(Click on picture for very nice lesson in types of pivots; key is to accelerate velocity of learning and to pivot to eventual revenue/business model, and market, ones that institutional investors find attractive)
One thing that we have noticed consistently as we search for the best/brightest, most disruptive, startups in the Midwest+ (Denver - DC and Minn StPaul - Austin), is that these startups, as compared with their coastal brethren, tend to be slower to challenge their initial assumptions (revenue/business model, size of market, more) thus (much) slower to pivot and get to their optimal model and market(s).
This can have strategic consequences, especially if the better pivot(s) takes the startup to a much larger market that institutional investors will (following angel round) find attractive. Angel investors benefit by backing a company pursuing a market that VC’s will find attractive or potentially risk backing a small market play with no interest in an institutional follow-on round, thus a bridge (note) to nowhere.
Our suggestion is that entrepreneurs, angels, mentors, etc. systematically test the initial vision for improvements (revenue model, business model, size of market, etc) that make the startup attractive to institutional investors or DO NOT MAKE THE INVESTMENT.
Eventually this discipline will settle in as table stakes and the local/regional market will learn that this systematic exercise is required if seed/angel financings are to be possible.
We encourage mentors and angels to drive this valuable behavior. There is much written about this in Steve Blank’s blog; check out the Nudge/Team Dynamo case.