In a startup environment, funds and other resources are often limited and only provide a short runway, or amount of time, for the entrepreneur to be successful before packing it in and going home. They tell a few friends and neighbors about their dream, and the friends and neighbors want to help so they give them some money to get started. Not always because they think the idea is good, but because they care about and believe in the person. The money entrepreneurs receive from family and friends is often referred to as “love money.”
Being able to identify customer segments and the level of interest in the market is key to determine whether to keep going down the same path or try to come up with something new and different. In the startup world, this is called “pivoting,” when a company realizes what it set out to do has no market or the market is so insignificant it cannot make money from the offering as it exists.
Pivots can happen in different areas. The most common is around the product, but they also can happen around target customer segments, pricing and sales approaches such as a “freemium” vs. pay-as-you-go models, funding sources, marketing approaches such as online or retail, distribution channels such as direct to customers or through resellers, and even technology platforms. Using pricing as an example, someone may have a great idea, but will anyone pay enough for it to allow them to build a business? An approach known as “getting out of the office” to see what potential customers think is a common learning mechanism in a startup environment.
Emotions also can keep individuals from pivoting. Even when data clearly says it is time to move on, no one wants to give up and admit they made a mistake. Pride is tough to overcome. As the saying goes, no one wants to admit their baby is ugly.