Brian Nichols is the co-founder of Angel Squad, a community where you’ll learn how to angel invest and get a chance to invest as little as $1k into Hustle Fund's top performing early-stage startups

One of my portfolio companies burned through $3M on a product launch. The market wasn't biting. Customers were interested but nobody was writing checks. They tried pivoting to different applications. Tried adjusting the technology. Nothing worked.

Eventually, they had to shut down. It sucked.

The question isn't whether pivots happen. They always do. The question is how do you know which pivots to support and which ones signal it's time to walk away?

Why Pivots Happen in the First Place

Most pivots happen because customer acquisition isn't working. The product exists, but nobody's buying. Or they're buying once and churning immediately. Or the cost to acquire a customer is higher than what you make from them.

These are the "nice to have" products. Customers say they want it. They'll even test it. But when it comes time to pay, suddenly they're busy. That's when founders realize they need to find a different customer or a different problem.

Sometimes pivots happen because the market shifted. COVID killed a lot of business models overnight. Companies that relied on in-person events had to pivot or die. That's not a founder problem. That's reality changing.

Other times, pivots happen because the founder realizes they can't raise more money on their current trajectory. Investors aren't excited about the progress. The metrics aren't growing fast enough. So they pivot hoping to find something more fundable.

The reason for the pivot matters a lot when you're deciding whether to support it.

The Good Pivot vs. The Desperation Pivot

Good pivots have a clear hypothesis based on actual data. The founder can tell you exactly why the current thing isn't working and exactly why the new thing will work better. They've talked to customers. They've validated the new direction. They have a plan.

Desperation pivots are vague. "We're going to try a few different things and see what works." That's not a strategy. That's panic.

I invested in a company that started selling marketing software to Airbnb hosts. Customer acquisition was hard. So they pivoted to selling to vacation rental property managers instead. Same product, different customer. That made sense because the customer pain was identical but property managers had actual budgets and decision-making authority.

That's a good pivot. It's a small adjustment based on clear learning.

Bad pivots are complete rewrites of the company. "We built B2B SaaS for real estate but now we're doing consumer hardware for healthcare." Those almost never work because you're starting from zero. New customer, new product, new everything. At that point, just start a new company.

At Hustle Fund, we've seen companies pivot successfully when they're adjusting their customer segment or expanding their product offering. We've almost never seen success when they completely change industries or business models.

The Capital Dynamics That Make or Break Pivots

How much money has the company raised?

If they've only raised $500k and need to pivot, that's doable. They can cut costs, find profitability with existing customers, and regroup. The preference stack is low, so even a modest acquisition clears the bar.

But if they've raised $15 million? Now every exit needs to be huge just to return investor money. Pivoting at that point is incredibly risky because you've burned through so much runway trying one direction. You probably don't have enough money left to fully test the new direction.

I've seen companies that raised too much too early effectively lock themselves into their current path. They can't pivot because they don't have time or resources to start over. They're trapped.

This is why we increased our initial check size at Hustle Fund but became way more selective about follow-on investments. We want to get ownership early when the company is cheap. But we're not throwing good money after bad if the pivot isn't showing traction.

The Retention Metric That Predicts Everything

If you're trying to figure out whether to support a pivot, look at retention first. Are current customers sticking around? Even if they're not the right customers long-term, do they love what exists?

If retention is terrible, the pivot probably won't fix it. Bad retention usually means the product doesn't solve a real problem. Pivoting to a different market won't change that unless the new market has a fundamentally different problem.

But if retention is great with a small segment of customers, that's interesting. Maybe the company targeted the wrong customer initially. Maybe they can pivot to focus entirely on the segment that loves them.

We had a portfolio company selling to small businesses with terrible retention. Small businesses go out of business constantly. The customer churn wasn't because of the product. It was because the customers kept disappearing.

They pivoted to enterprise customers. Same product, bigger companies. Retention improved dramatically. That's a pivot worth supporting because the core product worked, they just had the wrong customer size.

Questions to Ask Before Supporting a Pivot

Can the founder articulate clearly why the old thing failed? If they're vague or blame external factors entirely, they haven't learned anything. They'll probably make the same mistakes in the new direction.

Do they have evidence the new direction works? Not just theory. Actual conversations with potential customers. Maybe even a pilot or two. If they're pivoting based purely on hope, that's a gamble.

How much runway do they have? If they're pivoting with three months of cash left, they're already dead. They need at least six months, ideally a year, to properly test a new direction.

What does retention look like with existing customers? This tells you if the problem is product quality or customer selection. Good retention with wrong customers? Support the pivot. Bad retention period? Walk away.

Can they still raise money? If other investors are excited about the new direction, that's a positive signal. If nobody else is interested, question why you'd be the only one.

When to Actually Walk Away

Some pivots are just founders refusing to accept reality. I had a company pivot three times in 18 months. Each time, they insisted this was the one that would work. At some point, you have to acknowledge that the issue isn't the market. It's execution.

Walk away when the founder can't take feedback. If they're defensive about why the pivot is necessary or dismissive of concerns, they're not going to succeed regardless of direction.

Walk away when the pivot requires expertise they don't have. If they're pivoting from software to biotech, they're not magically going to become biology experts overnight.

Walk away when they've burned bridges with existing customers. Sometimes pivots happen because the founder over-promised and under-delivered so badly that their reputation is toast. Starting fresh won't fix that.

Walk away when the capital stack is too heavy. If they need to return $20 million to investors and the new direction is a $5 million opportunity, the math doesn't work.

How to Support Pivots the Right Way

If you decide to support the pivot, actually be helpful. Most investors say "good luck" and disappear. That's useless.

Help them validate the new customer. Make introductions. Get them in front of people who can tell them if this direction makes sense.

Help them cut costs. Pivoting usually means layoffs and tough decisions. If you've operated companies before, share what worked for you.

Help them tell the story to other investors. Pivots make fundraising harder. You can help them frame it as learning and adaptation rather than failure.

Most importantly, be honest about what you're seeing. If the pivot isn't working after three months, tell them. Don't let them waste another six months hoping it'll magically improve.

The best investors support pivots by being brutally honest about progress while remaining emotionally supportive of the founder. Those two things aren't contradictory. You can believe in someone while also telling them the current path isn't working.

Evaluating pivots gets easier when you're connected to other investors who've seen hundreds of them. Angel Squad members share pivot stories constantly. We compare notes on what worked, what didn't, and what signals to watch for. Because the hardest part of pivots isn't the decision itself. It's having enough pattern recognition to make good decisions quickly.