Pivots in startups are a tricky business for good reason. They feel overwhelming, expensive & heartbreaking.
It's sunk-cost fallacy at its best -- you've spent countless hours and days building out something with such tenacity & now you're faced with the prospect of letting it all go. It can be tough to deal with.
And you know it when you see it - you have a good product but you feel som
ething's off. Maybe you see your revenue has stalled or your customers are churning.
You sense that maybe it's time to try out something else -- but it's scary to start all over again. You climbed the mountain only to climb back down and try and scale another one.
Which is why many founders live in denial and carry on steadfast with their original idea. And while such resilience is admirable, sometimes this move can backfire in very permanent ways.
You might run out of money, you might lose your customers, you might spend money building something that has no future -- the list goes on.
A pivot offers a chance to start something new, with a lot more wisdom & closure on your side. Pivots are about recognizing that something's not working, being humble enough to accept this reality & having the courage to make bold decisions.
And hopefully you'll come out the other end, a lot more successful and thanking your past self for making such a bold move.
Pivots are tricky but there are signs on when you should explore one - in this post, I will show you three very successful startups who were down in the dumps, explored a pivot & emerged out of the other side as a roaring success.
“[Pivoting] gets more shots on goal to try to find this elusive thing [called product-market fit]. If you made something and you launched it and it’s like, ‘Meh, not really working,’ a dang good reason to pivot is you get another roll of the dice. I’ve seen people use these opportunities really well. It’s much easier to be lucky when you get half a dozen shots on goal than one.” - Dalton Caldwell.
Lattice
Today, Lattice is synonymous with performance reviews and people management. But it wasn't always the case.
Lattice was initially built as an OKR tool trying to solve the painful quarterly planning process. They did have a bunch of customers (Gitlab among them) but there was this resistance among customers when it came to pulling out their credit cards. They would say stuff like "can we try it out first?" or " can we do a monthly thing?".
And that's not a bad thing either - customers will tell you exactly what they like & dislike about your product. And Jack found out the hard way that the user retention just wasn't there. It was a vitamin product, not a painkiller.
There's a pull from the market that you just can't miss - according to Altman. And for Lattice the pull still wasn't there after 9 months. So he did the next best thing & spoke to his customers & asked them point blank what their HR tech-stack was.
While speaking to his customers, he identified performance management as a niche that could be capitalized on. Existing solutions were ineffective to the point that HR leaders stopped doing performance management altogether.
And that's what a good starting point for a pivot looks like - a lot of talking to customers. Jack did exactly that & executed on his new found hypothesis.
The team whipped up some designs and showed them to customers - and even with a half-baked product, customers were paying them annual upfront contracts. Organic leads were flowing in, people were recommending Lattice to other folks & revenue was on the up.
They made 2x as much revenue in the first month after the pivot than they had made in the entire previous year.
The lesson here is that if something isn't working, you'll know cause there's a market pull - it's kinda like gravity & you can't really miss it. And you'll only begin to see this if you talk to your customers all the time. They will tell you everything you need to do.
Notion
Notion's founder Ivan had an ambitious product vision - to enable anyone and everyone to build apps without code. Imagine a product that stripped down the software to its basic building blocks and gave it to people like you and me.
There weren't that many building blocks either - probably there were 25-30 of them. With these building blocks, we could go and make any kind of software.
But Notion learned a hard lesson. In the first 3 to 4 years, they realized that people don't wake up to build software, like people wake up to do their jobs. They were looking for tools that they can use to do their job.
And as for software engineers, well they would much rather build the real thing & not use Notion for it. Plus, Notion's early version was very unstable with a lot of bugs.
Because of this, a lot of the early users churned & retention wasn't great.
Retention is a great way to see whether your product is sticky -- usually a healthy retention rate corresponds to a high degree of PMF. Which was lacking in Notion's case.
So the team decided they needed to pivot. While speaking to their customers & analyzing user behavior, they realized one feature showing a lot of promise. The editor & collaboration feature was used a lot by customers who loved it, so the team anchored their pivot around this feature.
Their core objective with this pivot was to enable people do their tasks better using Notion (and not build apps with it).
I think this is a great idea to have some form of an anchor while making the pivot. Ask yourself - what can I ship today that people will use immediately? And then you have this entry point which you can leverage to make further inroads into the market.
Notion did just this - they kept their core building blocks & made templates using those blocks. They made it so anyone can click a button and actually do that thing (like making a todo list for example). The user clicks a button, gets a template & sets the ball rolling. It acted like a simple note-taking app & a company knowledge base.
In 2018, Notion added a general-purpose database on top of this knowledge base. And soon, there was a pull from the market that Notion could feel, after which it exploded. Today, Notion is a $10 Billion company and is used by 35 million people.
Framer:
In 2021, Framer was a simple product -- it was a prototyping tool like Sketch or Figma targeting designers. The founders Jorn van Dijk & Koen Bok had been building for the last 6 years & had raised $33 million in total, with $24 million coming in a Series B round in 2018.
But they faced a problem - growth had stalled. Despite them finding an initial burst of product market fit within the design community, revenues had dropped from their peak of $4 million in late 2019. Something clearly wasn't working.
The trouble was that Framer wasn't solving a novel problem - users had to design in Framer & then go separately to another tool for development. They noticed an adjacent bigger market showing pull: Users wanted to build and launch websites instead of just design them up.
"We discovered a really big juicy problem because traditional web design happens in one tool like Figma, then actual building is done elsewhere. The fact that they are separate makes for a very inefficient process.” - recalled Bok.
So the solution was to do two things :
- First, solve this core problem of design & development living in separate environments & bring it under one roof.
- Secondly, expand the user base from just designers to marketers & entrepreneurs who wanted to go from design to website in a single click with no-code.
So after a full 4 years, Framer pivoted. It was now positioned as a product that could help anyone go from design to fully-developed website in a single click.
This move expanded their market size & solved a core problem this new expanded market faced on a continual basis. And it proved to be a massive success.
Within 18 months of launching this new product, Framer's revenue increased 4x to over $10 million. Soon after, they raised a $27 million Series C round. Today, Framer is expanding rapidly, is extremely well-loved & appreciated among their user base.
Conclusion
As founders, we feel it's too risky to change gears all of a sudden. But there's value in observing why something isn't working & fixing the root cause of that. And sometimes it means making some hard & bold choices.
But the stories of Lattice, Notion, and Framer show us that pivots can be incredibly rewarding. By listening to their customers, identifying market needs, and making bold decisions, these startups were able to turn their fortunes around and achieve great success.
It's a reminder that pivots are not a sign of failure, but a sign of learning and growth. So, if you find yourself at a crossroads with your startup, remember that a pivot may just be the key to unlocking your full potential.
