It’s a tough time right now for founders looking to raise their next round, and many are coming to the painful realization that VCs simply aren’t buying what they’re selling. Investors are looking for clear signs of stable, profitable growth. If your company isn’t seeing strong growth with customers eager to use the product and share it with others, it might be time to pivot the company in a new direction.
I learned this lesson the hard way when I started Nextdoor. Before Nextdoor became a publicly traded company with millions of users, we were a completely different business. Our original company was Fanbase, a fledgling startup with a big idea to disrupt the sports information industry. We had all the “right” ducks in a row: a committed founding team, top investors, and exciting early traction.
But even with a peak of 15 million monthly users, Fanbase failed to grow beyond that point. We mistakenly thought we had reached product-market fit, but when we looked closer at the data, it became clear that people weren’t engaging the way we’d hoped. They would visit and then bounce.
Since my co-founders and I didn’t have another idea to pivot to, we made the painful decision to give our funding back to our investors. Our lead investor was Bill Gurley at Benchmark, and instead of taking back his money, he suggested that we give ourselves three months to develop a new big idea.
Every wasted day on weak product-market fit means fewer days to find one that will work. Address the elephant in the room as soon as possible.
After spending two-and-a-half years building Fanbase, it was excruciating to step back and say, “This isn’t working — Fanbase will never be the next ESPN.” Deciding to quit working on Fanbase and channel our energy into a completely new idea was personally and professionally difficult, but it was the step we needed to take to survive and unlock new opportunities.
Now, as an investor, I see founders going through the same periods of self-doubt and frustration. The market has shifted; the bar is higher. Founders need to get real: Are you building something the market needs? Maybe you need to shift the product, change your target market, or perhaps you need a full reset like we did. If you’re considering a pivot, here’s how to get your investors to support you.
Bring the data, not the bullshit
Startups are naturally going to deal with uncertainty, so how can you be absolutely sure that your company isn’t working — or isn’t going to work for the long haul? The short answer is: You don’t have real proof of product-market fit and you’re running out of money. These are red flags that it’s time to cut the BS.
Read the full article here
