Pivot or Head Shot?

Last week, I finally got around to reading Nick Bilton’s ‘Hatching Twitter‘. The book explores the history of Twitter, including its  early incarnation as Odeo, a directory and search destination website for RSS-syndicated video and audio.  When it gradually soon became clear that the prospects for the business were limited, the search was on for a new idea…and Twitter was born.

Now, anyone who’s spent time around startups during the last decade or so knows about the cult of the pivot. As Tyson (Mike, not Fury) once said “Everyone has a plan until they get punched in the mouth”. And often it’s just a simple fact that the amazing idea that you dreamed up with your buddies just doesn’t cut it when you finally ask people to pay hard cash to use it and find out things aren’t as you dreamed they might be.

But, contrary to startup mythology, maybe that rush to find a new, viable alternative for the business isn’t actually sensible. Quite the opposite. A couple of days ago, Fred Wilson raised the idea that perhaps a hard pivot is one of the worst things you can do – not only for yourself as an entrepreneur, but also for the investor for whom you are probably striving to save the business out of a sense of loyalty.

If that resonates with you, think very carefully. Using money you already have and a ready-assembled team is tempting. It’s easier than starting a new business from zero.  But you’ve now strayed into territory where people don’t care or worse, aren’t interested but content to tread water.

  • Your investors originally chose a different company to invest their money in than the one you now want to build.
  • Hopefully your current employees were hired because they were the best for Idea A. Can you honestly say they have the perfect expertise to drive the success of Idea B?
  • As an entrepreneur, you may have money in the bank to build the business – but you also own less of the equity. This is a problem because if you do manage to achieve success by knocking your guts out working hard over the years, you now have a smaller proportion of the spoils to look forward to – with the rest of the rewards going to those employees and investors who are unlikely to be the best for Idea B, as we’ve just seen.

At the end of the day, startup investors expect to lose money most of the time. Their rewards come from the fact that they invest in a couple of very successful ideas that provide a disproportionate return that dwarves that more than cover those losses.

So why persist if the mutual interest and enthusiasm has disappeared? Life is short – and zombie companies serve nobody in the long run. The head shot’s the way forward.