Successful Startups Don’t Make Money Their Primary Mission
By Kevin Laws , COO of AngelList, hbr.org
Some people look at Silicon Valley and see a world filled with fortune-seekers come to strike it rich.
Yes, the Valley has its share of mercenaries. But you’ve never heard
of the companies they founded or ran, because those start-ups couldn’t
attract or retain good talent, win solid investment backing, or earn
customers’ good will.
What drives the most successful start-ups
isn’t the money, it’s the
mission. The founders who go on to create the greatest value for
themselves and their investors are those with a vision of changing the
world in some way.
People outside Silicon Valley are often puzzled by the apparent
contradiction between the idea of companies having missions and the goal
of big returns for investors.
As Jim Barksdale put it when he was CEO of Netscape, “saying that the
purpose of a company is to make money is like saying that your purpose
in life is to breathe.” Of course, if you’re not breathing, it doesn’t
much matter what your purpose in life is. If you believe in your
mission, then it’s part of your moral imperative to attach a business
model to it. There’s no faster way to achieve your lofty goals. But
that’s the order for it: The business model exists to serve the mission,
not the other way around. That’s how Google managed to organize so much
of the world’s information in a few decades, and Facebook managed to
connect the wired world in just one.
But for founders who are in it just for the money, there are too many
reasons and ways to quit before the company becomes a massive success.
After all, starting a new institution from scratch is really, really
hard. Sometimes people stop because there’s no more money, or customers
don’t like the product. High-profile secret-sharing app Secret just shuttered its virtual doors and gave its remaining money back to investors when customers started leaving.
Other forms of quitting are less obvious. When a social-mission
company sells out to a big corporation, the founders all get rich and
sometimes the investors even make a little money. But that’s quitting
too; no company ever changed the world by selling early. Often what
happens is the acquiring company eventually shuts down the project and
reassigns or lays off the employees.
The selling-early kind of quitting is actually more dangerous and
represents a greater loss for investors than the
giving-up-under-hardship kind. For a start-up investor, losing the
entire investment is the expected outcome. For good investors the losses
are more than covered by the few massive successes — but a company with
fantastic potential can’t become a massive success if it sells early.
Larry Page and Sergey Brin grew Google to its current dominance by
sticking to their information-organizing mission. It was a mission they
believed in enough to turn down an offer of $1 billion for their company
from Yahoo. Google is worth over $350 billion today.
Yahoo
also offered Mark Zuckerberg a billion dollars for Facebook while it
was still an exclusive site that didn’t let most people join. He turned the offer down
(along with many larger offers, including from Google). His mission to
connect everybody wasn’t done yet. The company is worth over $200
billion today.
Imagine if Google and Facebook had sold to Yahoo for a billion each —
a great outcome by any measure. But inside Yahoo, would Google have
continued its crazy missionary projects, like scanning the world’s
libraries or organizing all scholarly papers? Would Facebook have
connected everybody with social news feeds and a constant flow of new
mobile products?
In each case, the company’s greater mission and its financial success were intertwined.
Employees also have to be inspired by the mission. If employees are
just mercenaries, they will disappear as soon as a better offer comes
along. For investments to have a chance of becoming unicorns — billion
dollar companies — they need management teams and talent that will
persevere through the tough times and not sell out early in the good
ones. Experienced investors know this — John Doerr at Kleiner Perkins
often talks about looking for missionary founders rather than mercenary
founders.
Of course every company has the obligation to become a successful
financial business, but the reason it exists is its mission. Lose sight
of that, and you lose the company.
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