In June of 2018, I was asked to be a keynote speaker for 30 entrepreneurs participating in the 2018 East Coast Academy organized and produced by the Cleantech Open Northeast. This is an intensive two-day bootcamp that kicks off the annual Cleantech Open accelerator. As a fellow entrepreneur in this sector, the opportunity to change the world for the better is extraordinarily motivating to most of us. But over ten years in, I've learned, often the hard way, that a strong sense of purpose is only one secret to success. But the other secrets are rarely discussed in Accelerators and Incubators or in Board Rooms or Boot Camps.
There is a lot of discussion about the importance of purpose. Having a sense of purpose in our life is critical to well-being. In a longitudinal study, researchers found that people who demonstrate a sense of purpose in their lives have a 15% lower risk of death. Having a sense of purpose in our roles at work is equally important. People with a sense of purpose at work have twice the job satisfaction. Are 3x more likely to stay at their company. Purpose driven companies have 12x the stock price.
As Cleantech entrepreneurs, we have a major built-in "purpose advantage" relative to entrepreneurs in more traditional sectors. Your startup's positive impact on this world will be that beacon that guides you to optimism when you have a very hard day. It will bring you better employees, often at a lower cost. It will attract a class of investor that wouldn’t invest without both return and impact: an increasingly bigger, more powerful group.
We all have distinct missions in this sector, but if we in this room, and in the other CleanTech Open geographies, are successful then we will have the resources and the climate for future generations to continue to live on this planet. We are literally starting companies to try and save the human race. That’s an incredible purpose. If we, as a sector fail, then let’s hope Elon has figured out this whole Mars thing.
Yet even with this purpose advantage, let me remind you of the sobering odds—just from a financing lens:
- Most start-ups fail to raise a seed round
- Of those that do, only about half raise an A round
- Only 15% get to a C round
- Less than 1% are a billion dollar idea
One of the most illuminating, if not depressing, conversations I had with an investor was when he told me that he could likely only make 1 investment out of every 500 meetings.
Now most Incubators, Boot Camps, and Accelerators will tell you the secret to start-up success is a large market, getting product market fit as fast as possible, building a great team, and planning your capital stops well. Yes—this is all very, very important. Listen to them.
But let me share a few realities about the WeSpire journey that have made me realize there are even more important secrets to success. First off a few facts: we are eight years old. We have 30+ Fortune 500 customers with ~1.5M employees. We've won Edison awards, been Named Environmental Product of the Year and I was honored to be named EY Entrepreneur of the Year for New England in emerging tech. We've raised over $10M dollars. We are just reaching profitability. We've reduced the equivalent of 2 power plants of energy. Sounds pretty amazing, right?
For the first six years, no one believed we were in a large market. Just last year it was finally sized at $74B. Sometimes you are just way too early and it is an absolute leap of faith that it can be very, very tough to persevere through.
We have had to test and learn a ton to find the right match between product/market/buyer/timing and scale. Some would argue we are on our third pivot. We are certainly on our third go to market model -- at least.
I've made major hiring mistakes — often with truly wonderful people personally—and had to inflict the pain of being fired on them, when hindsight 20/20, the mistake was mine and avoidable.
We've survived a 40% drop in revenue when a partnership exploded unexpectedly.
A quasi partner/competitor wanted to buy us, did diligence, we signed an LOI we were generally happy with, and then they cut the offer in half a week before the close -- some believe in a premeditated attempt to just steal our IP. We took a deep breath and walked away, but it was terrifying and a complete waste of precious time and money.
A consequence of all of the above is that I have spent most of the last eight years raising capital, worrying about capital, and running out of capital. I've gone off salary, as have other members of my team, on several occasions to ensure we made it. I still approve nearly every penny that goes out the door and track it religiously. We review our cash out date almost as frequently as our pipeline.
I thought it was just harder for us and then four years ago, I joined a high growth CEO forum and two of the CEOs were running so called “unicorn” tech companies. That's when I realized that we all were experiencing very similar problems with employees, competitors and partners, raising and running out of capital, shifting board dynamics and unexpected near-death experiences. Their problems just had a lot more zeros. Participating in that forum and learning what kept even the most successful entrepreneurs up at night helped me identify what I believe, besides a powerful purpose and the well-known fundamentals, the actual start up secrets to success are.
Four Secrets of Start-up Success
1. Don't implode personally
Personal resilience may be the single most important trait an entrepreneur has. The pressure is intense and you will face an endless steam of no’s. People won’t invest in you by the hundreds. People won’t buy your product by the thousands or will take that many days to decide. People won’t come work for you at all or they will quit often at less than ideal times. Most people, particularly investors, will tell you the hundred reasons why you are doomed to fail, often in snarky emails or irate phone calls. You will always be working -- or thinking about work. You will have sleepless nights. That pressure and rejection can lead to some very bad traits. Alcoholism. Divorce. Domestic violence. And in the wake of the news about Kate Spade, a reminder of a stark fact that 1/3 entrepreneurs are depressed, which is 4x the national average.
So take care of yourself. Your personal well-being is your startups most critical asset. Hike in the woods. Meditate. Join a religious or community organization. Sleep. Exercise. Eat more plants and less meat. Count your drinks. Find a coach or a therapist. Volunteer. Make time every day to improve your wellbeing, just as you schedule time to sell your product or raise capital.
2. Prioritize relationships
When entrepreneurs and business people are asked late in life what they wish they had done differently, no one says “made more money”, "raised a bigger Series A" or “worked more." They mention two things: spent more time with the people they loved and that they were true to themselves. Make a list of people you care about the most and try to see everyone on that list as best as you can. When you travel, stay with your friends instead of a hotel. Add a friend's name to a list of calls you need to make that day. Prioritize quality 1:1 time with your significant other and/or kids every week and turn off your phone when you do. Build in time to get to know your investors and board member as people: their motivations, fears, strengths and goals. Do the same thing with your team members and customers.
3. Build diverse teams and boards, Choose diverse investors
Companies that are top quartile for racial diversity are 35% more likely to have returns over industry means and 15% better for those with gender equity. Diverse companies are more innovative, focus more on facts and process facts more carefully. I stand here as a female entrepreneur and will tell you, it is really, really hard to build a diverse team. We’ve done it from a gender standpoint broadly on our board and in our company. But we are not where we need to be in terms of racial diversity. This needs to be highly intentional and focused and if you as founder don’t make it critical, no one else will. Make sure your board is diverse, as diverse boards are better boards. Join #founders4change, the global movement of entrepreneurs pledging to choose investors with more diverse partnerships because recent data shows that venture firms with diverse partners are better firms. Consider being a B Corp because it holds you accountable for measuring your progress.
4. Ensure psychological safety
Google did extraordinary research to understand the key to high performing teams. What they found: psychological safety. The ability to bring up problems and issues. Mistakes are not held against you. People aren’t rejected for being different. It's safe to take risks. It's easy to ask for help. No one undermines efforts. Your unique skills valued/used.
Start by measuring psychological safety on your team. Weed out the bad apples. Coach communication styles and skills. Practice situational leadership. Use the Predictive Index or Myers Briggs to learn more about each other. Commit to improving and learning from those things that cause people to feel unsafe. Working to improve psychological safety might be the most important thing I'm doing as a CEO.
You are in this room because you have a great idea. You are already brave for taking this leap, in spite of the odds. You are in for the greatest personal development experience of your life. I encourage you to find joy in the struggle and never, ever lose hope. We are all cheering you on and the next generation, in particular, needs you to give it everything you have.