Entrepreneurship for Engineers: Do You Need to Pivot?
Startups are constantly iterating, changing their communication strategy, sales strategy, sometimes even product strategy. But sometimes founders need to make a pivot that fundamentally shifts what the company is all about.
The sign that your company needs to make a pivot is simple, according to Jon Nordmark, co-founder and CEO of iterate.ai, an enterprise low code platform: “No one is buying your product.”
If no one is buying your product, it’s obvious that something needs to change. But when you drill down, it can be challenging to figure out exactly why your product isn’t catching on.
“There are many moving parts,” Nordmark said. “Identifying what the problem is, is hard.”
Ultimately, if your startup seems to be heading for trouble — particularly if it seems at risk of running out of money — you should pivot something. But do you keep your product the same and change your messaging? Or change your marketing and sales tactics? Or fundamentally change your entire company’s purpose?
I spoke with two entrepreneurs with experience with that kind of pivot about how to spot the need for one, how to execute it, and more.
When Ian Tien, CEO and co-founder of secure collaboration platform Mattermost, first got into the startup accelerator Y Combinator, it was for a company making a video game engine. The problem was, the technology worked great on the web and iOS, but it didn’t work well on low-end Android devices — and for a game engine, that was a fatal flaw.
But he found that some of the test games his startup produced were popular. So the company became a game studio. But making games isn’t scalable — it’s too much of a hits-driven business.
By the fourth and fifth game, it was clear to Tien that the business should pivot. “Our pivot came from a video game business to an enterprise software business,” he said.
So Mattermost, as it is today, was the third iteration of the company, and both pivots were fairly massive.
Where Do You Go?
In the case of Mattermost, the current business came out of the team’s frustration with its collaboration platform, which not only was buggy and prone to errors, but wouldn’t let the team export its data.
When the team released Mattermost as an open source project, enterprises started coming to the company and asking for a more “enterprise-ready” version, one that was more scalable and had more security controls.
“That pull from the market was a strong signal that there was something extraordinary to build here,” Tien said.
In most successful pivots there will be both a push and pull — a clear signal that the existing business strategy wasn’t working coupled with signs that another business might be more successful.
Convincing Your Investors
In Mattermost’s case, early investors and advisers were on board with transitioning from a game studio to an enterprise software company. But that’s not always the case.
Sometimes, said Nordmark, you have to persuade your funders and board members to make a change.
“A lot of times when they invest, you may not have product-market fit yet, it’s more of a theory,” he said. “It gets really hard to change because you have to convince your board that you’ve made a mistake.”
When Pivots Go Wrong
On the other hand, sometimes pivots can be driven by investors, and they can end up diluting the brand.
In 1998, Nordmark started eBags.com, a website that sold luggage. He and his co-founders had experience and connections in the luggage industry and were able to leverage that experience in the new company.
But then, as a way to expand, and under pressure from investors, they started selling handbags, and then shoes as well. This was a pivot of sorts, but it complicated things significantly, because everything was different about selling shoes, from the suppliers to the purchasing cycle.
Eventually, the team went back to selling luggage, only after learning the hard way that its competitive advantage was as a travel company, not an accessory company.
Pivoting isn’t easy, but both Nordmark and Tien said that every startup is likely to undergo some kind of pivot, even if it isn’t a drastic one.
“If your identity is based on the context of an early-stage startup in a specific space, that’s going to be a little precarious because you’re going to learn a lot through customer discovery and you’re going to change a lot,” Tien said.
Sometimes this can mean redefining for yourself what the journey you’re on is all about.
“What I realize is my career is not really about open source or about video games or about Microsoft Office,” Tien said. “My career is really about communities, whether that community is the Microsoft community and IT professionals, or video games and the social games we produced, or it’s open source and having communities of contributors build something really wonderful together.”