Author: Corry Anestia

Building a startup is not just a matter of creating traction and gaining as many users as possible. A true startup is well-known with a culture that survives through the concept of “fail fast, learn fast”.

Therefore, what happens if the startup business that you develop does not get the expected traction? One of the answers is a pivot.

Changing business models, transitioning to different services, or being called pivots is no longer a new way in the startup industry. Some startups in Indonesia have done this, starting from 100 percent pivot by changing company brands and platforms to changing the type of service.

When you decide to pivot, many questions will arise. Starting from what kind of things to prepare, things to be avoided, and how to begin.

In order to answer the question above, DailySocial summarizes various tips and strategies for pivots based on the results of our interviews with Kata.ai (pivot 2016), Akseleran (pivot 2017), and Moselo (pivot 2018).

For the record, these tips are not sorted by the sequence of steps.

Communication with stakeholders

All agreed that startups must communicate with stakeholders if they want to do a pivot. Indeed, the most important ones are the investors and the company team.

Kata.ai’s Co-founder and CEO, Irzan Raditya said communication is important to provide understanding and awareness for investors and teams. There should even be a break between making plans and starting pivoting employees.

“Do the right communication, especially investors to make sure you get the support from the shareholders to support and give a clear understanding of why you pivot,” Irzan said.

As for Moselo’s CEO Richard Fang, startups should avoid one-way communication about the reasons and goals of the pivot. That is, every employee has the right to express their perspectives and concerns about this pivot.

A clear and sustainable business model

Making a business transition is a major step that requires full commitment from both the organization and other stakeholders.

Also, for Irzan, before meeting investors, startups should ideally have a clear and sustainable business plan to ensure this new business model can survive in the future.

“First, we have to research before meeting investors. [After that], we were assisted by one of our investors to work on the direction. We must emphasized that when meeting investors, the plan should be clear and have the option of going where to pivot,”  he added.

As an example, Kata.ai, which was previously named Yesboss in 2015, offers a personal virtual assistant service with the concept of conversational commerce. In its journey, this business model is considered less scalable and has a wide impact.

Thus, the company pivot and the following year by becoming an Artificial Intelligence (AI) enabler focused on Natural Language Processing (NLP) technology.

Product-market fit is fundamental

The most common reason we’ll ancounter while interviewing pivoted startups is: products and services are not developing, or the traction grow slowly.

Above are some valuable lessons for Akseleran that product-market-fit is a very fundamental point for the survival of startup businesses.

Akseleran started its business as a solution to channeling loans to SMEs in the form of equity participation. After six months of release, Akseleran decided to pivot into P2P lending because of the slow distribution. After the pivot, Akseleran focus on the same target market, SMEs.

Akseleran’s co-founder and CEO Ivan Nikolas Tambunan revealed that the Indonesian market is quite receptive to equity-based funding. With the slow distribution, it makes Akseleran products less scalable and considered not market-fit.

Ivan also added, when the developed product has not been validated in the market when running the pivot process, startups should refrain from adding new human resources.

“At first, we have to give full information about the product roadmap and the business model. Therefore, they understand the changes. Well, to facilitate motivation and stay in one direction, it’s good for [the team] to start small,” he said.

Focus on the target market, not feature

Another point that should be noted for anyone who is building a startup is how important it is to focus on what the market needs, not what the company wants.

No matter how cool or sophisticated a product or service is, it will be useless if consumers are reluctant to use it.

This was experienced by Moselo who was originally a startup commerce chat provider for creative products. Richard Fang believes that this is often the case with startups who are just starting out.

He admitted that initially, his team was too focused on developing features, then forget the target market. When making a pivot into a marketplace that offers creative products, the company finally begins to focus on recognizing the right target market.

In addition, he said, the pivot that took time from August-December 2018 will actually make the company more relevant to consumers and businesses can be profitable.

“So what we did [during the pivot] was to sharpen Moselo’s target audience. We look for solutions that are appropriate from our data collection. Also, recognize the pain-points of the target because this can be a source of income for the business,” Richard added.

Measuring the limit of pivot success

Don’t ask how many startups failed to pivot. Lots.

Now, as startups, it is very important to know the extent of our limits to ensure that the pivots are run successfully or vice versa.

As we interviewed the three startups, each has its own parameter to measure the pivot success. Generally, it is the number of users or Gross Merchandise Value / Volume (GMV).

In terms of Kata.ai, Irzan mentioned after the pivot in 2016, the company has experienced business growth of three to five times, even already obtained profits in 2019. In addition, Kata.ai also has corporate customers from large-scale companies.

“Speaking of startups, talk of surviving. We have data and see which parameters can be improved. As an AI conversational startup, we look up to user engagement. Previously, we only have tens of thousands, now millions of users. Revenues also increased,” he said.

While Moselo pivots to get significant traction. Therefore, the number of transactions, the number of customers, and GMV will be the main parameters.

“Since the pivot, we have raised 320 percent GMV growth with users reaching up to 50 thousand. We continue to track the parameters in order to know whether this initiative succeeded or failed,” Richard said.

Similar to Moselo, Akseleran validates the action of this pivot with traction. Based on the company data, Akseleran can only distribute Rp2 billion funding while it was still an equity-based loan platform.

“In order to have a product-market fit, we validate it with traction. After turning into P2P lending, we have distributed more than Rp1 billion in the first month. Then it increased to Rp30 billion in six months. This validates whether the pivot is working or not.” Ivan added.

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Original article is in Indonesian, translated by Kristin Siagian