How can you negotiate with a syndicate to ensure a startup can pivot effectively?

I can speak from the investor’s point of view, having been in that role while debating pivots. While having “data and evidence” is important, it’s not always possible. The lack of data (clients, usage, revenue) is often the problem. Startups pivoting know what they’re leaving, not what they’re committing to. Hopefully, they’ve learned some lessons along the way, like talking to prospects before engaging too many resources.

I have funded well over 500 business plans in a four decade career and few have gone exactly as planned. The key is to identify the need to change quickly and then provide well articulated and concise reasons the pivot is necessary coupled with the risks associated with not making the change as well as the risks of making the change. Quick, concise and reasoned will be the most effective path to getting the change desired in my experience.

It honestly only boils down to transparent and truthful communication. It doesn't matter if your investor is a syndicate, angel, or an institutional fund (VC). Make clear what your assumptions are for the pivot, listen to your partner (investor) who potentially has seen something similar in the past, and find an amicable solution together. The more validated data points a founder has to back up their claim for a pivot, the better it is and the more likely it is that they will maintain a good relationship with their investor.

A syndicate is typically consisting of a group of investors who can have varied opinions and interests, making the negotiation process more complex. Here are some ideas: 1) Open and Transparent Communication: Clearly communicate the reasons behind the pivot, including market research, customer feedback, and any other data that supports the need for a change in direction. Transparency builds trust and understanding. 2) Demonstrate Flexibility and Resilience: Show that your startup is adaptable and resilient. Investors are more likely to support a pivot if they see a team that can handle change effectively. 3) Outline the Pivot Plan: Present a detailed plan for the pivot, including objectives, strategies, timelines, and expected outcomes.

while the post is for a syndicate, as a founder hopefully you have an investor with whom you have built a relationship - who then potentially can be a sponsor for you if this situation turns up. Communicating, sharing updates, seeking assistance, showing execution, outcomes and involving could well be some aspects that lead to "getting people on the table onboard the goals". If the situation - external or approach internal to the execution demands a change then its useful to reason out why the new approach could be better than continuing on the old path. Swiftly is better, if some aspects of the current can be leveraged (thereby repurposing the resources) helps in getting the context setting of the so called pivot endorsed for a bridge

Clearly articulate the reasons behind the pivot, such as market shifts, customer feedback, or changes in the competitive landscape. Initiate transparent and early communication with the syndicate about the need for a pivot.

The most important benefit a founder should highlight to justify the pivot is how this pivot generates a more valuable company. Are you able to solve the problem more sufficiently? Have you discovered a market niche that has more potential? And so on.

Emphasize the lessons learned from the current approach and how the pivot aligns with market realities. Frame the pivot as a learning opportunity and a strategic move to enhance the startup's chances of success.

Discuss contingency plans and how the startup plans to navigate uncertainties during the transition. Address potential risks associated with the pivot and present strategies to mitigate these risks.

If you need to secure additional funding for the pivot, be prepared for a lower valuation (especially if you need to start from scratch). This is a hard reality that founders sometimes don't want to accept, but your investors backed your initial idea and your initial promise (besides your team).

Be open to negotiating terms that align with the syndicate's interests while supporting the startup's strategic shift. Discuss potential adjustments to the investment terms to accommodate the pivot.

Constant communication, collaboration, and trust do not start with the pivot, but with the founding of the company. If a positive team culture is built from a get go, the pivot is just a part of a business cycle; the syndicate understands it. Unfortunately, the pivot is often postponed. The syndicate is more sensitive to this postponement than to the pivot itself.

Emphasize the collective interest in the startup's long-term success. Work towards building a consensus within the syndicate by addressing concerns and showcasing the potential positive outcomes of the pivot.

Build trusted advisors to help weigh pivot options without permission, their guidance can address investor concerns and get everyone aligned on new goals.

A syndicate is a marriage of convenience. Agendas will always differ but they are kept in check through common goals and good. The best way to negotiate with a syndicate is meeting up and asking too many questions. Listening is the key. Also if possible meeting syndicate members individually / their vendors / customers / stake holders will give you insights on how you can derive higher value for your proposal / project from the syndicate.