When to Pivot: The Strategic Art of Startup Innovation

Insights from Embarc Collective’s Angel Investor Summit featuring Embarc Collective coach Ryan Schneider

Building a successful startup is rarely a straight path. Most founders face critical inflection points that determine whether their venture thrives or joins the 90% that fail.

In this guide, Ryan Schneider, Embarc Collective coach and Co-Founder of Thrive25, explores how to identify when your startup needs a pivot, strategies for effective innovation, and the mental frameworks that enable founders to navigate these challenging transitions.

Recognizing the Need to Pivot: Three Core Problems

1. The Demand Problem

The most fundamental challenge any startup faces is whether it’s solving a genuine customer problem.

Ask yourself these critical questions:

• Is this truly an important and urgent problem for your customer? If your customers could live without your product, you don’t have product-market fit.
  
• Are you trying to educate your customer about a problem they don’t know they have? This is a dangerous position for early-stage startups. As Ryan states, “Google can do that. Meta can do that. Apple can tell us we have a problem we didn’t know about. A startup that’s raised a million dollars? That’s too expensive.”
  
• What happens if you take your product away? Would your customers genuinely miss it, or would they easily move on? The answer reveals how essential your solution really is.

Pre-Series A startups simply don’t have the capital to create demand through education. You need to find existing tailwinds rather than fighting headwinds.

2. The Supply Problem

Even with strong demand, your business model must be able to scale:

• Can you scale to meet potential demand? Ryan shared one example about bringing functional medicine to employers. Despite the promising concept, the founder discovered that selling to just 50 major companies would exhaust the available doctor supply, making the business model unworkable at scale.
  
• Do your unit economics work at 10x scale? Your business can’t just work as a small operation; it needs profitable economics that improve with growth.
  
• Do you have network effects or other sustainable advantages? Peter Thiel suggests building a monopoly in a niche, but you must have a vision for how this expands.

3. The External Market Problem

External factors beyond your control can doom even the best-executed startup:

• Are you relying on market developments you can’t control? Ryan recalls a founder sharing with him that, “as soon as those VR headsets become mainstream, I’m golden.” Hitching your success to unpredictable market shifts is risky.
  
• Is competition overwhelming your differentiation? While most startups compete primarily against the status quo (people don’t like to change), once you seek venture funding, you need to be number one or two in your market. Ryan notes, “You’re not gonna 10x, you’re not gonna 100x the company if you can’t be the Jack Welch theory of number one or two in that market.”
  
• Are you ignoring market signals? Growth curves, customer acquisition costs, and other metrics don’t lie. If you’re consistently fighting uphill, it might be time to reassess.

Case Study: From Human to Snacknation

Ryan shares a powerful real-world example of successful pivoting:

Human (Helping Unite Mankind And Nutrition) sought to place healthy vending machines in hospitals, schools, and YMCAs nationwide. After raising $5 million, they faced a critical problem: 100 of their 120 franchisees weren’t profitable.

The problems they identified:

• Demand problem: They needed to educate consumers to pay $2 for healthy snacks instead of 50 cents for Cheetos.
  
• Supply problem: Franchisee economics didn’t work, and scale wouldn’t fix the issue.
  
• External market problem: Larger vending companies could offer better value.

Instead of persisting with a failing model, they pivoted by:

1. Selling the vending business to Compass Group Canteen
   
2. Identifying their true advantages: relationships with CPG brands, distribution capabilities, and a strong sales team
   
3. Launching Snacknation, a B2B healthy snack subscription service for companies

This pivot transformed a struggling 10-employee company into a successful 150-employee business serving 7,000 companies nationwide.

How to Pivot: Strategic Innovation Approaches

Pivoting doesn’t always mean abandoning your entire business. Ryan outlines several approaches:

1. Change the Product

The most obvious pivot is changing what you sell. Reassess the problem you’re solving and how you’re addressing it.

2. Change the Customer

Sometimes you’re targeting the wrong buyer:

• You might be selling to the director of marketing when you should target the CRO
  
• You could be focusing on enterprise clients when mid-market companies have the same problem without enterprise resources
  
• Like Thrive 25’s example, you might target individual “longevity nuts” when your real customer is “the head of the household, the mom with two kids whose husband’s not gonna go to the doctor without her nagging him.”

3. Change the Distribution Model

How you reach customers evolves constantly:

• B2B and B2C boundaries are blurring
• New channels emerge: B2B2C, affiliates, channel partners
• Your current distribution approach may simply be inefficient

The Pivot Methodology: Do Your Homework

The most critical insight from Ryan is that founders often shortchange their pivot planning:

“Think back to when you started your company… How much time and effort did you put into that idea? You did a SWOT analysis… You built a financial model… And then you go make a pivot and say, ‘I’m just gonna go do this.’ You have to do that same level of effort.”

Before pivoting:

1. Conduct thorough customer discovery (100+ conversations)
   
2. Perform a complete 360-degree review of your business and the new idea
   
3. Identify your founder market fit and edge in the new direction
   
4. Analyze the competition thoroughly

Shortcuts here can lead to missing critical insights about why your new direction might fail or why it doesn’t already exist.

Mental Models for Navigating Pivots

Ryan emphasizes two powerful mental frameworks for founders:

1. The Pause: Responding vs. Reacting

The most valuable skill for founder health and decision-making is the ability to pause:

“The difference between reacting and responding is how you’re going to be successful as a founder.”

When facing adversity—frustrated with your team, investors, or discouraging customer feedback—your ability to pause, engage your “thinking slow” brain, and respond thoughtfully rather than react emotionally will determine your success.

2. Find a Coach

Even experienced founders make the same mistakes in their own companies that they can easily spot in others.

A coach provides:

• An outside perspective to “see the forest from the trees”
• Support during inevitable difficult moments
• Objective guidance not tied to your cap table or brand

The Reality of the Startup Journey

Ryan shares this powerful metaphor:

“The startup journey isn’t a straight line to success. For the small percentage of startups that reach their goals, success depends on how they navigate 5-6 critical inflection points—”how did you get over the rocks, across the bridge, over the water… through the hill or valley, and through the rain.”

These inflection points invariably involve innovation, pivots, and responding to challenges. The founders who succeed aren’t necessarily those with the best initial ideas, but those who:

1. Know when to pivot (and do it early enough)
2. Have the support network to make those pivots effectively
3. Possess the mental frameworks to respond rather than react

Product-market fit remains the north star for startup success, but the path to finding it often requires pivots.

By recognizing the three core problems (demand, supply, and external market), approaching innovation strategically, doing thorough homework before pivoting, and developing founder resilience, you dramatically increase your chances of being in the 10% of startups that succeed.

Remember that pivoting isn’t failure—it’s an essential part of the entrepreneurial journey. As the Ryan wisely notes, “it’s not about being right. It’s about setting yourself up for a chance to be successful.”

Product-market fit and thoughtful customer discovery remain the most powerful tools in a founder’s arsenal.