What You Need to Understand About Startup Pivots

A Thought Leader Guest Post from Ricky Khamphoumy of OCSC Gold Sponsor Silicon Valley Bank:

Understanding the Possibilities and Pitfalls of Startup Pivots

Key Takeaways

• A pivot can save a struggling company; it can also create new opportunities for a successful one.
• To pivot successfully, act quickly and decisively, and be ready for painful changes.
• Walking away from ideas may be hardest for the founding team; don’t let that blind you to challenges and possibilities.

Pivots are hard; founders who have navigated them successfully share their learnings

Pivots are something of a rite of passage for startups. Giants like Slack, PayPal, and Instagram all pivoted their way to unicorn status. However, a radical redirection of a startup is hard to embrace and even harder to pull off. The stories of these founders offer lessons on when a startup may benefit from a pivot and how to navigate it successfully.
--Ricky

Charlie Javice, the founder and CEO of Tap’d, was on the brink of signing a $10 million Seed round to launch her new business focused on providing an innovative credit scoring solution for college students. Tap’d had built a team of 11, developed a prototype, and secured coveted office space in Manhattan, thanks to a friends and family round. Credit industry experts had validated the concept and the business appeared to have strong momentum.

Then, the unexpected: Due to industry regulations, the credit score agency envisioned would only work if re-incorporated as a credit union. The restrictions and slow growth of a credit union ran counter to everything the team had worked on. It was time for a pivot.

“I walked away from that term sheet and re-envisioned the business plan to focus on helping students directly to get better loans,” Javice says. All but one of the team members were abruptly let go. An investor helped to cover the outstanding payroll and rent. “Then we started from scratch,” she says. Today, the company, rebranded Frank, is a 25-person startup backed by $15.5 million in venture capital. Another round of investment is expected later this year.

Despite her success, Javice says she “wouldn’t wish a pivot on anyone.” The experience was painful and soured relationships with members of her team. “It’s not always pretty,” she adds.

Making the Right Call the Right Way

Launching a business in a new direction isn’t for the faint of heart. It’s also not uncommon in startups.

Pivoting tracks with concepts of developing a minimum viable product and rapidly iterating to find product-market fit. Many founders start with... 

Read the rest of this article at svb.com...

Thanks for this Guest Post and its graphics to Ricky Khamphoumy of OCSC Gold Sponsors Silicon Valley Bank.

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