A key characteristic that entrepreneurs of all types share is an almost innate ability to assess the risks and rewards of new opportunities. As Mark Cuban recently pointed out, however, Millennials like me have a different view of entrepreneurship and investing, which is leading to a widening gap in how to even think about, let alone evaluate, startups’ returns on investment.
Even the framework that has emerged as social return on investment, or SROI, does not go far enough in accommodating the new Millennial paradigm that has young entrepreneurs demanding to understand not only the financial return of a venture, but also the social and environmental costs of any company — startup or otherwise.
The Real Value of Compensation
The story of the first startup I was involved in, Yurbuds, illustrates Cuban’s point. When I received the unsolicited offer to be one of the first two employees of the St. Louis-based sports earphone company, my immediate response was, “Thank you, but no,” mostly because I could not see how my time there would lead to anything other than financial returns.
It took an “offer I could not refuse” and a great deal of persuading to convince me that I could put in a few good years in my mid-20s at a commercial venture and then pursue my own interests in social entrepreneurship and impact investing with some money in the bank.
Despite Yurbuds’ epic debut and recognition by Forbes as one of the most promising companies in America, I was absolutely miserable during my seven months launching the company, and I chose to announce my departure just two weeks shy of when my options would have vested.
I was due for a cash bonus equivalent to half a year’s salary, but I have never looked back.
The Challenge of Wooing Traditional Investors
Understandably, those of us who identify as social entrepreneurs are viewed as a strange breed by older generations, and doubly so by those who made their money in the markets and now control the world of investment capital. While Millennial entrepreneurs also share a high tolerance for risk, the rewards we seek — and the value we attempt to create — are not only personal and financial, but also social and environmental.
More often than not, that value benefits an underserved, neglected, or highly disadvantaged population of which we are not members. And, soberingly, we are just as likely to incur personal debt (in my case, 14 months without pay and $450,000 into the red) just to “change the world” for someone else.
This willingness to put our own skin in the game is often viewed as illogical, foolish, and the result of the naïveté of a younger generation that just hasn’t learned yet how the world really works. As such, it is not uncommon for potential investors to be suspicious of Millennials’ motivations. Investors are often unwilling to trust social entrepreneurs with the money they control. Sadly, my experience has been that this is often the case with charitable sources of capital, too.
The Future of Capitalism
While it would be an oversimplification to say this is an issue of “Boomers versus Millennials,” I completely agree with Cuban that an important difference in worldviews exists between the two and that despite the growing pains inevitable during the transition of power to a new generation, we have every reason to be optimistic about the futures of capitalism and our country.
So while the rest of the world catches up to the promise of a new generation of entrepreneurs, here are some thoughts from my own experiences about how to navigate the business landscape in the meantime.
• Remember that “maximization of profit and shareholder value” is still the law of the land. As much as I wish it weren’t the case, if you’ve got a scalable business model and are actively seeking capital from traditional investors, you should follow your lawyer’s advice for full disclosure but leave your social entrepreneurship bona fides at the boardroom door. Investors don’t care (yet), and you’re just going to confuse them.
• Focus on the commercially viable part of your venture first. Trust yourself that you won’t suddenly forget about the people and causes you care so much about just because you’ve done well for yourself. Social entrepreneurs don’t get a “pass” on financial sustainability, and you owe it to your mission to create the best possible conditions for it to flourish.
• Look for opportunities to tie financial returns to social issues. While some of us work to create the political will needed to change the system holistically, you can in the meantime use your abilities to identify new opportunities in the areas of cause marketing and corporate social responsibility. The data already exist to support this version of “social entrepreneurship lite,” and investors of all generations can see the value of brand-aligned corporate social responsibility.
I have no doubt that we will collectively create a better future for us all if we can secure the support of the preceding generations. This won’t happen on its own, and political engagement is also necessary, but the writing is already on the wall, and the tools of entrepreneurship are, in fact, sufficient to solve the economic, social, and environmental issues of our day.