If you’re a founder struggling to raise your next round, it might be time to get honest with yourself. Do you truly know your customer and their pain point? Does your business ease their pain? If so, does your customer actually want your company to solve their problem? 

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If your company isn’t seeing strong growth with customers eager to use your product and share with others, it's best to understand that as early as possible. As painful as that realization can be, if it's the truth, you can start working on addressing it and if that doesn't work, it might be time to pivot the company in a new direction.

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I learned this lesson the hard way. Before Nextdoor became a publicly traded company with millions of users, we were a completely different business. Our original company was Fanbase, a fledgling startup with a big idea to disrupt the sports information industry. We had all the “right” ducks in a row: a committed founding team, top investors, and exciting early traction. But even with a peak of 15 million monthly users, Fanbase failed to grow beyond that point. We mistakenly thought we had reached product-market fit, but when we looked closer at the data, it became clear that people weren’t engaging the way we’d hoped. They visited and bounced.

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Since my co-founders and I didn’t have another idea to pivot to, we offered to give our funding back to our lead investor, Bill Gurley at Benchmark, in 2010. He refused and suggested that we  take three months to work on a new big idea.

Without Bill’s nudge, Nextdoor would have never happened. For the next few months, the founding team of seven people met every other day to explore new ideas, and track progress on previous ideas. We gave ourselves 48 hours between meetings to test and research assumptions. One day we talked about how we, and so many others, felt disconnected from the people we live closest to: our neighbors. With no easy, efficient way to talk about issues and share resources in local communities, we realized there was a gap in the world – there was no way to easily connect neighbors with each other and with local businesses and organizations. We came up with the idea of a hyperlocal social network to help neighborhoods build stronger communities. At least that was our hypothesis. 

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Unlike with Fanbase, we didn’t start building a product right away. Instead, we interviewed people in neighborhoods to really understand their pain points. These interviews helped unlock Nextdoor’s core user personas and provided invaluable insights into how they would use a hyperlocal social platform. Based on this feedback, we created crude paper prototypes to quickly illustrate how Nextdoor could work. Armed with more feedback on the prototype, we built an MVP. For a year, Nextdoor stayed in private beta and kept adding more communities and more functionality based on feedback. In October 2011, Nextdoor launched in the U.S., and with rising popularity, we raised $18 million from multiple investors in July 2012.

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If our pivot experience sounds easy, I assure you it wasn’t. After spending two and a half years building Fanbase, it was excruciating to step back and say, “This isn’t working — Fanbase will never be the next ESPN.” Ultimately, deciding to quit Fanbase to channel our energy into Nextdoor was personally and professionally difficult. But it was the necessary step we needed to take to unlock the opportunity to build Nextdoor. When one door closes, the next door opens.

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Now as an investor, I see some founders going through periods of self-doubt and frustration. The market has shifted, the bar is higher, and it’s a tough time to raise venture capital. While you can point to the market shift, I encourage you to look at your product and customers to truly analyze if you are building something that the market needs. Maybe you need to shift the product, or shift your target market, or perhaps you need a full pivot like we did. If you’re considering a pivot, here’s how to get your investors to support you.

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Bring the data, not the bullshit

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Ambiguity naturally comes with startup territory, so how do you know with absolute certainty that your company isn’t working — or isn’t going to work for the long haul? The short answer is: you don’t have real proof of product-market fit and you’re running out of money. This is a red flag that it’s time to cut the b.s. 

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At Fanbase, we spent several months trying to fix the product. We added more viral loops. We tested new features. We integrated with Facebook. Despite all these experiments and best practices from other companies, nothing changed and people kept bouncing. The reality was we were still not solving a meaningful problem for our users. The product was meh — and that’s the kiss of death for a product — just good enough to not suck but clearly not a breakout success. You could be in this product limbo forever (or until the money runs out) if you don’t make a chance.

