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Is Pivoting Worth the Effort? – ReadWrite

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Is Pivoting Worth the Effort? - ReadWrite


The idea behind the startup “pivot” is captivating. It certainly makes for a great story — especially if the pivoting startup eventually finds success.

But pivoting isn’t a magic switch that can suddenly turn a failing business around. In fact, pivoting can backfire, putting you in an even worse position than when you started.

If you find your startup in dire straits, should you consider pivoting? Or is it better to simply move on?

What is Pivoting?

A pivot is a strategic move in which an existing business, usually a startup, transforms in order to survive. Oftentimes, this strategy begins when a company is struggling with limited customers, limited capital, or other issues. Rather than giving up and closing the business permanently, an entrepreneur decides to change the business model – ultimately focusing on a different demographic, developing a different product, or in some cases, rebranding entirely.

Pivoting looks different for different businesses, since there aren’t any hard rules for what constitutes an official “pivot.” By some definitions, any substantial change could be enough to justify the “pivot” nomenclature.

Notable Pivoting Success Stories

There are plenty of famous examples of startups that pivoted, eventually finding success. It’s proof that pivoting can work – at least, when the conditions are right.

For example, consider YouTube. We all know YouTube as the massively successful video streaming platform it is today, but that’s not how it started. In the early days, it was a video-based dating service; think Tinder or OK Cupid, but with short video introductions instead of card-based profiles. It was only after a few years of middling results that it began to broaden its approach to a wider audience.

There’s also Groupon – or, as it was called back in the day, The Point. The Point was designed as a social media platform where individual users could pool their efforts and support charities together. It had an impressive launch, but momentum quickly fizzled out.

To support it further, the founders introduced a new subdomain, “Groupon,” where users could band together to get interesting local discounts. When this model proved more successful, the founders leaned into it, ultimately transforming the entire business to suit it.

PayPal is another strong example. When PayPal started, palm pilots were the dominant form of mobile technology. PayPal itself was a technology designed to help users transmit IOUs from one device to another. This didn’t quite work out (for a number of reasons), so the PayPal team pivoted to focus on transferring money via email. The company continues to be a top innovator today.

The Problems With Pivoting

But despite the thrill of these vibrant success stories, pivoting isn’t a surefire approach to succeed.

Consider the problems with pivoting:

  • Time. How much time is it going to take to pivot the business? Are you rebuilding everything from the ground up? Are you retooling every structure and developing new technology from scratch? If so, it may actually take you more hours and more months to complete a transition than it would take to simply start a new business from scratch.
  • Money. A similar issue emerges when you consider your monetary limitations. It costs money to transform a business, and you’ll probably have to cut some losses if you want to move on. On top of that, startups considering a pivot are often struggling financially – meaning they don’t have much of a budget to work with in the first place.
  • Failing to solve the problem. If you’re seriously considering a pivot, there’s something wrong with the business – a problem that needs to be solved. Transforming the business is one way you could solve the problem, but it’s not a guarantee that the problem will be solved. For example, if you’re dealing with stiff competition, and you change your business model only slightly, the competition will still be a problem in the new iteration of your business.
  • Facing new uncertainty. There are situations where a pivot is grounded; for example, when Groupon pivoted, it knew there was a viable model to be found in this new territory because they were already working on it and succeeding. But if you’re attempting a new pivot from scratch, you’ll have to deal with far more uncertainty.

The Retrospective

If you want a chance to succeed in a startup pivot, you need to spend time analyzing your current situation. It’s not enough to simply try something new. You need to understand why you’re here; why are you in this position and what are the main problems still faced by your business?

You also need to understand what resources you can use during the pivot.

Fortunately, you can address both these big questions with the same analysis.

Consider:

  • Funding/capital. Some startups begin the downward spiral toward failure when they start running out of capital. If this is the main source of your stress, you need to figure out why you ran out of money. Did you not have enough funding? Did you waste money with premature spending? More importantly, how will pivoting the business resolve this problem? Will you be able to make do with the current capital you have? Will you have an opportunity to seek new funding once you make the transition?
  • Demand and appeal. Is your business struggling because of a lack of demand? Is there a reputational problem associated with your brand? If so, pivoting the business may not be the best move. Those reputation issues may linger indefinitely, plaguing the new version of your business well into the future. Conversely, sometimes changing demographics is all it takes to solve a demand problem.
  • Competition woes. How much competition are you facing? Are you being beaten with lower prices, better offers, or a better overall presence? If so, these problems will only disappear if you significantly overhaul the entire business. If you’re only planning a minor pivot, you’ll still need a plan to overcome these challenges.
  • Team and staffing issues. Most startup entrepreneurs who consider pivoting already have a good team in place; they want to keep these partners and use them to build something new. If you don’t have a solid team, pivoting may not be the best route. It’s tough to pin all the problems of a failing startup on the team members that constitute it, but if they’re a contributing factor, it may be better to start fresh.

