How to Keep Investors Happy When Pivoting – A Four-Point Guide

#1 How to align with investors when pivoting

Building a profitable venture is hard for many entrepreneurs, even with a top-notch product or service. From raising funds and putting together a winning team to converting that first prospect into revenue, turning any idea into a business is a scary deal. So, when that first idea turns out to be a poor fit for the market, it can be pretty daunting to consider a pivot, especially for Vision Masters like yourself who’ve poured money, heart and mind into a business concept.  But pivoting on a timely basis IS one of the major tests of Vision Mastery.

Contrary to popular opinion, pivoting doesn’t mean failure. It may mean that your concept is evolving. With you as the Vision Master incorporating lessons, you’ve learned along the way. When executed correctly, a pivot can offer investors and stakeholders a fresh perspective of your business concept, which could set you up for long-term success.

When pivoting from one business model to another, it’s essential to keep your investors aligned with what they want. If you’re not sure how much they care about this new direction, ask them! They’ll tell you if they’re happy or unhappy with the change. It will also help you understand whether there is room for improvement on your side. If you can find ways to make your current investors happier, do it. There’s one key rule of thumb in keeping investors happy while pivoting, so read on.

#2 Bad timing for a pivot is being too late

Pivoting right after completing a fundraising round isn’t wrong. Pivoting means that some hard truths are learned, and you are taking action. It would be best if you were agile, learn quickly and act – while making intelligent decisions. Leading your team in the wrong direction is what kills your dreams.

If you have to make a timing error when pivoting, better to be too early than too late.  Once the company stalls out, pivoting becomes much more challenging.  But not doing the exploratory work beforehand is also wrong. Your investors will stop believing in you, and your team will, too.  Do your homework.  Make sure your execution is on board. THEN, move fast and break things! Above all, don’t be late and you’ll keep your investors happy when pivoting.  But there’s one thing more to remember when pivoting.

#3 Be ready to flex

As with any strategic shift, it takes time to implement the “Wise Pivot.” Companies must first understand what they want from this transition before embarking on it. Understand where they currently stand: how much capital they have invested in your current business; whether there are other areas within the company that could benefit from additional investment; and if so, how what is the priority. It also means identifying and communicating potential risks associated with pivoting away from your core business.

#4 Why Are You Pivoting?

Before making any changes, understand the reasons for the pivot. Do you feel as if you have a viable product, but you misjudged the market plan? Did you misjudge the complexity of the product? These may be excellent reasons to pivot. Or, have you discovered that the thesis you used to attract an all-star team and millions of dollars in venture capital are flawed? All Vision Masters have these moments of doubt. Sometimes it’s the truth. Be honest with your investors, advisers, and your senior management team. There is no shame in starting a venture that needs to evolve to change the world.  In fact, almost all venture-funded companies go through at least one major pivot before a liquidity event.  It’s a poorly handled pivot that can cause more damage than hitting the stop button.

Consider the disastrous consequences the U.S. is experiencing as a result of pulling out of Afghanistan.  It’s not the decision that was flawed, it was the execution. This leads to my main point today.

#5 Pivoting Without Falling Out With Investors

It is crucial to make investors are onboard when significant changes occur. But there’s something that comes first.

A strong pivot requires a carefully choreographed approach that keeps investors and other stakeholders happy. If pivoting requires significant funding changes to your business model, investor relations should play an essential role within your pivot strategy.

Here’s the key point:  Get your Execution Master firmly on your side about the timing and nature of your pivot before making any decision.  Then, discuss the details with your investors.  Come to your investors united.

Once you as the Vision Master and your Execution Master agree that a pivot is a proper strategy for your business, here are a few items to help you with the transition while keeping your investors happy.

  1. Get your investors’ opinion early and often
  2. Keep investors informed of your decisions
  3. Collect data to prove that a certain pivot is needed
  4. Pay attention to legal, financial, and tax considerations
  5. Remain true to your vision and keep the team focused on that vision
  6. Above all, don’t let your company stall out
  7. If your company has stalled out, call me
  8. Always keep your company moving in the direction of your vision

 Key Takeaways:

  1. Get your Execution Master firmly on your side about the timing and nature of your pivot before making any decision.
  2. The above may require compromise and debate with your Execution Master.
  3. With your Execution Master’s help, gather data about the need for the pivot itself, your plan, and the legal, financial, and tax considerations.
  4. Then, discuss the details with your investors.  Come to your investors united.
  5. Request investor input into the details of the decision.