How To Keep Your Employees and Investors Excited for Higher Valuations
Square, Tesla, and WeWork: The Importance of an Overarching Vision
Square, Tesla, and WeWork: The Importance of an Overarching Vision
The current narrative of entrepreneurship is focused on going from 0 to 1. Most business books about entrepreneurship have been about building the 1st prototype, customer, and reaching the alluring stage of product-market -fit. Zero to One by Peter Thiel and The Lean Startup by Eric Ries are representative of this intense focus on 0 to 1.
However, surviving the other stages (1 → 10, 10 →1000) of the company's growth is equally difficult. Three years ago, we were an early startup valued at $50M with about 50 employees. Now we are valued at over $500M with 320 employees.
Although there are many critical points to consider when scaling past the 0 to 1 phase, I believe one of the essential features for an early startup is to have a compelling overarching vision that states your company’s reason for existence.
Articulating a company's vision, mission, and value may seem secondary due to its conceptual nature. But it is imperative for a company to accomplish the below in the long term:
Attract visionary and talented engineers, business development, and product managers. A set of long-term goals will also motivate continuous innovation under the overarching vision.
Increase investor appetite in the company, leading to a higher valuation. Companies like Tesla, Square, and WeWork have (had) a vision for solving more significant social issues that keep investors excited. Hence, their valuations have much higher multiples (P/E) than other companies in the same industry.
Charm other companies for cooperative partnerships and joint ventures. Although various factors influence the terms for partnerships (e.g., product utility, price, etc.), mutual respect for each others’ vision can lead to smoother negotiations.
In this article, I would like to deep-dive how innovative companies like Square, Tesla, and We Company embody this idea and why your startup should work on the vision and mission if you haven’t done so.
Square: No One Should Be Left Out
Square’s first product was a mobile credit card reader that attaches to mobile devices through a headphone jack. It was an elegant integrated hardware-software solution that gave unregistered merchants the ability to accept credit card payments.
The dongle itself had excellent traction, and the company quickly reached a $3.25 billion valuation. Jack Dorsey could have stopped with the dongle and be content with the mild success. However, fast forward over eight years, Square now has the most talented employees working and building a myriad of products and services with a valuation of $107bn.
One of the reasons behind this continuous innovation was Jack Dorsey’s vision for Square:
No one should be left out of the economy because the cost is too great or the technology too complex — Square Mission
In other words, everyone should be included with easy tools. With an overarching vision clear, Square knew from the beginning that the reader is not enough to accomplish their mission.
A general trajectory of Square’s services reaffirms that they are aligned with its vision. Yes, even Bitcoin and their acquisition of Tidal. Square Suite supports SMBs as a whole with business intelligence dashboards, loans, loyalty programs, etc. Cash App allows consumers to spend and send, receive, invest, and store money quite easily. The purchase and acceptance of Bitcoin will allow for a similar ecosystem across borders. And the acquisition of Tidal will enable artists to get fairly compensated with NFTs.
The continuous strive to achieve the mission attracts and motivates engineers who align with the vision. It also keeps investors excited for what is to come next. If Square were a company that merely provided readers, it would be too easy to “comp” it, which would probably lead to the valuation be a fraction of what it is currently.
Tesla: Accelerate the World’s Transition to Sustainable Energy
Tesla is another company that has an audacious yet attractive vision. For the general public, Tesla may be seen as simply a company that builds electric vehicles. However, their mission has always been bigger:
Accelerate the world’s transition to sustainable energy. — Tesla Mission
In fact, this has been on Tesla’s website since 2006, written clearly in their first Master Plan.
As most people know about Tesla, I won’t go into detail about its strategy. Still, everything Tesla builds — both its products and technology infrastructure is all related to the mission, and it resonates with most people.
Therefore, they not only produce an electric vehicle, but they keep innovating on their vertical integration (AI, Software Platform, Battery/Charger/Motor Technology) to make their cars more affordable and efficient, and ultimately autonomous. In addition, Tesla has an energy generation, distribution, and storage platform that is soon becoming the benchmark for the renewable energy industry.
As a result, Tesla has one of the greatest brands with the brightest employees and most passionate investors.
People work better when they know what the goal is and why. It is important that people look forward to coming to work in the morning and enjoy working. — Elon Musk
We Company: Elevating the World’s Consciousness
There is probably an ample amount of debate regarding the success of now-debunked We Company (currently WeWork). However, it is no question that it successfully posed as one of the most exciting “tech companies” despite being in the co-working office share business, which is not a new industry.
At one point, the pseudo tech company had a ludicrous valuation of $47bn, which is absurd considering that it is mainly a real-estate play. Although one of the largest public companies in the flexible office leasing industry, IWG, had much better financials and operational metrics, their valuation was a fraction of WeWork’s.
We ofcourse looked at that every single day, and said what are we missing? Is there an ingredient that we are missing out? But we never found it — Mark Dixon, CEO of IWG
One of the reasons behind this insane valuation was the grandiose ambitions of Adam Neumann and claiming to be more than an office space. His primary mission was not simply to revolutionize the workspace.
Elevating the collective consciousness of the world — WeWork Mission
To elevate the world’s consciousness, they had businesses in other areas to support this mission, such as lending furnished apartments (WeLife), building education facilities and programs for young children (WeGrow), and a luxury gym concept facility (Rise by We).
“If you have a business that is mission driven, you will attract the best people. If you attract the best people you have to remember this, you have to take care of them. The most important thing in every business is the employees making it work every single day”. — Adam Neumann Speech at Baruch College
Although the company had terrible financials, it was one of the most exciting companies of our time. It is incredible that a company with a simple business model — long-term leases on short-term revenue obligations ($650/week) — could rise to the levels of the We Company.
Final Thoughts
I believe all three of the companies manifest the importance of an overarching vision and mission. They all attract the best talent, keep investors excited, leading to higher valuations, and have attractive partnerships. The problem with We Work was that it had a great vision, but the strategical roadmap to reach its mission was poorly managed and executed.
Great companies don’t hire skilled people and motivate them, they hire already motivated people and inspire them. Simon Sinek, Start with Why
After our company started to get our first clients, we began to articulate our vision and mission. Our vision is quite audacious: to solve social issues using AI. Accordingly, every product or business line needs to have a vision articulating how it will solve a social problem (HR, Care/Medical, Security, etc.).
Tied to the vision, we also set out social KPI metrics to track the impact of our business. An example is the number of hours a care worker will reduce their workload when using our AI speech-to-text product.
When starting a company, you are extremely busy and may feel that the vision statements are too conceptual and can be taken care of down the road. The main focus is on the initial product-market fit but seeing our company grow, I clearly understand the value of communicating it at an early stage. We were able to hire talented engineers, product managers, and business development inspired by the vision. And the more extended the vision, the larger the space for innovation.
If you have a product that has reached product-market-fit and are looking to scale your company, it is worthwhile to sit and write down the vision and the strategical roadmap to support it.
Where are you headed, and what does the destination look like in 3–5 years?
Why do you exist?
What do we need to build, and how do we get there?
“Leadership requires two things: a vision of the world that does not yet exist and the ability to communicate it.” — Simon Sinek, Start with Why