You Don’t Have to Pivot in a Crisis


When Covid-19 burst upon the scene in early 2020, startup ventures faced dramatic shifts in markets and the importance of strategic agility became axiomatic: If you wanted your venture to survive, let alone thrive, pundits (including ourselves) almost universally advocated deep internal cuts accompanied by pivots to new markets and business models. As the leadership of the tech-focused California VC firm Sequoia Capital wrote in a March Medium post identifying Covid-19 as the black swan of 2020, “Nobody ever regrets making fast and decisive adjustments to changing circumstances.”

However, ventures we know well through our investment portfolio (Isenberg is a minor (<1%) shareholder in Guesty, X24 Factory, and Camp) and network — many well-funded startups in hard hit industries such as hospitality, travel, and furniture — shunned strategic agility (changing product-market fit) for stability and resolutely stayed the course with only minor tweaks. Examples include:

  • TravelPerk, a Barcelona-based online provider of corporate travel services, which has raised $140 million in seed and expansion capital.
  • X24 Factory, a Berlin-based operator of online European home furniture marketplaces, which has raised $13 million from private and fund investors in Europe.
  • Guesty, a Tel Aviv-based global platform that automates and streamlines the daily operational tasks for short-term rental management companies listing on Airbnb and the like, which has raised over $60 million since graduating from Y Combinator in 2014.

Despite the turmoil in their markets, TravelPerk, X24 Factory, and Guesty all made the conscious decision to not pivot and deliberately maintained their strategies, their business models, and their teams with only marginal changes. However, staying the course doesn’t mean inaction. Across the observed portfolio of ventures, we found some commonalities, a set of rules that the “stay-the-course” companies followed: slow down, reaffirm your thesis, trim around the edges, watch the data, and test for weakness — and if you do have to pivot, do it explosively.

Immediately slow down. Entrepreneurs tend to run at breakneck speed — these companies were no exception. However, when their markets started to melt down, rather than slamming on the brakes, they downshifted in order to listen to customers, track the market, conserve resources, and enhance their ability to change direction if needed.

There is an analog in the animal world: The cheetah, the world’s fastest land animal, pursues its prey at just half speed, rarely reaching even close to its 70 miles per hour limit. Scientists believe that this strategy allows the cheetah to save its strength and preserve optionality by not over-committing to a wrong direction as its prey suddenly shifts.

These companies followed a similar logic. As Avi Meir, co-founding CEO of TravelPerk, put it, “We slowed down decision making because it was a wartime scenario with little information, and the worst thing would have been to run amuck.” Meir wanted to keep his and his team’s eyes sharply focused on TravelPerk’s long-term vision and avoid making rash decisions that might compromise that vision.

Take time to reaffirm your basic thesis. Slowing down also allowed these entrepreneurs to make double sure that their view of their future marketplace was still valid.

Amiad Soto, co-founding CEO of Guesty, engaged his board and executive team to look a few months out; he concluded that Guesty’s fundamentals had not changed one bit: “During the pandemic, people still seek vacation rentals, even though the specific patterns might change: In addition to cleanliness and safety being paramount, we concluded that vacation and short term rentals would become longer and demand would increase. We are in the business of helping/ensuring property management companies thrive, and that did not change for us,” reflected Soto.

Meir saw additional benefits to TravelPerk staying true to its initial vision: “We saw our better-resourced competitors acting too fast.” As competitors rushed into major layoffs, TravelPerk picked up many of their corporate customers “because we kept our sales and service capacity intact while they rashly cut costs,” commented Meir. Meir felt comfortable continuing to invest in staff because he was confident that the company’s core thesis remained the same.

Trim fat, not muscle. Part of slowing down is trimming operations, but only around the margins. This is counter to the now-conventional wisdom of crisis-driven cutting into the muscle by reducing payroll faster and deeper than you think is necessary. Yes, take advantage of the fall in prices to renegotiate rental leases and supplier contracts, but consider making only marginal cuts in payroll expenses, primarily through performance management rather than layoffs or furloughs. As Meir reflected, “We cut fat, not muscle or bone like our competitors,” preserving TravelPerk’s strength and flexibility.

