I attended a pitching competition this weekend, as I do many times each year. This one was not unlike many others.
Most of the pitches were very interesting, and I liked many of the ideas. But I noticed something I didn’t like. Aside from the usual little foibles like “we’re the Uber of X” (probably not), and “$400 Billion Market!” (kind of not really), I heard, several times, detailed digressions into exit strategies.
Ok, there’s nothing inherently wrong with thinking about an exit strategy. But I do find something offputting about a company that is trying to raise seed-level investment, talking about selling out within a couple of years. Exit strategy is not part of our program at StartupYard, because an exit is a natural extension of success- it doesn’t need to be the focus.
An Exit is Not a Vision
We like to ask people what they hope their company will be doing in five years. That’s not because we think they really know what will happen in that time (they never do), but because we want to know the scope of their vision for the future.
You should know where you want to be in five years, because if the answer is “doing something else,” then building a startup might not be the best path. This isn’t Wall Street- there are no golden parachutes at early-stage startups.
Which would you rather hear? “I need $300K to build a great company that’s going to be changing the way people do X in five years–” or, “I need it to build a company that’s going to be bought by Google 18 months from now?”
One of those two is a vision. The other is at best a strategy (and at worst a delusion). Again, I’m sure it would be great if a startup could promise it definitely would sell to Google in 18 months, but if that’s your vision, and it doesn’t work (because it probably won’t), what then? If your greatest hope is to cash in a lottery ticket, then what kind of a sales pitch is that?
As Frédéric Mazzella, founder of BlaBlaCar, recently said in his comments for The State of European Tech, by Atomic Ventures, “Growth isn’t like an elevator, it’s like building a set of stairs.” Meaning, every step on the path towards growing a large company has to be taken individually. There is no straight line to the top.
Founders Focusing on Ambition, Not Passion
This is indeed something I’ve been taking more note of recently. It seems to me that I am hearing more about startup founders’ ambitions, and less about their actual passions. I’m getting a pitch about a person, instead of about the idea they care about. The cliche of “make the world a better place,” is at least a nod to social responsibility and building a sustainable business.
But this focus on exits, which I’m sure some startups do in their pitches, seems to me to be crass and opportunistic. Even more perversely, I’ve actually heard this phrase more than once: “I have a passion for growth.” Which uses the words that founders know we want to hear, but is pretty twisted when you think about it.
Maybe this will sound incredibly touchy-feely, but I don’t think the best and brightest would be in the tech business if it was just about the money. Why we have to tell ourselves that it is, in fact, all about money is a mystery to me.
The sad part, at least for me, about such pitches is that they completely alienate me, and I suspect many other investors, and betray a focus on money that is unhealthy for an early stage company, still trying to find product/market fit.
As we say, “If it was easy, everyone would do it.” And yet I notice founders trying to make their paths toward profitability seem easy. A breezy growth spurt, followed by an acquisition, champagne raining from the sky. I suspect though, that this is a combination of self-deception and poseur behavior. Sound like you believe it, the reasoning goes, and the audience will think you have it covered.
But at the end of the day, if it’s something Google is going to buy for a cool $100 Million, they’ll be buying it because doing it themselves is hard. The value is in the difficulty of the work, along with the opportunity it represents. And yet I hear “$100 Billion market,” far more often than I hear: “here’s how we can do what nobody else can do.”
As I sometimes say to startups: “Do you want to be something- or do you want to do something?” Being a hyper-growth startup in a huge market is an ambition. Doing the best work you can, no matter what business you’re in, is a passion.
Ambition Isn’t Enough
Of course, at StartupYard we talk to a lot of startup founders, and many, even most, will never realize their ambitions. That’s not a bad thing. Ambition is important, but it can’t be everything. Sometimes people fail because they aren’t smart enough, or don’t care enough, or don’t have the timing right. But sometimes it’s because their ambitions are far too great for their actual passion.
We’ve seen that first hand, and the end is always the same. The founder who is all ambition does just enough to satisfy the ego, and never enough to really drive the company forward in a meaningful way. Progress, according to ambition, is to be seen as a winner. Passion is for winning- for being the best, even if no one knows it yet.
Ambition is important. You must have it if you want to try to do things no one else has tried. Ambition drives people to succeed. But naked ambition leads nowhere. It must be paired with a strong passion to do good work.
These are hard lessons that must be learned. Still, I wish that as accelerators, incubators, investors, and mentors, we would be more clear on what we value most- which is passionate founders who are ambitious in a healthy way.
We like ambition. But ambition is not ever enough. Ambition doesn’t drive you to do the right thing for your fellow man. It doesn’t make you unique, or creative, or better than anyone else.
Passion is the thing that can’t be taught. You can develop someone’s ambition, and we often do just that. But we cannot develop their passion. As investors, it’s always tempting for us to be sold on a founder’s ambition. But in the end, passion always wins, and our best startups are the ones doing things that only they can do best. Why? Because they love it. Because they couldn’t imagine doing anything else.
And if they make boatloads of money from it, I can virtually guarantee, it will be a side effect of that passion, not a result of their ambitions.
Either you have passion for something, or you don’t. If you’re thinking of starting a business, I can only encourage you: do something you really care about, even if that something isn’t sexy, or isn’t going to make you very rich. If you’re really good at it, then it will make you rich enough.