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While it was not easy to face that truth, we knew we had to do something different. We were wasting time and money if we did not face the reality of the situation. If you are in this swirl of ambiguity, you must study the data and get really honest: Do you actually know if your customers are desperate to use your product to solve their problem? If you’re not sure, talk to customers and really listen. If it’s not obvious that your customers need what you offer, you don’t have product-market fit. It should be so clear that a 10-year-old would understand it to be true. If you need to squint to find a sliver of hope, you simply do not have product-market fit. And if users are not clamoring to tell others, you don’t have product-market fit.

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Earlier is better

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We were fortunate to have millions of dollars in the bank when we decided to pivot away from Fanbase. This allowed us time to work on new ideas, develop a prototype, and prove that we had traction and product-market fit before we raised a new round of funding. This was fortuitous because it gave us time to test and experiment. 

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If you think your product-market fit is weak or non-existent, it’s valuable to address the issue as soon as possible. Many companies over the last few years raised capital ahead of their traction. This gives them time to try new approaches and maybe to pivot. But you need to move decisively. Every wasted day on a weak product-market fit situation means fewer days to find one that will work. Address the elephant in the room as soon as possible. 

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Be honest with everyone about your pivot

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There’s no halfway in a pivot — you have to go all in. When we announced plans for a radical change to our Fanbase team, we didn’t mince words. We explained that we were going in a new direction and the future was uncertain. We invited anyone who was unsure about the new direction to opt out and offered them a severance package. We even helped them find a new job without any hard feelings. We gave each member of our 10-person team a week to consider the options and let us know if they wanted to opt into the new direction and uncertain path of exploring new ideas. By the end of the week, three engineers elected to offramp instead of exploring new ideas (we didn’t have the idea for Nextdoor yet). As heart-breaking as it was to lose great engineers, a small and nimble team that’s 100% aligned is better than a larger team that doesn’t believe in the new mission. 

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Don’t be nostalgic — move on. Let go of the emotions that come with sunk costs. That said, remember your unique insight and what you’re great at. During our pivot, we may have discarded the entire Fanbase code base but we remained focused on a community-centric model — that was our expertise. When we pivoted to Nextdoor, we were laser-focused on seeing a clear signal of product-market fit, because we didn’t want to repeat our mistake. Startup success isn’t just about how fancy your tech is (looking at you, Web 3.0). The magic is in using technology to solve a burning problem for users and customers.

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Think AI will solve all your problems? Think again. 

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It can be frustrating to see another company in some hot space easily raise money when your company is struggling to get second meetings. In fact, some think “pivoting to AI” or incorporating AI to a product is the quick fix to a struggling business or a surefire way to get investors’ attention. But that’s not true for all businesses. AI or not, if you’re not solving an important problem for someone who’s looking for a solution, you probably won’t reach product-market fit.

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Make no mistake: Founders should definitely think about how to leverage AI, especially if it improves the product. But AI in and of itself is not the reason people buy a product. I mean, how many customers think, “I just need some AI to solve my [fill-in-the-blank] problem”?

In other words, AI is one potential solution but not the panacea.

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I recommend that founders consider how AI could be used to improve their product or disrupt their current offering. But I challenge founders to avoid leading with “AI technology” pitches as a way to interest customers and instead focus on how the product delivers better results without even mentioning the specific technology that powers the improvement.

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Tap your investor for insights and iterate quickly

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To be honest, investors are a terrible source for ideas; otherwise, they’d be founders. :) But their “outsider” insights can save you a lot of time and pain. Investors look at companies and problem areas all day and are able to see around corners that founders don’t. Investors can also tell you if 100 other companies are trying to do the same thing as you. Use investors for a periodic sounding board and sniff test, but rely more on your target customers to understand if you have a unique solution to burning customer needs.

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Once you know you’re on the right track, get ready for action and iterate quickly — so long as you’re focused on the right problem. Compasses and checklists are helpful but you also need to read situations and react in the moment. There is no simple checklist you can follow to make a successful company. Each founder must read the situation on the figurative field of play and make the decisions as they unfold in realtime.

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A version of this article was published here on TechCrunch.