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HubSpot : When, Why, & How to Pivot a Startup Business

01/20/2022 | 08:11am EDT

Instagram wasn't always Instagram as we know it - meaning it didn't start as an application dedicated to photo-sharing. Instead, the former location based check-in platform underwent a startup pivot, or business pivot as it's sometimes called.

Several factors contribute to whether or not a pivot may be the right move for your startup. We'll explore why and how to pivot your business so you can make the decision that's right for you.

The Startup Pivot

A startup pivot, or business pivot, occurs occurs when a company shifts its business strategy to accommodate changes in its industry, customer preferences, or any other factor that impacts its bottom line. It's essentially the process of a startup translating direct or indirect feedback into a change in its business model.

Drastic pivots like Instagram's are the ones you tend to hear about, but not every pivot is a fundamental change to an entire company. Startups don't always have the need or resources to pull something that radical off. In many cases, a company will only have a single problem that needs to be addressed.

A pivot could be anything from changing how a product is manufactured to shifting marketing efforts to appeal to new buyer personas. The term is relatively fluid, but it always entails a change in startup's business strategy, generally dictated by factors beyond its control.

When to Pivot a Startup

It can be tricky to know when to pivot your business model. We've compiled a few reasons to help you evaluate whether or not one is right for your business.

1. One piece really stands out.

Sometimes, a single feature of your product, service, or business model will perform considerably better than the others around it. If that's the case for your company, explore the possibility of pivoting to support that single aspect exclusively. Your goal is to be as efficient as you can be - to work smarter and get the best possible returns for your effort.

Trimming as much fat from your business operations is one of the best ways to streamline production and, in turn, extract more value out of the time and capital you invest in your company. If you can identify a single feature of your product or service that your customers enjoy or leverage more than others, consider pivoting and building around it.

2. The business isn't financially viable.

Startup founders often have sentimental stakes in their businesses. Founding a startup is a matter of having both a new idea and the motivation to see to it that it's realized. That makes that pursuit inherently personal.

Despite what it might mean to you personally, a business can only go so far as its capital lets it. If your company is running out of money, you'll need to jump ship from the idea or processes behind it and pivot to something more financially viable.

Take an honest, objective look at your business - without accommodation or emotion - and see where you could be doing better. See what you can strip back, which aspects are burdening you financially, and where you might be able to go with the resources you have on hand. Use that information to identify a reference point for your pivot.

3. The market didn't respond the way you'd anticipated.

The prospect of getting your product or service to market is exciting. It's a moment of truth, but you always have to account for the fact that the truth might hurt. Maybe, People won't be moved by your messaging. Maybe, you'll overestimate the scale of the problem your product or service addresses. Or maybe, your target audience just won't be willing to pay what you're charging.

Any case where your product or service doesn't resonate with consumers like you thought it would is cause for a pivot. One way or another, you have to change your business model to convey better value to your target audience.

Take strides to generate interest in your solution. That could mean lowering your price, focusing on further developing certain features, or changing your target market. Ultimately, you have to make consumers see your business in a new light.

4. You're consistently being outperformed by the competition.

The startup realm is a dog eat dog world. You're always going to be pitted against some kind of competition. If other companies are absolutely dominating your space - taking up business you need or confining you to a niche you're unhappy with - it's probably time for a pivot.

Your industry might be crowded. There could be too many companies in it to claim a significant enough portion of the market. Or, a single company could have a definitive grasp on your target audience. In both of these cases, you'll need to differentiate yourself. That means pivoting.

In this case, your pivot is going to be drastic. You'll need to radically alter your company and how it operates. You might have to change your product or service, cater your messaging to a new audience, or completely alter your sales strategy.

Pivoting to challenge your competition is a matter of becoming different - different from your competitors and different from your business as you know it.

5. You just want something different.

Say your startup has been operating for a while now, and you're becoming unhappy with the trajectory your business is on. Your perspective and goals might have shifted. You might have developed new values as your business has grown. Maybe, a lucrative niche you could appeal to might be emerging.

In any of those cases, some kind of pivot is a viable option. But be careful - this particular reason for pivoting is the trickiest to navigate. If your business is doing well, it could be risky to make a radical shift. Still, as a business owner, it's up to you to decide how your company operates. Do what you feel is right - whether that be a matter of your vision, morals, finances, or all three.

Successful Business and Startup Pivot Examples

Willbur Labs, a San Francisco based startup studio, surveyed 150 founders and revealed 55% of them reported having to pivot their startups to avoid failure. Although less than half of the founders surveyed said they were optimistic at the start of the pivot process, 75% reported success. Let's check out some successful business pivots below.

1. Instagram

The platform, as it currently exists, was born out of a service called Burbn, a location-based check-in app.

After noticing the popularity of its photo-sharing capabilities, relative to its other features, Burbn's leadership stripped the application of virtually every other aspect - focusing exclusively on its photo, comment, and like functions. The business ultimately rebranded and became Instagram: the photo-sharing giant we know today.

Why it worked: Instagram doubled down on what it did well and what was most popular with users, which enabled a successful pivot.

2. Feastin

When the pandemic struck, restaurants quickly had to adjust to a predominantly delivery-only model. Hannah Wagner and Sebastiaan Van De Rijt, owners of Northern California restaurant chain Bamboo Asia, sought to not only help restaurants stay afloat, but provide a delivery platform that gave them more autonomy. With that, Feastin was born.

