investment, pivotingIt appears that statistically speaking huge pivots after starting down different initial path are outliers when it comes to companies that experience massive growth.
Is there any reason to believe that pivots increase the odds of limited future returns?
It appears that statistically speaking huge pivots after starting down different initial path are outliers when it comes to companies that experience massive growth.
The article you linked to was about 39 companies. These are not numbers you can apply statistics to in any meaningful way. It’s a puff piece.
There is no real definition of what they’re counting as “big pivot” in the article. I’d certainly argue that many of the companies outside their list of “big pivots” have gone through some quite major changes on how they approach their product and market. Take twitter for example. Odeo -> SMS based P2P messaging -> P2P Web app/smartphone apps -> these days more broadcast rather than P2P - with twitter focussing a lot of effort on people who don’t even have twitter accounts.
Generally by the time you have got funding you have done you’re biggest changes. Because people who get series A/B generally do that by demonstrating that they have product-market fit.
Is there any reason to believe that pivots increase the odds of limited future returns?
Pivots are not just random decisions. Pivots are decisions based on what you have learned so far. They’re evidence based decisions. By definition pivots are made because the evidence tells us that our current business model isn’t working, and that this new model might stand a better chance because of
I don’t see how that can not increase the odds of better returns.
Expanding on this answer to the other question you just posted:
https://startups.stackexchange.com/questions/3066/pivots-vs-changing-course-what-is-the-difference/3072#3072
Companies rarely pivot after getting funding for two reasons:
You seldom hear about the gazillions of startups that actually do pivot and then go bankrupt. I’d gather this is the most important reason, and that the article you linked to has a huge sampling error because of it. (But I’ve admittedly no data to show for it. It’s just a hunch.)
When they stay alive with or without pivoting, it’s useful to remember that investors prefer to put money in companies with some level of proven traction. And if you’ve proven traction, you’ve probably been pivoting before looking for (or obtaining) funding.
So, yeah, in a sense, there are reasons to believe that pivots increase the odds of limited returns (from the point of view of a VC in a series A or later) – it means the founders aren’t quite sure about what they’re going to be delivering yet. But there is also plenty of reasons to argue the opposite: the startup is successful because it pivoted enough to find a scalable product-market fit.
Steve Blank's response to the “Unicorn Club” and if pivots matter:
Short answer – almost all the Unicorns pivoted. The authors of the article didn’t understand what a Pivot was.
Basically, Steve's take is that the author of the article had too narrow a definition of what a pivot meant - and that analysis shows the majority of the startups worth billions pivoted on business model components such as: revenue streams, cost structure, customer segments, channels, value proposition, etc.
Why pivot at the first place? After experiencing the field you are in, you decide to chase a better opportunity, reduce your chances of failure and therefore increasing your chances of success. So there is no doubt they increase the odds of success, because thats what pivoting is all about. (Assuming it isn't in the wrong direction)
Great story of Twitch.tv
- Started out as Justin.tv. Its only channel has Justin Kan wearing a webcam 24/7.
- The first spin-off channel, iJustine.tv, launches.
- The site becomes an open network—anyone who wants to can register and broadcast.
- Socialcam, a mobile video-sharing app, is spun off.
- TwitchTV, begins streaming gaming competitions to a passionate niche audience.
- Justin.tv was officially renamed Twitch Interactive Inc.
They kept their core intact which is livestreaming but changed a lot times on the path to become a billion dollar company. I am pretty sure they wouldn't even pass a million with only Justin wearing a webcam.
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