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How Great Entrepreneurs Mint Emotional Currency

How Great Entrepreneurs Mint Emotional Currency

Nov 5, 2013

Start-up CEOs can’t build a company all by themselves. For that they need the help of cofounders and other team members, customers willing to try the start-up’s product, and eventually investors.

But start-ups usually have little money to pay top talent. Yet some succeed in attracting the best people in their industry. The way they do it is to mint what I call emotional currency. Talented people getting paid big salaries at big companies often feel that their work has little meaning.

But start-ups that set the right goals can attract create a work environment that is much more meaningful and exciting – and that emotional currency makes it possible to recruit and motivate top talent.

Minting such emotional currency requires an entrepreneur to set three such goals:

  • The mission that describes why the founder is passionate about the company
    and how it will change the world;
  • The long-term goal that will explain to investors how they will earn a return; and
  • Short-term goals – a series of real options, or frugal experiments, that direct the start-up to make the most of its scarce resources as it pursues key business milestones.

Consider Delphix, a Menlo Park, Calif. startup that helps companies roll out App projects 20% to 80% faster and is growing at 225% a year.

Silicon Valley has between 250,000 and 500,000 engineers which are ”feeder schools” for start-ups, according to Delphix CEO Jed Yueh.

Yueh believes that Silicon Valley is the best place in the world for what he calls “outliers” – the top 0.1% of start-ups — but it leads the other 99.9% of them to struggle for resources. Delphix is succeeding because it was able to recruit what Yueh calls “king pin engineers” who have experience leading the design of products that went on to create big revenue streams.

Yueh believes that the key to recruiting this top talent is to create a mission that will attract them to working on the hardest engineering problems. More specifically, he believes that a start-up will be able to recruit this top talent if it satisfies three criteria:

  • It is going after a significant market opportunity that will enable the company to reach $1 billion in sales;
  • Its product delivers a huge benefit to customers — what I call in Hungry Start-up Strategy a quantum value leap — that can be measured in 100% to 1,000% benefit improvements to customers; and
  • Building its product is a complex and difficult engineering challenge.

A compelling mission is even more important for social enterprises. An example is Embrace, a startup founded by Stanford MBA, Jane Chen, that’s dedicated to stopping the death of 20 million low birth weight and premature babies born each year.

This mission and her passionate leadership have helped Embrace recruit “a PhD in Electrical Engineering who is an expert on fiber optics, an aerospace engineer, and a computer scientist with a string of entrepreneurial successes in his wake,” according to Chen.

While you will need to craft all three of the goals I mentioned above at some point in your start-up’s evolution, the one you need to get right first is your mission – which will only be effective for recruiting if it grabs talented people emotionally and intellectually.

As you consider how to craft a powerful mission for your start-up, consider the answers to these two questions:

  • What talented people does your start-up need to reach the next level of growth?
  • How can you explain your start-up’s mission in a way that will attract and motivate that talent?

Answering these questions effectively mint the emotional currency you’ll need to attract top talent and spur your start-up’s expansion.

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Strategy consultant, start-up investor, teacher, corporate speaker, pundit and author Peter Cohan has invested in six start-ups, three of which were sold for a total of $2 billion. Before founding Peter S. Cohan & Associates in 1994, he worked with HBS strategy guru Michael Porter and at Index Systems, a consulting firm founded by four former Sloan School professors. Cohan has run over 150 consulting assignments for corporations and governments and engaged corporate audiences from Barcelona to Beijing. He teaches business strategy and entrepreneurship at Babson College. His eleventh book is Hungry Start-up Strategy: Creating New Ventures With Limited Resources and Unlimited Vision.

One comment

  1. Interesting contrast to this article: The WSJ is asking if Silicon Valley has an arrogance problem: