To Pivot or Not To Pivot: On the Relationship between Pivots and Revenue among Startups

Abstract

The concept of the pivot, whereby a new venture alters its offering or business model, is standard practice among new ventures seeking to validate their value proposition in uncertain markets. Whereas a new venture begins with a business model driven by the entrepreneur’s perception of the market, pivots driven by market feedback align the venture with market need. However, we argue that executing too many pivots can adversely affect firm performance by postponing the maturation of the firm. Using change in a venture’s NAICS code as a proxy for pivoting, we show an inverted-U relationship between revenue and the number of pivots among Kauffman Firm Survey participants. This longitudinal empirical study is one of the first on the relationship between pivoting and performance. It aims to attract attention to this important topic of entrepreneurship, and help the entrepreneur facing the difficult decision of whether or not she should pivot.