July 7, 2020 10 min read
Opinions expressed by Entrepreneur contributors are their own.
During a recession, it becomes especially important for early-stage businesses to prove why they matter more than other companies. In this climate, purpose-driven businesses are the only ones who can say for certain that the world is a better place with them in it.
When your business has an important mission at its heart, you will have more power to attract talent, valued mentors, investors and customers. That’s because today’s consumers are drawn to ethical products from ethical brands. Employees are willing to work for less pay if their company shares their values, and these trends are only going to become more ingrained as the world comes to terms with recent events.
Research shows that purpose-driven companies are more resilient in times of crisis. B Lab found that during the last recession, companies with a social mission had a 63 percent better chance of surviving the downturn than other similar sized-companies.
“People — consumers, investors, everyone — are looking for inspiration and leadership now more than ever,” says Miyoko Schinner, an American chef, cookbook author, animal sanctuary founder and owner of dairy-free cheese brand Miyoko’s Creamery. “Without standing for something, you can’t inspire or lead.”
Here’s how purpose can be the engine driving your business to success:
Attracting the best talent
Times are changing, and people are more adamant than ever that their workplace reflects their personal values.
Millennials, who make up the largest percentage of the modern workforce, are much more driven by the chance to work for ethical businesses than their parents’ generation. A recent LinkedIn Workplace Culture report highlighted that nearly 90 percent of workers aged between 22 and 37 would accept a reduced salary to work at a company whose mission and values align with their own (compared to less than 10 percent of those between 54 and 72).
Put simply, millennials prioritize purpose over short-term personal gain. This means they will be likely to stick with your company in difficult moments and go the extra mile when the going gets tough. After all, a passion for a shared cause is a great morale builder.
Barton Wharton, CEO and co-founder of R3SET, was inspired to launch his wellness startup after his personal battle with stress as a corporate marketing executive took a heavy toll on his physical and mental well-being. His experiences drove him to build a team focused on developing actionable steps and remedies to lower stress and improve the wellbeing of its users. “When we launched this business, our product was inextricable from our purpose of making the world a healthier place,” he says. “In doing so, we have attracted the most talented group of people I have ever worked with. Everyone works here because they relate to the mission, they can share stories about how they have struggled with stress and got past it.”
Paying top dollar for top talent isn’t always an option, especially during an economic downturn. We are currently in a unique situation as thousands of layoffs have created a great pool of talent for startups. Given the fact that many of these workers probably came away with hefty redundancy settlements and a sour taste, these new candidates are likely less interested in money and on the lookout for projects with a potential to make meaningful change. Any company that can only offer the dollar sign will likely have to pay more to attract the best talent, or have to give new hires an equity share.
Dina Bayasanova, founder of PitchMe, a data-driven recruitment and upskilling platform aiming to reduce bias suggests that founders make sure that their purpose and mission shine through in their job advertisements. “When you are an early-stage company you are not selling the business, you are selling your vision,” she says. “Mention your team culture, opportunities for growth and what mission you are driven by. People who join startups are more driven by this, than by money.”
It will be pretty transparent to people if that “reason” is not genuine. Paying lip service to a certain value while your business practices (where are you sourcing your material?) and the way you treat your staff (are you making time and resources for their mental wellbeing?) run counter to those values won’t help.
“We are not just jumping on the ‘Insert brand purpose’ bandwagon,” says Wharton. “We really help our community. We create free content around key themes like LGBT+ stress in the run-up to Pride week. We start team meetings with mental health exercises. “We are a very purpose-driven company, but we don’t label it, we just live it.”
Connecting with the right mentors
As you grow as an entrepreneur, you will find that a relatable purpose will open up access to different types of support. Startups and the tech industry have a strong “pay it forward” culture, largely because so many of us bootstrap our way in and have shared each others’ struggles.
Barbara Shannon, a San Francisco based C-level advisor and founder of CEO peer groups Theceoboard, and Athena, says: “Like other tech business leaders, the members of my CEO group really enjoy giving back, especially to the next generation of founders.”