Minimizing Transition Pains

Much of the risk inherent in a startup pivot is in the transition. You’ll spend a lot of money and time fundamentally changing your business and pursuing a new direction, no matter what. But you can minimize the strain here by transitioning to an adjacent model.

Is there a current product or service you can use as the foundation of your new business? Is there a way you can harness your existing resources in a clever and efficient way? Can you transform the business into a form that’s recognizable in your current industry?

If not, the transformation may be too much of a stretch. At that point, it may be better to close down and start over with an entirely new model.

Starting Over

Many startup entrepreneurs attempt to pivot because they’re afraid of losing what they’ve already built, or because they’re too proud to admit defeat. But there’s nothing wrong with starting over. Failure is a natural part of the learning and development process of an entrepreneur, and starting over from scratch is often the best way to make discernable progress.

However, you decide to transform your business (or start over), you need to keep business fundamentals in mind. Pivoting isn’t always the best approach, and it could end up making your existing problems even worse. That said, pivoting has helped thousands of promising businesses survive otherwise catastrophic conditions, and in the right hands, pivoting can be an incredibly powerful strategic move.

Image Credit: andrea piacquadio; pexels

Timothy Carter

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Timothy Carter is the Chief Revenue Officer of the Seattle digital marketing agency SEO.co, DEV.co & PPC.co. He has spent more than 20 years in the world of SEO and digital marketing leading, building and scaling sales operations, helping companies increase revenue efficiency and drive growth from websites and sales teams. When he’s not working, Tim enjoys playing a few rounds of disc golf, running, and spending time with his wife and family on the beach…preferably in Hawaii with a cup of Kona coffee.

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Fintech Kennek raises $12.5M seed round to digitize lending

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Google eyed for $2 billion Anthropic deal after major Amazon play


London-based fintech startup Kennek has raised $12.5 million in seed funding to expand its lending operating system.

According to an Oct. 10 tech.eu report, the round was led by HV Capital and included participation from Dutch Founders Fund, AlbionVC, FFVC, Plug & Play Ventures, and Syndicate One. Kennek offers software-as-a-service tools to help non-bank lenders streamline their operations using open banking, open finance, and payments.

The platform aims to automate time-consuming manual tasks and consolidate fragmented data to simplify lending. Xavier De Pauw, founder of Kennek said:

“Until kennek, lenders had to devote countless hours to menial operational tasks and deal with jumbled and hard-coded data – which makes every other part of lending a headache. As former lenders ourselves, we lived and breathed these frustrations, and built kennek to make them a thing of the past.”

The company said the latest funding round was oversubscribed and closed quickly despite the challenging fundraising environment. The new capital will be used to expand Kennek’s engineering team and strengthen its market position in the UK while exploring expansion into other European markets. Barbod Namini, Partner at lead investor HV Capital, commented on the investment:

“Kennek has developed an ambitious and genuinely unique proposition which we think can be the foundation of the entire alternative lending space. […] It is a complicated market and a solution that brings together all information and stakeholders onto a single platform is highly compelling for both lenders & the ecosystem as a whole.”

The fintech lending space has grown rapidly in recent years, but many lenders still rely on legacy systems and manual processes that limit efficiency and scalability. Kennek aims to leverage open banking and data integration to provide lenders with a more streamlined, automated lending experience.

The seed funding will allow the London-based startup to continue developing its platform and expanding its team to meet demand from non-bank lenders looking to digitize operations. Kennek’s focus on the UK and Europe also comes amid rising adoption of open banking and open finance in the regions.

Featured Image Credit: Photo from Kennek.io; Thank you!

Radek Zielinski

Radek Zielinski is an experienced technology and financial journalist with a passion for cybersecurity and futurology.

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Fortune 500’s race for generative AI breakthroughs

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Deanna Ritchie


As excitement around generative AI grows, Fortune 500 companies, including Goldman Sachs, are carefully examining the possible applications of this technology. A recent survey of U.S. executives indicated that 60% believe generative AI will substantially impact their businesses in the long term. However, they anticipate a one to two-year timeframe before implementing their initial solutions. This optimism stems from the potential of generative AI to revolutionize various aspects of businesses, from enhancing customer experiences to optimizing internal processes. In the short term, companies will likely focus on pilot projects and experimentation, gradually integrating generative AI into their operations as they witness its positive influence on efficiency and profitability.

