that steps have been taken that extend the company’s breathing space for a period long enough to find a new product-market-fit (a reasonable time is 18 months), explain why this is the right decision and communicate to them Clearly what are the next steps from here and how they can help.

The pivot itself – looking for a new direction

This stage can be a whole book in itself, but in my experience, the most important things in this stage are: making sure that the “new job” search process is carried out efficiently and intelligently; And make sure that the change process is super transparent and participatory for all team members – this turned out to require a delicate balance and a lot (a lot!) of effort and attention on my part and on the part of the other managers to maintain it.

Despite the efforts, we found it very important, due to the desire to move forward from the search phase quickly, together with the desire to keep the existing team. To do this, we focused on several main issues: more frequent one-on-one conversations with employees in the company; inviting all team members to brainstorming sessions and raising ideas; Joining some of the developers in the company to meetings with investors and sales meetings to potential customers; Company shows that are relevant to Pivot, for example: at Happy Hours we held sessions of the “Sharks” in which we tried to convince the team who were the judges to invest in the ideas we submitted to them from the directions we considered or alternatively we let each team member propose an idea he had and convince everyone why this should be the new direction of the company ; Weekly company updates on the ideas we are currently considering, ideas we have rejected and explanations as to why.

One of the values ​​of our company was “this is our company” and I wanted everyone to really feel that they are contributing and influencing the future of the company in a significant way. As I already wrote, maintaining the balance was a very exhausting process. Within this, we decided to establish a dedicated team to actively explore new directions. We decided to do this, because despite the strong desire to share and empower each team member, in the end the founders of the company are the ones who have to decide that they are the ones who bear the responsibility and are the most “invested” in the success of the company.

It should be remembered that people choose to join a startup in the early stages despite the adventurous nature because of the desire to contribute significantly to building the company, the brand and the product. Therefore, the contribution of the team and their experience must be preserved even in an event like Pivot.

Find product-market-fit and grow

Part of the pivot is to finish it and decide what the company’s new line of business is. Fundo today is a company with a strong product-market-fit and in the midst of accelerated product and revenue growth. We returned to recruiting and in the collective memory of the company, the Pivot period feels like a “Morak that you remember with pride”. The challenges today are different but seem like “small problems” in relation to the screeching brakes we experienced back then, without us having a clear idea of ​​where we were going. Our new product is Much more profitable, with greater value to customers and a larger target market. The team, investors, and my co-founder and I are closer and more cohesive, thanks to the process we went through together.

The writer is co-founder and CEO of Fondue


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