Investing

Consumer + Enterprise + Mission

Photo by Devin Avery on Unsplash

My friend Nikhil recently made a great point about how more startups are serving both consumers and enterprises. “The technology world used to clearly segment businesses by consumer or enterprise,” he wrote. “But those lines have been blurring for quite some time. The most interesting companies don’t fit into either bucket.” He cites Zoom, Amazon, PayPal, Notion, and many others as examples of this trend.

I saw this firsthand at eBay. It started as a consumer company, but very soon, two things happened:
1. Sellers on the marketplace realized eBay could morph from a fun side hustle into a profitable main business. Some of these sellers grew into SMBs. The world is full of enterprising people. And when your product encourages them, they will find new and interesting ways to stretch and use it.
2. Businesses realized there were a lot of buyers on eBay. It became an attractive additional storefront for them to sell their wares.

By the time I got there, eBay was already both a consumer (p2p) and a business company (b2c and early signs of b2b).

So, I agree with Nikhil 100% that the next big thing will be both consumer and enterprise. However, I believe there is an even more important lens to evaluate companies: mission.

I think of a company’s mission or purpose as its raison d’etre.

  • Why does the company exist?
  • At scale, what problem does the company solve?
  • If the company solves the problem, does it make our world significantly better?

If your company can answer that final question with a resounding “yes,” you are at a big advantage.

One advantage is that you can hire talent at reasonable rates, because people buy into the mission. Gen Z is the first generation to prioritize purpose over money. If they authentically believe in what they are working towards, their commitment level is incredibly high.

Another advantage of being mission-driven is resilience. All startups hit speed bumps, but with a strong mission and a team of believers, these become easier to weather. The purpose will help guide your team through the hard times.

Finally, customers value mission, too. Millennials and Gen Z care deeply about which brands they patronize. When they see a mission-driven company that aligns with their values, it is much more likely they will form a strong affinity for the brand.

At eBay, employees thought about the mission every day. Last week, I was catching up with a former eBay colleague, and he expressed the desire to be driven by mission again: “I mean, we weren’t working for just any company.” When you’re helping expand access to economic opportunity, and you’re doing that with a great team, it’s a powerful thing (and it’s a ton of fun).

Core, one of our portfolio companies, exemplifies this idea of consumer + enterprise + mission. It’s a mental performance company that encourages meditation. Consumers are adopting it, and companies are buying Core to help their employees find a sense of calm and focus. Their mission, to cement mental performance as a pillar of well-being, gives them an important advantage.

Historically, mission (or purpose) has been sneered at. Investors believed the lack of singular focus on money led to sub-commercial returns and failed startups.

Not us. At Spero, we believe that when you combine a great business model (an absolute must) with a great mission, magic happens. Purpose is not just icing on the cake. When a company, by executing on its core business, makes the world better, that’s a huge win. eBay, Tesla, and WhatsApp are all examples.

Mission/purpose is your secret sauce. It’s your superpower. That’s why I believe the best companies of our generation will be purpose-driven.

Re: Money On The Screen

Photo by Christina @ wocintechchat.com 

What I love most about the newsletter format is that it encourages discussion. In response to my last post, Put The Money On The Screen, a founder emailed me with some points that I want to share and discuss.

The founder rightly pointed out that there’s nuance to the idea of putting the money on the screen. Spending and cost-cutting decisions depend on the stage of the company and the unique circumstances.

Here’s part of what the founder wrote:

The problem with cutting off-screen costs is that the results over time mainly go to investors (because the great majority of the company over time is investor owned), and proportionally less to employees and common shareholders, which are asked to bring the sacrifice. Just be mindful of what asking people to sacrifice means.

This founder was speaking from a personal experience: being asked to take a ridiculously small salary after raising a significant Series A from a top-tier firm. The founder went into debt as a result of this, and it took a long time to recover.

While I haven’t heard both sides of the story, I do think putting a founder in that situation is harsh. VC firms should make sure founders and CEOs aren’t under undue financial stress—it’s in everyone’s self-interest for the CEO to be able to focus on building the company. Additionally, some expenses that might strike VCs as superfluous may be legitimately necessary for team morale or culture. Those are best judged by the company’s leadership.

All of this depends on the stage of the company. At the later stages, the tradeoffs will change. But regardless of stage, employees bear the brunt of putting the money on the screen during tough times. I’ve seen this happen in film, where the writer/director bears the highest cost in “making it happen,” and first-time founders are often in the same situation.

While that’s the nature of the beast, it’s something worth pausing on. It is not always the right decision to cut some “off-screen” costs. The best decisions may emerge when investors and CEOs have honest conversations that recognize the impact and consequences of these decisions.

Being Wrong

Photo by Andrej Lišakov on Unsplash

At some point in 2002, while I was still relatively new to eBay, I found myself sitting in a room with the exec staff discussing something strategic. Many of the details of the meeting are now blurry, but one little event is still crystal clear in my mind. People were talking, discussing options with opinions flying around, and I said something. I don’t remember what I said, but I do remember the reaction to it. 

One of the senior leaders—a lovely, but brutally honest and blunt man—said, “That is the dumbest thing I have ever heard.”

There was a pause in the conversation. My heart stopped. And then the conversation continued, while I sat there, stunned. 

I felt in my bones that I must speak again, in this meeting, to get over that comment, to move on and retain the confidence that I can contribute.  I practically forced myself to speak again. Sort of like falling off a horse and getting back on. 

I can guarantee you that the only person who remembers that moment now, 18 years later, is me. It’s actually a moment I’ve thought about several times as one of the key learning moments in my life. 

The reality is that we will all be wrong sometimes, or at the very least, perceived to be wrong. It’s the price of speaking, the price of thinking, the price of writing. So what should we do? Never speak, think, or write unless we are certain we are right? That would erase your voice from the conversation. 

I wrote a post last week about Quibi, and I purposely made a bold statement about how innovative this new film platform is. The innovation is not just the short-form content (or chapters) that Quibi uses; it is creating an interaction between the form factor of the screen (the phone) with the content for the first time in cinema. 

Many (most?) people disagree. Some even wrote to me privately to tell me why I was wrong. I love the engagement. 

Am I sure that Quibi will succeed? Absolutely not. But I am glad they are trying something fresh, new, and innovative, and I certainly hope they will succeed because I love the bold approach. I’ve been watching chapters for the past two nights and it’s a slick user experience. 

As investors, we need to be both right and contrarian to make a return for our LPs. We will often be wrong, too, because the path to success for any company is filled with so many near-death experiences along a very winding road. But we can’t be afraid to make an investment.

Similarly, we can’t be afraid to talk or write. I will be right sometimes. I will be wrong sometimes. What matters to me is the thinking and the engagement. And I prefer to have a hopeful and optimistic view of the world, where I am rooting for success rather than failure. 

Speak up. Claim your seat at the table. So what if you are wrong sometimes? We are all wrong sometimes. Shake it off and move on. I promise you that you are the only one who will remember that moment (even days later). Ultimately, your voice matters. Don’t erase yourself.