Early-stage tech companies are in a different world than late-stage ones. The cohort has had access to a lot of capital in the last few quarters, giving them a bubble of venture capital that protects them from rapid changes in the economy.
The bubble is not popping, but it is changing shape.
We may not see early-stage startups go through aggressive rounds of layoffs or rapid cuts to valuations due to shifting market conditions, but there is a different signal worth watching: pivots.
A change in business strategy based on a new insight or market trend is inevitable for young companies still chasing product-market fit. pivots give a snapshot of a startup reacting to new tensions in the market and they are more important to track than fundraises.
A pivot is a definite signal that something is changing, a tension other than a group of investors affirming that a founder is on to something big.
The coming weeks and months will include many subtle shifts in how early-stage startups do business. Some may re-prioritize objectives to reduce risk, while others may pursue new, more near-term business models to finally get some revenue in the door.
Before the market changed, pivots were popular. Everyone was moving to the metaverse. Everyone is shifting to more sustainable revenue models.
Winnie is launching a new product called Winnie Pro. The service will help the centers grow and manage their businesses.
The company, which has investment money from a number of companies, has an expanded business model.
Winnie used to make money based on how many parents it sent to a center. The strategy worked well because Winnie experienced a surge in traffic, leading to 8x growth in revenue. The company wants to do more than just place butts in seats.
Pay-per-lead varies every month based on how many parents you are trying to care for.
The company is now pursuing a model in which it charges a monthly fee based on the capacity of the center to help businesses with marketing, enrolls and even staffing.
The company can now give advice to centers based on the demand it sees from parents, which is a natural evolution of the business model. Winnie could tell a business that parents in their geography are hungry for drop-in care and advise them to hire accordingly to increase revenue. Flywheels feel good, right?
Going from a consumer marketplace to a B2B software model and a marketplace is one example of how startups are evolving during this time to be more ambitious and sticky.
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