Carlos Eduardo Espinal is a partner at Seedcamp, an early stage mentoring and investment program that engages startups through monthly Seedcamp Events, where entrepreneurs present their companies, network, receive mentoring, and compete for investment by Seedcamp.
“If you have visions, you should go see a doctor” – Helmut Schmidt, one of the most admired German chancellors.
Because I know how confusing and frustrating the fundraising process can be for a founder, one of the topics I like exploring is “How to get into the mind of an investor” – particularly when an investor is evaluating you for an investment.
Whilst the easier topics to tackle tend to be quantitative in nature, the harder ones tend to be the “fuzzier” qualitative ones.
In that spirit, I think we’ve all heard how investors want to invest in a “solid team” and how they want to invest in founders with a “strong vision” – but what does that mean exactly?
With visions, mission statements, and all kinds of vagueness as part of many self-help books, do these elements really have any place in the fast-moving, cold and hard world of startups? In the context of the early stage high growth startup world, what does having “vision” really mean?
Let’s start by defining what a founder’s vision is not.
Vision does not equal power
A founder’s vision is not about how much money you want to make once you exit, nor is it about obtaining power or prestige. It isn’t about knowing exactly what the future will bring, nor is it about doing something no one else has ever done before.
Rather, a founder’s vision is about how you communicate and put into action your values, beliefs, and ideals in producing and creating something of value for yourself, your founding team, your employees, your investors, and your customers. A founder’s vision is the foundation of a company’s culture and brand.
In the words of James Kouzes and Barry Posner, authors of The Leadership Challenge: “There’s nothing more demoralizing than a leader who can’t clearly articulate why we’re doing what we’re doing.”
A founder’s vision, therefore, creates a company’s culture. This culture may not always be visible to outsiders of the company (nor is it generally communicated to potential investors specifically as such), but it is visible through the company’s culture, the brand, and brand values of your company are ultimately determined.
It is the brand of your company which is the outward-facing aspect to your company that customers and potential investors engage with. This brand allows you to attract potential employees, customers, investors and partners.
Thus, I believe that vision determines culture and culture determines brand. Think of many brands you love and respect and you will likely be able to trace their authenticity to one or several individuals (even if they are no longer there) who created the vision of the company and set the culture for all the employees to guide them through the creation of the products and services you love.
Think of the ones that you liked at one point but no longer do, and you’ll likely be able to trace why to a point in time where there was a break-away or ‘sell-out’ from the original vision that started it.
How is a founder’s vision applied?
In some startups, a founder identifies a need they personally have (they are the customer), and thus, builds a company around a product or service to satisfy that need.
Alternatively, there are other founders that find ideas within markets that didn’t previously exist (they intuit a need for a customer). In some cases this happens by design and research; others happen by accident, as was the case with the 3M Post It note.
Whichever way it may come, founders that have a strong vision – that is, one that’s synthesized, communicated and articulated to their team (and their customers) – can capture these opportunities and evolve them to become successful businesses.
Effectively, a founder’s vision facilitates the decision-making process the team uses to create a company’s products and services. It is through the clarity of a founder’s vision that focus is brought to the planning and decision making process within a company, and as a consequence the company can function efficiently and increase its probability of success.
Authentically connecting with your clients
In a world where new products are constantly emerging and many are copied by unfair competitors, it is the strong adherence to your vision and the culture and brand it creates that ultimately engages your customers to become loyal supporters and fervent defenders of your company.
Unfortunately, if you betray your customer’s trust by deviating from your brand’s values, they will likely throw you and your products under the proverbial bus, so to speak.
In his TED talk about how great leaders inspire action, Simon Sinek, shares his golden circle of “Why, how, and what.”
You can watch the talk in full, but the key point is that it all begins with the ‘why’ a leader must articulate to be effective… the “why” determines culture and the “why” determines ultimate “how” you do things and “what” you ultimately make.
A talented designer and good friend of mine, Gearoid O’Rourke shared a thought in one of his talks that I really think captures why it is important to take the creation of a founder’s vision and company culture seriously. In his words: “Products can be copied, but culture cannot…
“Even if your products are copied, you will always be ahead of your competitors because they can’t copy your culture [and culture is what lets you innovate].”
Once determined, the culture of your company will help you make decisions about how to engage and communicate with your customers, whom to hire, what to prioritize, and whom to partner with. In effect, your vision, your culture, and your brand will become the foundation and focus of all you do.
Where to find your vision
Your ability as a founder to set this vision and culture is the attribute that investors look for. If you are unable to determine and set a vision and culture for your company, unfortunately, you are likely to have others, such as influential mentors and perhaps even your investors set it for you. And as we all know, we can’t be someone we are not, and ultimately, this will likely lead to failure.
Once you have determined your culture and then you want to communicate it externally, authenticity is the key to retaining trust. In the words of Gabbi Cahane, “If it’s just words on the wall, then it’s meaningless. Your culture is what you believe in and how you behave. Codify it, live it, recognise it and reward it. And do that every single day.” “Early stage investors are looking for the signs that you instinctively get this.”
If you are in the early early stages of starting a company and you’re really more just thinking of starting a company, I’d highly recommend you spend some time trying to understand what drives you and why, for if you want to embark on the difficult journey that is to become a founder and leader of future employees and future shareholders, it would really help everything if you are be able to share the “why” of why you do things.
And in case you are reading this and thinking to yourself, “but investors only care about traction,” I’ve seen several cases of where an investor is willing to take a huge leap of faith on a founder, even before any visible traction – but only when the investor feels there is a strong vision behind the company.
Therefore, I leave you with this thought: Traction comes from happy and loyal customers, happy and loyal customers come from a great product or service that does what you say it does.
A great product or service that does what you say it does comes from a team that has a coherent culture that allows them to know what to do, and a coherent culture comes from a strong and clear vision from the company’s leadership team.