Watch new data like a hawk. Within days of the lockdowns starting, X24 Factory saw demand for furniture plummet by 40%, according to founding CEO Miro Morczinek. “But rather than overreact, we first started looking at all kinds of new data. We looked at Italy to see how their worst-case scenario might apply to our major market in Germany. We looked at job searches to see where the layoffs were happening in our supply chain. We studied other verticals such as cars and travel to see how they were being impacted.” At first, this seemed to Morczinek like a replay of the 2008 recession, but after setting up an hourly data watch, “On the second weekend after lockdown, our intense monitoring showed a surprising explosion in demand.” It emerged that the lockdown was allowing people to accelerate home improvement projects and pushing them to move living space outdoors – garden furniture more than compensated for losses in other categories, and in response, “We only tweaked our messaging.”

Test for weaknesses and prepare internally. Companies should apply increased scrutiny not only to the marketplace, but also to their own internal points of failure. You can stay the course only if you stay ahead of the organizational disruption that external shocks can cause. “On March 11, I conducted a surprise ‘fire drill’ by requiring everyone to work from home in order to learn what our weaknesses were,” recalled TravelPerk’s Meir. Remote work was unprecedented at the venture, and they quickly identified problems — home offices with no air conditioning so windows had to stay open to noisy streets below, poor internet connections, and the lack of desk chairs. Meir created a team to resolve these issues and completed equipping 500 home offices on the weekend Spain locked down the entire country.

If and when you do pivot, consider doing it explosively. Back to our cheetah. In addition to holding the mammalian speed record, the cheetah is also the champion of redirecting its body — they change speed and direction better than trained polo horses and accelerate faster than racetrack greyhounds. When a cheetah does change direction, it does so with unparalleled decisiveness and commitment, digging its non-retractable claws in while wrenching its lithe physique towards its prey.

In-store retailers have been crushed by Covid-19, but Ben Kaufman, co-founding CEO of the retail family experience startup Camp, pivoted like a cheetah. Anticipating in February that sheltering-in-place would soon reach the U.S., by mid-March Kaufman had shuttered all five of Camp’s new, high end “family experience stores” and furloughed 130 retail staff. Following just days of intense discussions, Kaufman and Amanda Raposo, Camp’s chief experience officer, started bringing their entire in-store family experience into the home, first launching Camp’s Zoom birthday parties, which within a few months were contributing (along with other new digital products) to the revenues that surpassed pre-pandemic forecasts. Camp went on to cut major deals with Walmart and other retailers to imbue their brands with Camp’s unique online family engagement.

Methodically not-pivoting can pay off — in the right situation, that is. Staying the course, with minor adjustments, has proved to be a winning strategy for these ventures: “For the first time since founding, X24 Factory is significantly profitable,” commented X24 Factory’s Morczinek. TravelPerk is adding new customers and winning market share, and in fact exceeded its July forecast by 100%. Guesty is seeing significant increases in longer-term rentals. The lesson here is that when a crisis hits, it pays to resist knee-jerk reactions on how to handle external shocks and ask what is going to work best for your company, based on the particular realities of its business. Ignoring the playbook of rapid cuts plus strategic pivoting can be the smart move.

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Daniel Isenberg is president of Entrepreneurship Policy Advisors and adjunct professor at Columbia Business School and Babson. He is also the author of the book, Worthless, Impossible, and Stupid: How Contrarian Entrepreneurs Create and Capture Extraordinary Value (July 2013).

Alessandro Di Fiore is the founder and CEO of the European Centre for Strategic Innovation (ECSI) and ECSI Consulting. He is based in Boston and Milan. He can be reached at Follow him on twitter @alexdifiore.

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