Startup Pivots Don’t Actually Matter
We are probably blowing their significance out of proportion
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In late 2013 Cowboy Ventures did an analysis of U.S.-based tech companies started in the last 10 years, now valued at $1 billion. They found 39 of these companies. They called them the “Unicorn Club.”
The article summarized 10 key learnings from the Unicorn club. Surprisingly, one of the “learnings” said that “the ‘big pivot’ after starting with a different initial product is an outlier. Nearly 90 percent of companies are working on their original product vision. The four ‘pivots’ after a different initial product were all in consumer companies (Groupon, Instagram, Pinterest and Fab).”
One of my students sent me the article and asked, “What does this mean?” That’s a good question.
Since the pivot is one of the core concepts of my Lean Startup methodology I was puzzled. Could I be wrong? Is it possible pivots really don’t matter if you want to be a Unicorn?
Short answer: Almost all the Unicorns pivoted. The authors of the article didn’t understand what a pivot was.
What’s a pivot?
A pivot is a fundamental insight of the Lean Startup. It says on day one, all you have in your new venture is a series of untested hypotheses. Therefore, you need to get outside of your building and rapidly test all your assumptions. The odds are that one or more of your hypotheses will be wrong. When you discover your error, rather than firing executives and/or creating a crisis, you simply change the hypotheses.
What was lacking in the article was a clear definition of a pivot. A pivot is not just changing the product. A pivot can change any of nine different things in your business model. A pivot may mean you changed your customer segment, your channel, revenue model/pricing, resources, activities, costs, partners, customer acquisition — lots of other things than just the product.
So here’s a more practical definition for pivots: A pivot is a substantive change to one or more of the nine business model canvas components.