Goldman Sachs’ Cautious Approach to Implementing Generative AI

In a recent interview, Goldman Sachs CIO Marco Argenti revealed that the firm has not yet implemented any generative AI use cases. Instead, the company focuses on experimentation and setting high standards before adopting the technology. Argenti recognized the desire for outcomes in areas like developer and operational efficiency but emphasized ensuring precision before putting experimental AI use cases into production.

According to Argenti, striking the right balance between driving innovation and maintaining accuracy is crucial for successfully integrating generative AI within the firm. Goldman Sachs intends to continue exploring this emerging technology’s potential benefits and applications while diligently assessing risks to ensure it meets the company’s stringent quality standards.

One possible application for Goldman Sachs is in software development, where the company has observed a 20-40% productivity increase during its trials. The goal is for 1,000 developers to utilize generative AI tools by year’s end. However, Argenti emphasized that a well-defined expectation of return on investment is necessary before fully integrating generative AI into production.

To achieve this, the company plans to implement a systematic and strategic approach to adopting generative AI, ensuring that it complements and enhances the skills of its developers. Additionally, Goldman Sachs intends to evaluate the long-term impact of generative AI on their software development processes and the overall quality of the applications being developed.

Goldman Sachs’ approach to AI implementation goes beyond merely executing models. The firm has created a platform encompassing technical, legal, and compliance assessments to filter out improper content and keep track of all interactions. This comprehensive system ensures seamless integration of artificial intelligence in operations while adhering to regulatory standards and maintaining client confidentiality. Moreover, the platform continuously improves and adapts its algorithms, allowing Goldman Sachs to stay at the forefront of technology and offer its clients the most efficient and secure services.

Featured Image Credit: Photo by Google DeepMind; Pexels; Thank you!

Deanna Ritchie

Managing Editor at ReadWrite

Deanna is the Managing Editor at ReadWrite. Previously she worked as the Editor in Chief for Startup Grind and has over 20+ years of experience in content management and content development.

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Politics

UK seizes web3 opportunity simplifying crypto regulations

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Deanna Ritchie


As Web3 companies increasingly consider leaving the United States due to regulatory ambiguity, the United Kingdom must simplify its cryptocurrency regulations to attract these businesses. The conservative think tank Policy Exchange recently released a report detailing ten suggestions for improving Web3 regulation in the country. Among the recommendations are reducing liability for token holders in decentralized autonomous organizations (DAOs) and encouraging the Financial Conduct Authority (FCA) to adopt alternative Know Your Customer (KYC) methodologies, such as digital identities and blockchain analytics tools. These suggestions aim to position the UK as a hub for Web3 innovation and attract blockchain-based businesses looking for a more conducive regulatory environment.

Streamlining Cryptocurrency Regulations for Innovation

To make it easier for emerging Web3 companies to navigate existing legal frameworks and contribute to the UK’s digital economy growth, the government must streamline cryptocurrency regulations and adopt forward-looking approaches. By making the regulatory landscape clear and straightforward, the UK can create an environment that fosters innovation, growth, and competitiveness in the global fintech industry.

The Policy Exchange report also recommends not weakening self-hosted wallets or treating proof-of-stake (PoS) services as financial services. This approach aims to protect the fundamental principles of decentralization and user autonomy while strongly emphasizing security and regulatory compliance. By doing so, the UK can nurture an environment that encourages innovation and the continued growth of blockchain technology.

Despite recent strict measures by UK authorities, such as His Majesty’s Treasury and the FCA, toward the digital assets sector, the proposed changes in the Policy Exchange report strive to make the UK a more attractive location for Web3 enterprises. By adopting these suggestions, the UK can demonstrate its commitment to fostering innovation in the rapidly evolving blockchain and cryptocurrency industries while ensuring a robust and transparent regulatory environment.

The ongoing uncertainty surrounding cryptocurrency regulations in various countries has prompted Web3 companies to explore alternative jurisdictions with more precise legal frameworks. As the United States grapples with regulatory ambiguity, the United Kingdom can position itself as a hub for Web3 innovation by simplifying and streamlining its cryptocurrency regulations.

Featured Image Credit: Photo by Jonathan Borba; Pexels; Thank you!

Deanna Ritchie

Managing Editor at ReadWrite

Deanna is the Managing Editor at ReadWrite. Previously she worked as the Editor in Chief for Startup Grind and has over 20+ years of experience in content management and content development.

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