The word “pivot” can strike fear into the hearts of entrepreneurs, especially those embarking on this journey for the first time.
One reason changing the course of your business can be daunting is potential investor perception. But investors are no strangers to pivots. They’ve seen it all before, and their reactions can vary greatly depending on how you handle it.
Here are five strategies to help you gain investor support when navigating pivots. They can also help you increase additional investor interest.
Don’t repeat your mistakes
Ask yourself, “What steps did I miss?”
Gather your team, outline all the actions taken, and identify what was overlooked. This will not only help avoid mistakes in the future but also be valuable during negotiations with investors.
Be smart: start from afar
If you realize you need to pivot, it shouldn’t come as a surprise “bomb” to your investors — they should be able to see how you got from your original plan to the new plan.
Make it a habit to send a regular biweekly newsletter to both current and potential investors. Include two to three updates, along with a couple of industry news highlights.
This way, you can guide investors to understand that a pivot is needed and that it’s a positive development.
Start from afar. For example: “Fun fact, we discovered that runners love our app, even though we’re a B2B company.” Then, in the next newsletter: “We researched what else is important to runners, and it looks like we can do it” and so on.
Don’t shy away from seeking assistance
When it comes to navigating a pivot, seeking guidance and assistance can be invaluable. Investors, especially experienced ones, comprehend the challenges involved in transitioning to a new market or product direction.
If you can present a well-reasoned plan supported by data, investors are more likely to sympathize with the “transitioning pains” your company may experience.
Plus, investors can provide not only financial support but also valuable advice and resources to help you execute your pivot effectively.
Don’t scrap your original plan entirely
There are some instances where a simple pivot — such as from B2B to B2C — is enough, but other times, a radical pivot is needed based on the market and user feedback.
However, there are likely plenty of aspects of your initial model worth keeping. It’s also crucial to maintain a connection with the portion of the market you’ve already captured. Striking this balance will provide investors with greater peace of mind.
Efficiently allocate your budget
Balancing your budget is crucial during a pivot. Imagine you currently have $10,000 in monthly recurring revenue with your existing business model, Model A, which may not be sustainable in the long run.
Now, envision transitioning to Model B, a promising new direction. To thrive with Model B, you must not merely match your previous $10,000 MRR but surpass it by threefold.
This is vital for two reasons. First, it demonstrates to investors that Model B is viable and scalable. Second, it generates funds for further development. To achieve this, allocate resources to marketing initiatives.
A robust marketing strategy is as crucial as your product, as it attracts customers, boosts revenue and helps you reach your MRR goal.
Avoid the common startup pitfall of spending too many resources on a polished minimal viable product, or MVP. Instead, focus on getting a basic version into users’ hands to gather feedback promptly. This real-world input will reveal what your customers truly value, allowing you to allocate investors’ funds wisely in areas that will drive success.
Artem Semjanow is the founder and CEO of Neatsy.ai, the first app that detects podiatry issues with a phone camera. He pivoted twice: First, from B2C to B2B, and then from a sneakers company to an AI health app that works with Harvard University and Massachusetts General Hospital.
Illustration: Dom Guzman
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