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Opportunity, not Failure: The Real Reason Startups Decide to Pivot

There are so many lessons to be learned from the entrepreneurial spirit of the startup. Even when faced with failure, these nimble operations adapt and find a solution. That’s one reason why Wharton management professor Jacqueline “Jax” Kirtley is drawn to studying them. She spoke to Knowledge@Wharton about her latest research into startups that are focused on hard science and technology.

An edited transcript of the conversation follows.

Knowledge@Wharton: What do you study?

Jacqueline “Jax” Kirtley: I study early-stage, hard-science startups, firms that are spinning out of labs and new science and technology theory. I’m interested in how they evolve in their first few years and how their strategies, their products, their technologies develop.

Knowledge@Wharton: What have you found over the course of your research?

Kirtley: One of the things that I found that was quite surprising to me is that for all of technology entrepreneurs’ talk of “When we hit a road block, we’ll pivot,” they don’t. When they hit trouble, hit problems, they firefight. They solve them. It’s the entrepreneur’s way.

When firms do change, when they evolve or really massively change what they do — when we look back and call it a “pivot” — it’s actually because of an opportunity that appeared that they jumped on. That starts off this chain of events that changes their strategy, so that when something does go wrong, they’ve got this other path that they’re already on.

Knowledge@Wharton: How can knowing this help other businesses going forward?

Kirtley: One of the things it does is to give us a sense of what we can do to help entrepreneurs who are just starting — as a university, as mentors and advisers — to give them an idea of what the future looks like. What are the kinds of expectations they should have? The fact that your attitude [needs to be] a little more of optimism than pessimism is one of the pieces that I find interesting. It’s not that the world is falling, crashing around us, and that’s why we pivoted — those are the stories we hear about. It’s that everything is challenging, and we knew it was challenging. We’re entrepreneurs. But there are these opportunities that appear that we never imagined, that these firms are embracing. When they embrace them, those are the new paths that we are hearing about in these stories, these heroic tales of startups of the past that have changed what they are doing and are now valued in the billions.

“When [entrepreneurs] hit trouble, hit problems, they firefight. They solve them. It’s the entrepreneur’s way.”

Knowledge@Wharton: Could this research help entrepreneurs be a little more open to a pivot if it does present itself? They could see opportunity rather than failure.

Kirtley: This notion of “fail fast, fail often” already is a pretty major conversation going on with entrepreneurs and in business schools. But even if you accept that failure might happen, it’s hard to wrap your brain around it being OK. I think when you look at the stories that we talk about, the firms we idolize in a lot of ways … a lot of them failed. But it was the opportunities that they followed that really set their future and their success. Focusing on that is, I think, a useful thing for startups.

Another piece of what I’m looking at is the role of other organizations and structures that help these startups in these processes as they evolve. Whether it’s venture capitalists who are involved as mentors and board members, angels, foundations that they work with, incubators and accelerators — all of these structures are there to help firms survive and do well and succeed and make connections.

But there’s also this piece of that story that I’ve just started a project to examine: They also direct you. They set you on the path they want you to have, and that can be a constraint. [For example,] if a VC wants some big financial exit in a short period of time, that may not be the best thing for the entrepreneurs or even for the product [or] the company they are making. Getting a better sense of how that works and how these structures constrain or direct startups is something that I’m really interested in. When these changes happen, how are they happening? Is there a way to make sure that they happen for the best, both for the firm but also for the product that they’re making that’s going to go out into the world and we’re going to get to play with and buy?

Knowledge@Wharton: It’s a huge decision for an entrepreneur to widen the circle and let people in. You’re not just letting in their money or their advice, you’re also letting in maybe their view of what the company should be.

“I had an entrepreneur tell me once that the second you say yes to an investor, you’re married.”

Kirtley: I had an entrepreneur tell me once that the second you say yes to an investor, you’re married. And no one side gets to set the tone for everything in a marriage. That’s really what happens. Once you take money from someone, they’re part of your firm. Once you involve another entity, whether it’s an organization like an accelerator or just a single angel investor, they are now part of what you are doing. Whether they’re in a position of power where they get to tell you what to do as a board member, or they are just an adviser, they will affect the path you take. There’s a lot of value in understanding how they direct firms and how they maybe constrain what paths the firm takes because that is going to set where firms can go and what they can evolve into.

Knowledge@Wharton: What’s next for your research?

Kirtley: One of the things about my work that I think is a little different from some of the work going on in entrepreneurship is that I am very interested in hard-science and heavy technology-based startups. It’s not the same story to be an entrepreneurial firm with very few resources and very little money and develop clean-tech future energy generation or energy storage — big hardware systems. That’s a very different story than developing an app or web service. A lot of what we’ve learned so far about technology entrepreneurship has been much more software focused. These hard-science and hard technology startups that have the potential to give us really great technologies, to really help us change our future, are not as well understood.

Not everything a software company can do or everything we can recommend to a software company is really applicable for a company that is making some kind of novel battery that they’re going to sell to a utility. It’s a very different story for them. That’s something I’m really interested in my work — to expand the knowledge of how we can help entrepreneurs doing that kind of technical work.

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