Feastin delivers restaurant meals, meal kits, and groceries to customers throughout the Bay Area. Through their partnership with restaurants, farmers, and purveyors, customers are able to connect directly with local suppliers. Plus, unlike other delivery services, Feastin doesn't charge restaurants and purveyors commissions, so restaurants keep more of what they earn and customers save since there's no price markup to compensate for extra fees.

Why it worked: Wagner and Van De Rijt were able to take their experience as restauranteurs and pivot to a new business model that solved for fellow restaurant owners and customers alike.

3. Netflix

While Netflix signaled the demise of brick and mortar video shops like Blockbuster with their convenient DVDs by mail model, they too found a need to pivot and continue to do so.

Streaming video and movies was becoming more popular and in 2007, Netflix started offering a plan that included streaming movies and television shows. Now streaming is the dominant method people consume content.

Netflix didn't just stop at streaming. The company has also pivoted into creating its own content, launching Netflix original series House of Cards in 2013. Orange is the New Black was released shortly after, and now the streaming giant has created a successful model for other platforms to follow.

What will the company's next iteration look like? We'll have to wait and see.

Why it worked: Netflix is always iterating on its product and capitalizing on new technologies to stay competitive and provide a better viewing experience for customers.

4. Pinterest

Pinterest started off as a company called Tote, a mobile app meant to make shopping on your phone easier. It was 2009, and mobile shopping wasn't as widespread as it is today.

The app flopped, due in part to mobile payment technology still being clunky, which prevented them from simplifying the mobile shopping experience. However, founders Ben Sillberman, Vikram Bhaskaran, and Paul Sciarra noticed Tote customers were creating large collections of "favorite" items they found online and sharing them with their friends.

In response, they created Pinterest, a medium that allows users to display and share photo collections of anything online. The platform quickly became popular and today it's the 14th largest social media platform in the world, according to Hootsuite.

Why it worked: While the first iteration of the app was a bust, Pinterest founders were able to take what worked, and pivot their product to capitalize on a feature their users loved.

5. Slack

It might be hard to believe that the popular chat app, Slack, started off as an online game. Glitch, the adventure game created by Stewart Butterfield, allowed players to inhabit the minds of giants and embark on quests with other players.

While the game had a small, but devoted following, Butterfield noticed that the players continuously talked to each other while playing. The game's built-in messaging technology laid the groundwork for what would become Slack.

Butterfield is no stranger to turning failed games into startup gold. His first attempt, Game Neverending, went on to become Flickr. You could say he's mastered the art of the pivot. Slack, now a messaging and productivity tool, has over $10M daily users.

Why it worked: Slack saw the potential of their messaging technology and how it could be applied outside of their game to create a product used by millions.

Startup Pivot Process

Let's say you've recognized your business isn't scaling as planned and know a pivot is necessary. Where should you start? We've outlined a process to help guide you along your transformation.

  1. Discovery: This stage is similar to your initial customer profile development, only now you're using the data and feedback you've amassed while running your business. Use it to inform changes in your business model and product ideas.
  2. Development: Once you've established a new product idea, it's time to develop a prototype. You'll want to come up with something that has just enough viable features to attract early customers. This is also referred to as a minimum viable product (MVP). You're going to be testing the product in the validation phase, so you don't want to spend too much time and resources on development.
  3. Validation: Now that you've got your MVP, it's time to test it. Reach out to customers for feedback and insights. Adjust and iterate on the product until you come up with something that customers will buy.
  4. Plan: You can't pull off a successful pivot without a plan. Create a timeline to bring your new product to market. Make sure any necessary changes to branding and messaging are taken care of before launch.
  5. Execute: You've done all the groundwork. Now it's time to execute your plan and launch.
How to Pivot Your Business

While the examples above might make it seem like undergoing a business pivot is an easy task, pulling one off requires a lot of work. Here are a few tips to follow to ensure your startup pivot process is successful.

1. Focus on what works.

In the examples above, the founders were able to hone in on the most popular features of their product or tap into a functionality that was incredibly useful. Evaluate your business model and products. Keep the things that perform best.

2. Inform and involve stakeholders.

Talk to your startup's investors. If you're changing business directions, they'll definitely need to know. Communicate the need for a business pivot to employees and get them onboard. They may even be able to provide insight on what features are most popular with customers, or what technology can be repurposed for something else.

3. Act quickly and decisively.

Once you've decided on a new business model or direction, get started immediately. Resources will need to be directed to new projects and a new brand strategy.

4. Skill up if you need to.

Undertaking a startup pivot may require learning a new skill set and new workforce. Ask yourself:

  • What new skills do we need to learn to create a successful product?
  • What are our blind spots, and weaknesses?
  • Do we need to hire new people to achieve our new goals?
5. Get comfortable with change and embrace it.

Pivoting your business model in such a dramatic way can be very risky and stressful. Letting go of previous failures will make the transition smoother. Sometimes, it may even feel like starting over from scratch. Embrace the newness and focus on recalibrating your business to make it the best it can be.

Pivoting your startup isn't a decision to take lightly. No matter what you choose to do, it's going to take considerable effort on your end. It's a tough call to make. It means being honest with yourself and any employees you might have about how you do business.

To Pivot, or Not to Pivot

Pivoting is a humbling process. It requires a real understanding of where your business is heading, and deciding on a potentially drastic course of action. Still, if your startup is radically underperforming or flat-out dead in the water, some kind of pivot may be necessary to stay in business.

This article was originally published in March 2020 and has been updated for comprehensiveness.

Originally published Jan 20, 2022 8:00:00 AM, updated January 20 2022

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Startups
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Disclaimer

HubSpot Inc. published this content on 20 January 2022 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 20 January 2022 13:10:05 UTC.


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