The Hard Things about Pivoting
A bit of background. We closed our seed round in mid-May. Two weeks later, we were starting to have concerns about our product and vision. We understood that we were a vitamin rather than a painkiller. We spent the month of June exploring some new potential visions. How could we announce this to our new investors who had put money on our previous vision? What would they think of us? Would our team lose motivation, and would we lose any key employees? Of course, all these questions were in our head, but we knew it was best for everyone for us to pivot, investors included.
This article is about how we handled it with all the stakeholders - investors and team.
How we communicated about the pivot with our investors
Transparency and trust
We try to be as transparent as possible with our investors, even when we were pitching for our seed round. You could say that we were lucky in terms of timing, as we were still in the trial periods with our prospects while we were raising. We didn’t know at the time that our product would turn out to be a vitamin,, so we were super enthusiastic, as our only KPI (the lead flow) was progressing super fast.
The first time we mentioned our concerns over our inability to convert prospects into paying customers was in our May monthly investor update email. We share everything we have in mind and don’t hide any ugly truths in those emails. Investors trust you with their money; transparency is the first step towards being eventually worthy of their trust.
In that email, we shared our suspicion about being only a nice-to-have, and even more so in the Covid context.
Your interests align with your investors’ in a pivot context
Our investors were super supportive. They had already entrusted us and the team with their money. If you’re in seed stage or earlier, the investment is made more on the team than on the project. So you shouldn’t fear having to pivot; the goal is to learn the fastest and iterate in the smartest way to get to product-market fit (PMF) before you run out of cash. When you have a vitamin, you will not get to PMF; that’s it. So if you don’t find a way out of the vitamin position, your investors will have a hard time getting some return on their investments.
It is in the investors’ best interest that the founders are ambitious about their project and don’t settle for a vitamin (or nice-to-have).
Both reasons - investment on the team and aligned interests - explain why they were very supportive to us, even if we started expressing concern two weeks after the round. But that only works if they trust you and if you were fully transparent with them from the start.
Involve and leverage your investors in your pivot effort
When we shared our concerns in the May monthly investor update email, some of our investors offered intros and feedback/advice sessions. At the time, we felt we would explore how to evolve the previous product, but would keep our explorations in the marketing data industry.
As we didn’t find any vision that was convincing enough to us, we informed our investors in the June monthly investor update email that we would expand our explorations to other industries, and shared a few ideas with them. What happened again is that they offered still more intros in the industry we mentioned, and we were able to interact with them about our ideas.
Involving them in our exploration process enabled us to take a step back, focus on the right signals, and, above all, feel confident that what we were doing was the right thing for the company.
We finally ended up finding our final vision of building an open-source data integration engine in mid-July. Since then, we haven’t looked back.
In the end, whatever you need to do, however uncomfortable it makes you feel, we would always advise that you be fully transparent to your investors. In our case, they helped us get intros for our explorations and provided better perspective for our ideas. We’re so thankful for their trust and their help.
An important note here: If you communicate your concern to your investors but don’t act on it, that’s when the investors lose confidence in your abilities, and you will see that you will have lost their interest. They will not reply to your emails anymore; that’s an indicator you don’t want to see.
How to handle it with your team
Another issue you might think of is how to keep your team super motivated along the way so you don’t lose any key members. How things went with our team was very surprising to us, actually. They taught us a lot. Let us tell you why.
Transparency and trust – again
Remember our monthly investor update emails? We also share them with our team. Our goal in doing so is alignment at all levels. However, you don’t want your team to learn about your concerns in an email to your investors. So we were very transparent with our team with all the concerns while we were discovering them.
But, we were concerned that they would lose motivation. In the beginning, they joined us because they believed in the vision we sold them at the time. We also knew that the more heads were thinking about a problem, the more perspectives we would have, and the faster we would get to a true good vision.
In the end, a startup is in search of a truth that has not been identified by any other company before. We needed our team to help us with that. So in June, we stopped coding and started exploring several different visions together.
“We signed up for it”
We conduct regular one-on-one meetings with all our teammates. Besides maintaining good communication and rapport, it was a great way to discover how they were feeling in this exploration period where we knew we would stop working on our previous product.
Across the team, the reactions were pretty similar. They understood why we needed to pivot; they agreed with us. That didn’t break their trust in our common abilities to build a great company. And above all, they were happy to go through this period, and this was pretty surprising to us, until they said, “We signed for it, we wanted to have the startup experience, and now we’ll go through all stages, even inception!” That’s when you know you have the right team!
What matters is the trust the team feels towards you
It’s also at that time we understood something. The moment you will have issues with your team is when you have lost their trust. If you have to make very hard decisions that may throw away the last months’ worth of your team’s work, it will be okay as long as your team understands the reason why, and still have faith in you and trust your abilities and decisions.
The moment you lose this trust, you lose them.
The only bad timing for pivoting is when it’s too late
Pivoting a month after fundraising is not wrong. Pivoting means that you learned some hard truths and you are acting on them. As a startup, you need to be agile, to learn and act the fastest...well...while still making the smart decisions ;). Committing your company and team in the wrong direction is what kills your company, and also your faith in the project in the end.
That’s why there is no bad timing for pivoting. But understanding you need to pivot and not doing the exploration work to see how you need to very early is what is wrong. Your investor will stop believing in you, and your team will, too. Move fast and break things!
On our side, we don’t regret the decision to pivot at all, as we have become passionate again, this time with our new vision to make data integration pipelines a commodity.