Startup Empowerment Mitigating Founder Pivot Failure Risks

Founder Pivots: How to Mitigate Failure Risks

In the world of startups that are experiencing growth, pivoting as a founder is common, but also risky. Founders are frequently faced with situations where they need to change their business model in order to account for marketplace changes, customer feedback, or new opportunities (and in the best cases, some combination of these). However, pivots come with considerable risks that, if not managed properly, can lead to significant failure. In this blog, we will explore the pain points surrounding founder pivots, analyze the risks surrounding a pivot, and provide comprehensive strategies for minimizing risks. Along the way, we will showcase how Evolve Venture Capital can help founders face these challenges. 

The Allure and Peril of Pivoting

Think about having put everything you have into a startup, and realizing that the business model you developed is either not what the marketplace shared a willingness to pay for, or doesn't resonate with your desired consumers. This is a reality that most founders end up confronting in a pivot situation. A pivot can be a silver lining, but it is fraught with peril. A founder must weigh multiple factors surrounding trust with stakeholders and investors, precedent with customers, and scenarios about burn rate without a finite reimbursement. The mental pressure can be that daunting – and unfortunately, a failed pivot could spell the difference between viability in the marketplace and absolute ruin for the founder.

Analyzing the Risks

Financial Viability

Financial considerations are one of the most critical elements of a pivot. Founders should perform a financial cost-benefit analysis in order to take into account the financial implications of the new business model by producing a forecast of the revenues, expenses and cash flows. If a founder devises financial expectations without a rigorous financial plan, a pivot risks wasting resources and becoming a dangerous situation.   

Operational Capacity

A pivot can include many new operational changes. Founders should be assessing whether their existing workforce, assets and technology are capable of supporting this new operational shift. If they are not thinking about these matters, there is a strong likelihood that some operational bottlenecks and inefficiencies will present themselves that could water down a potential successful pivot.

Market Demand

Getting to know market demand is essential. Founders should be actively researching and testing if the ultimate pivot is the correct move through surveys, focus groups, or pilot programs. It is a huge mistake to skip this key step and think you can create a new product or service that is effective without talking to actual customers. Otherwise, it is likely you will have created a product or service that fails to address pressing customer problems, and they will not want to buy it, and it will not be utilized to generate any revenue.

Legal and Regulatory Implications

Launching into another industry or changing the way to do business also comes with new legal and regulatory issues. Not adhering to them can lead to fines, lawsuits, and reputational damage. Founders will want to be able to ensure that the pivot complies with legal regulations and acquire new certifications as required.

Strategies for Risk Mitigation

Comprehensive Risk Assessment

The first step is to conduct a rigorous assessment of potential risks. Founders should assess all perceived risks whether they are strategic, operational, or financial and prioritize the top significant risks in order of magnitude or importance and likelihood of them occurring. This is valuable in focusing the efforts on the greatest potential risk at the start.

Development of Risk Mitigation Plans

One of the best practices of risk management is to prepare detailed plans on how to manage the significant risks. For instance, a tech startup that is pivoting to a new platform may want to develop a cybersecurity protocol for the potential risk of a data breach.

Implementation of Risk Controls

It is critically important to have processes and procedures to manage or control for risk. This could take the shape of taking inventory control measures, procure new technologies, or establish safety procedures. Controls can help mitigate risk impact.

Continuous Monitoring and Review

Risks change, and so must the risk mitigation plans that you have made. Founders must stay vigilant and continuously measure success against their goals, with the understanding that they may need to change course. Adopting this proactive mindset will increase your chances of keeping pace with new emerging risks. 

Transparency and Communication

Keep stakeholders updated by communicating around the evolution to keep all stakeholders informed of the progress of the pivot. Include information of any milestone events as well as challenges in your communication and provide information to one common format or date to build trust and ensure that they stay aligned with the new direction.

How Evolve Venture Capital Can Help

At Evolve Venture Capital we recognize the complexity of the founder pivot and the risks posed. Our mission is to support the startup on its journey by providing the needed resources and expertise to succeed. Here is how:

Customized Support

We offer custom growth strategies and funding solutions that fit your business needs. It could be a change in your target market or pivoting your business model, our custom solutions will help you find the funding and options you need.

Proven Strategies

With tested methodologies throughout our industry, we provide you with effective solutions. We develop actionable insights and data-driven strategies to guide informed decisions. This includes, financial forecasting, research, scenarios, and other processes that limit risks.

Mentorship Programs

Our mentoring process connects you with experienced professionals that have successfully completed pivots. Teachers need trained students and getting you to avoid their opportunity mistakes is always a benefit.

Growth Roadmaps

We create actionable growth roadmaps to help you scale systematically. These plans also include milestones and contingency plans to assure you stay true to your roadmap, pending acts of God! 

Global Networking

Access to any network of innovators and investors from around the world provides significant value. This can lead to unique resources and referrals, and the ability to connect with and receive perspectives from people you may have not otherwise considered, let alone had access to!

Conclusion

Founder pivoting is part of a start-up's journey, yet comes with associated risk. By assessing risk, developing mitigation strategies, and disclosing potential issues, founders can mitigate the chance of suffering in future subsequent rounds. Evolve Venture Capital is dedicated to supporting founders through their pivoting process. We can assist founders by providing guided pathing, best practice research, and comprehensive programs spanning the nexus and global, experienced network. Our end goal is to provide opportunities for startups to embrace pivots to sustainable growth.