“The single most important attribute of successful mentor relationships is a strong personal connection.”
This spirit of cooperation means mentors will be more interested in supporting startups who are also “paying it forward” to their communities or existing social issues.
Remember that real purpose appeals to real people. When you reach out to business mentors using your purpose as a hook, you will attract those who care about fueling the same causes as you. They’ll be best placed to accelerate your big mission (and as a result, your company), and will be more willing to offer you their time, advice or services at little or no cost. Talking money is often generic and impersonal; you’ll get more value from mentors who you share a deeper purpose with.
Similarly, when searching for the right mentor — be it on social media or through trusted industry peers — it may be more effective to use your purpose as a filter, perhaps even more so than industry expertise. The same goes for finding the right mixers, events and conferences to network. Always make sure your purpose is one of the first things out of your mouth when presenting your business.
“I love startup training forums and accelerators — they’re a great way for people like me and my CEO clients to connect with early-stage founders, and they actually provide entrepreneurs with the time and space to showcase their deeper values,” says Shannon. “Both the founders and the mentors are usually curated, so you can have confidence that you’re interacting with knowledgeable, motivated leaders on both sides of the relationship.”
There are also many startup programs and grants available for impact-driven startups, as well as online resources for those at earlier stages in their journeys who are still assessing the viability of their projects.
Drawing in investors
As a result, investors want to see strong leaders with the capacity to motivate their team amid layoffs, lockdowns and budget cuts. Investors know that business leaders that embody social values will more clearly be able to support their staff’s well being and inspire them to keep the company afloat.
As well as resilience, having purpose tells investors that in this day and age, you have a special ability to attract and keep customers.
“Like it or not, conscious capitalism is on the rise,” says Kuda Biza, CMO of Nunbelievable, an impact-driven baked goods company that donates meals to soup kitchens for every food box sold. “Research shows that companies that practice conscious capitalism perform 10 times better than others. I’ve experienced this first-hand that our customers have confessed to picking our brand over other brands because they are aligned with our mission of feeding people.”
With missions like these, customers are more likely to feel a connection to you and organically spread the word. “Our purpose has enabled us to develop authentic connections with our customers, increasing brand loyalty. Having a solid base of raving fans has attracted the right investors to the business – ones that believe in both our product and our mission.”
Being impact-driven inherently means it matters that much more that your company survives — that you’re worth keeping around. Investors have to consider that if you go under, it would negatively impact the societal issues you pledged to solve.
“The purpose of a company isn’t just to sell products, it’s to make lasting change in the world with its products or services,” says Miyoko Schinner, who is also a leading advocate for the right of vegan food products to use traditional meat and dairy terms on their labels.
“Having true conviction in your purpose or mission will elevate you from the chaff and give reason to consumers and investors to support your company,” Schinner adds.
According to co-founder and chief medical officer of wellness startup Levels, Casey Means, MD, purpose gives your company another edge over your competition: adaptability. “Having a clear north star drives the company to be flexible and adaptable in responding to user feedback,” she says. “That’s because your mission creates a uniquely strong bond between company and customer so that you’re practically co-building the product — your customers are moving the company closer to where it can have the greatest impact.”
Aside from traditional investment, there are other funds available for purpose-driven companies. Ifundwomen is a funding platform providing women-owned startups access to grants and crowdfunding, and which has spaces specifically for impact-driven businesses. Purpose Ventures funds purpose-driven startups through a steward-ownership model, by which profits have to serve the business mission, while the company maintains its independence.
The world’s largest pre-seed startup accelerator Founder Institute is granting 10 fellowships to founders working on solutions to improve our post-COVID-19 future. It also has an extensive guide on how startups can navigate COVID-19, which includes fundraising options.
During such turbulent times, it can be tempting to forgo social responsibility for a business model that focuses solely on the bottom line. What we have to realize is that today, having a purpose and building a sustainable, profitable business go hand in hand.