Summary
Pivoting in startups involves changing the business strategy or product direction. It is necessary to avoid opportunity cost and maximize potential gain. Good reasons to pivot include when the current idea is not growing or working, the founder is not the right fit, or external factors are beyond control. People often wait too long to pivot due to attachment to their initial idea and fear of admitting weakness. Pivoting can increase the chances of achieving product/market fit. Finding a better idea involves considering factors such as personal interest, perceived difficulty, and quick validation. The best time to pivot is when there is a lack of progress or when the idea is impossible to start. Scoring ideas involves evaluating idea size, founder-market fit, ease of starting, and early customer feedback. Real-world examples highlight the importance of recognizing and adapting to market feedback. Overall, being open to changing ideas and being strategic in the process increases the chances of success.
Introduction
- Dalton Caldwell, partner at Y Combinator, explains the concept of pivoting in this video
- A pivot is when a company changes its business strategy or product direction
- Companies should pivot when they realize their current strategy is not working or when they identify a better opportunity
- Evaluating ideas for a pivot involves considering market demand, competition, and the company's capabilities
What is a "pivot"?
- A pivot refers to changing your startup idea, especially in the early stages of the company.
- It is a lightweight and common practice that involves constantly changing ideas and assumptions to find the right version of your idea.
- It can also involve shutting down a current product or service and pursuing a different direction.
Why pivot?
Pivoting is necessary to avoid opportunity cost and maximize potential gain. Key points include:
- Opportunity cost refers to the loss of potential gain from choosing one alternative over others.
- Continuing to work on something that is not working means missing out on the opportunity to work on something else.
- Lack of progress after months of work is a strong signal to pivot.
- Early in the process, the need to pivot may be less obvious.
Good and bad reasons to pivot
Good and bad reasons to pivot in a startup are discussed in the video.
Key points include:
- Good reasons to pivot:
- Current idea not growing or working
- Founder not the right fit for the idea
- Relying on external factors outside of control
- Founder out of ideas on how to make current idea work
- Bad reasons to pivot:
- Trying to avoid hard work
- Constantly changing ideas without following through
- Being influenced by hype of hot new trend or funding.
People wait too long to pivot
People often wait too long to pivot in their startup because they struggle to let go of their initial idea and feel invested in it. Politeness can also be misleading, as people may not directly tell founders that their idea is not working. Fear of admitting weakness or defeat, blaming customers or investors, and the belief that perseverance alone will lead to success are other factors that contribute to delayed pivoting.
- Founders struggle to let go of their initial idea and feel invested in it.
- Politeness can be misleading, as people may not directly tell founders that their idea is not working.
- Fear of admitting weakness or defeat contributes to delayed pivoting.
- Blaming customers or investors is another factor that leads to delayed pivoting.
- The belief that perseverance alone will lead to success is a common misconception.
Product/market fit
Product/market fit is a crucial concept in startups, indicating that the product is well-aligned with the market. Pivoting can increase the chances of achieving product/market fit. Taking multiple high-quality shots at creating and launching a product improves the odds of success.
- Product/market fit is when growth is not the main challenge
- Pivoting can be a good strategy to achieve product/market fit
- Taking multiple high-quality shots at creating and launching a product increases the odds of success
Finding a better idea
Finding a better idea for a startup involves several key considerations:
- Choose an idea that excites and inspires you, rather than something boring or uninteresting.
- Opt for an idea that is perceived as harder, as it can be more rewarding.
- Be self-aware of your strengths and weaknesses and play to those strengths.
- Look for an idea that can be quickly built and validated, avoiding lengthy research and development processes.
- Understand that not all businesses require venture capital funding and be aware of this.
- Determine if your idea is venture capital fundable by considering factors such as potential for high revenue, fast growth, and the use of technology.
- Recognize that popular fundraising shows like Shark Tank may not align with venture capital funding.
The best time to pivot
The best time to pivot is when you feel hopeless after trying to acquire users for weeks or months, or when your idea is impossible to get started with. It is also a good time to pivot if you secretly know that your idea isn't working. However, pivoting too frequently can lead to giving up on the company. Finding a balance between pivoting and sticking with an idea for too long is important. Additionally, constantly pivoting can slow down progress and demoralize the team.
Scoring ideas
- Scoring ideas involves using a subjective quality score based on four criteria: idea size, founder-market fit, ease of starting, and early customer feedback.
- The size of the idea and the founder's fit in the market are important factors to consider.
- It is crucial to find ideas that are easy to start and receive positive feedback from customers.
Real-world examples
The most profound aspect of the text is the importance of recognizing and adapting to market feedback in order to achieve success in business.
- Brex, a startup, initially focused on creating a VR hardware headset but faced challenges such as lack of expertise, funding, and market interest. They successfully pivoted to creating a credit card for startups, achieving product-market fit and raising significant funding.
- The video discusses three companies: a credit card product, a SAS company called Retool, and a payment app called Prepivot. Each company faced challenges but successfully pivoted to find market fit.
- Another example is given of a startup that initially built a product for college internships but received average market feedback. They decided to pivot and build it out further.
- Magic, a company that started with an app for blood pressure coaching, received poor market feedback. They quickly pivoted and built a new prototype that gained significant press attention.
- Two examples are given of companies that successfully pivoted: a chat bot company that became a top data infrastructure company, and a data infrastructure company that focused on a popular JavaScript tool for analytics.
- The speaker emphasizes the importance of recognizing market demand and being willing to pivot based on market feedback.
Conclusion
- Changing your startup idea is a crucial and early part of the process
- Opportunity costs and "shots on goal" emphasize the importance of pivoting
- Best practices and openness to changing ideas are recommended
- Being scientific and strategic in this process increases chances of success.