The term “pivot”
If you are at very very early stage it’s not exactly “pivoting” - its just idea iteration. Pivoting usually implies changing a product that is fully live and has customers.
Pivoting is not a big bang moment - it’s just a thing you do when you iterate on ideas - it’s a lightweight thing
A company that is not quickly ideating and rapidly learning and changing assumptions in the beginning is probably not moving fast enough
Why pivot
Opportunity cost: “the loss of potential gain from other alternatives when one alternative is chosen.”
Good reasons to pivot
- I hate working on it
- It’s not growing
- I’m not a good fit to be working on this idea
- I am relying on an external factor outside of my control to make my startup take off
- I’m out of ideas on what to do differently to make it start working
Good reasons not to pivot
- You are trying to run away from doing hard work (like sales)
- You are repeatedly changing ideas and giving up on them before launching and doing sales
- You read an article about some hot new trend that is popular with investors and want to chase it
Why people take too long to pivot
- Loss aversion (неприятие) - when you have invested so much in it that it is mentally hard to pivot
- Have a little bit of traction
Having a little bit of traction is the pit of the PMF, when you do believe that it is working but you cannot get enough traction to make real sales.
- People are polite and have a hard time telling you they don’t want what you are making in a direct way
Having polite quasi-customers is also a pit. Do not get blinded by their reviews.
- Putting blame re:why things aren’t working on customers/investors
- Belief given to you by inspirational sources that “if you just believe hard enough things are going to change”
Ideas that a total fail in some way are better than ideas that got some traction. Those who fail fast can pivot easier and faster than those who believe in their ideas and keep pushing forward into nowhere
Anecdotes
- There are lots of anecdotes about people who “just believed hard enough”
- These are nice and uplifting and inspirational which is a good thing
- However just as stories about people who win the lottery don’t help you yourself win the lottery - these anecdotes aren’t terribly instructive or helpful
- Ultimately you are the ultimate decider of what to do, you have by far the most information, and you reap the rewards or loss of the decisions you make
- It’s all up to on what to decide, do not try to delegate it to startup authorities
Reminder about product/market fit
- Most people never get it
- You know you have it when growth is not your biggest problem - keeping up with demand is
- If you don’t have PMF and you have given an idea you best then it can be easier to get PMF by changing ideas than continuing to throw good time/money after bad idea
- you get more “shots on goal” than if you were pushing a single idea
How to find a better idea
- Try to find something the founders are more excited about and makes them feel more optimistic to work on it
- Corollary (вывод): being more ambitious is often counter-intuitively easier
- Honest assessment of founders strengths/weaknesses and attempt to find something with better founder/market-fit
- Best to find something easy to get started and validate market feedback
Find something you’re more excited and optimistic about to wake up and work on that thing
It’s OK to not work an idea that requires venture capital
- Most companies in the world that people start don’t require VC. That is good.
- Trying to raise money for a company where VC doesn’t make sense is not a great use of anyone’s time
- If the way you evaluate the quality of an idea is from investors, you are going to get pushed down the VC rabbit hole
Venture vs non-venture scale ideas
- There is no guidebook I am aware of for what “venture scale means”
- Some suggestions I have:
- Can I imagine this business possibly generating 100s of millions or billions in net revenue per year?
- Can I imagine the revenue growth to get that scale taking less than ten years?
- Can I imagine this as a publicly traded company?
- Kevin’s first lecture talks about this
- Other usual properties of a venture-backable business:
- Technology is a key component, and the technology is built by the founders rather than outsourced
- Extremely high “software” margins
- A large % of stuff on Shark Tank is not a venture-backable business
When is the best time to pivot
- As soon as possible when these things happen:
- You have launched and have been trying to get users for weeks or months and it feels hopeless
- When the idea is impossible to get started on because it takes years of building, too much capital or etc.
- You know in your heart it’s not going to work
More pivoting thoughts
- Pivoting over and over an over again can cause whiplash (больно в общем)
- Whiplash makes founders give up → kills the company
It’s more deadly for company to get whiplash and get sad to get a bad idea, because when you have fun working on a bad idea you at least get it to customers (but I believe it’s also bad due to loss of traction)
- Founders that are incapable of changing ideas struggle, founders that change ideas too much struggle. Find the happy medium
- Having employees while pivoting is extra hard and not recommended - best to do it with just founders
Idea quality scores
- How big of an idea it seems to be: 1-10
- Is is an obvious publicly-traded company? Tesla is good as a car company, selling stuff on ebay is bad
- Founder/market fit: 1-10
- How founders’ skills and experiences match the market needs? Creating a car company while you worked in the industry for years: good I’m gonna do an AI startup while not knowing how to code - 0 points.
- How easy it is to get started on the idea: 1-10
- Early market feedback from customers: 1-10
- Do people want to immediately want to go to sales or is it impossible?
I guess this means that the only good market feedback is from the real buyers
- Overall score: 1-10
Real-world examples
Conclusion
- Changing your idea is part of doing a startup, and the earlier you lock into the right idea the better
- When you are considering a pivot it should not feel like some huge monumental decision
- You should follow pivoting best practices