Most of us are familiar with the drama of WeWork’s Adam Neumann. I would highly recommend all aspiring entrepreneurs to listen to Wondery’s WeCrashed to understand the rise and fall of WeWork.
Arguably high-profile founders like Adam Neuman and Therano’s Elizabeth Holmes gave a bad name to purpose-driven startups. They were too effective in communicating their purpose, they’re too convincing and too passionate in “selling” their vision of the future that led to their growth-lusting investors’ oversight of the financial fundamentals of their user growth and business model.
Scott Galloway, the best-selling author and professor of marketing at New York University’s Stern School of Business, harshly crtitized that some companies today are scaling the charisma of their founders and participating in “yogababble,” where they overpromise and underdeliver. He believes there may be an inverse correlation between companies that yogababble and their share performance. (full post here)
Prof. Galloway’s post on Yogababble proposed a very interesting concept — The Yogababble Index®. When paired The Yogababble Index® (how flowery and sleek the language used to describe their purpose) with the stock performance, it is very telling on the company’s culture. You get a sense of how dedicated a company is in building a sustainable business or their management is purely paying lip service to jack up valuation for maximizing financial gain for its investors.
Mission: “To make video communications frictionless.”
Bullsh*t rating: 1/10
Stock return 6 months post-IPO: +122%
Mission: “To unlock the potential of human creativity by giving a million creative artists the opportunity to live off their art and billions of fans the opportunity to enjoy and be inspired by these creators.”
Bullsh*t rating: 5/10
Stock return 1 year post-IPO: +9%
Mission: “On the most basic level, Peloton sells happiness.”
Bullsh*t Rating: 9/10
Stock return 1 day post-IPO: –11%
One big lesson for us to learn is to strike the balance between aiming high and being practical at every step of pursuing growth. And also to pay attention to the language that management use to describe the company’s purpose. We all love charismatic leaders and ones who are passionate and driven is hard to come by. But what if these founders could be more grounded and directed their attention to maximizing the value all stakeholders instead — what if Elizabeth Holmes would put their patients’ interest first; or what if Adam Neumann would channel his We zen in building a real community that harnesses worthy synergy between his entrepreneur tenants? They might one day see their vision come true. Not to mention if only they could be nicer to their employees, the founders might get their teams’ genuine support to overcome technical challenges and make things happen.
However, damage is done. Trust between purpose-driven founders and investors will take a long time to repair. We would propose a more practical and responsible approach for founders to regain the confidence from investors.