When you start a company, there is no limit to how big a future you can envision; but usually, you lack the resources to turn that vision into a business.
To close that gap, you have to be great at sales. And the sales pitch you must deliver over and over again is different for each kind of person whose support your venture needs. For example, to attract talent, you need a different sales pitch than the one you would deliver to potential investors.
Regardless of the recipient of your sales pitch, what you have to offer is intangible. I call it emotional currency. And it comes in three different bundles -- all of which fall under the broad conceptual umbrella of goals.
Before getting into why each of these are different and important for your startup's success, let's examine the concept of emotional currency. Since startups can't pay high salaries, how do they attract and retain top talent? The answer is to make talented people feel that they are working on a very challenging problem in an environment that respects their ability to solve it.
Big companies, driven by the need for efficiency, are unable to provide meaning to individual employees the way startups can. This means the individual workers must fit within a corporate process in which new ideas are often considered unwelcome. Because you are starting a new company, you can decide to create a work environment that top talent will find more meaningful.
In order to mint such emotional currency, you must choose the right mission for your startup. Such a mission should tie together your values and passion to help potential employees, customers, and investors understand why your startup exists.
For example, Delphix, a Silicon Valley startup that built a system to help app developers get their products to market faster was able to come up with a mission that helped its CEO, Jed Yueh, recruit engineers who have leading design experience.
Yueh believes that the key to recruiting this top talent is to create an environment that allows them to work on the hardest engineering problems. More specifically, he believes a startup can recruit top talent if it satisfies three criteria:
- Going after a significant market opportunity that will enable the company to reach $1 billion in sales
- The product delivers a huge benefit to customers -- what I call a quantum value leap -- that can be measured in 100 percent to 1,000 percent benefit improvements to customers
- Delivering on that promise requires solving a complex and difficult engineering challenge
The lesson: Choose a mission for your startup that you and the talent you want to hire will find deeply meaningful.
The second long-term goal explains to investors how they will profit. In my interviews with over 200 entrepreneurs, I frequently hear that being acquired or going public is not an end point but a milestone in the journey.
But when an entrepreneur goes to investors to raise capital, there is a discussion of how the investor will get a return. I think most startup CEOs do not think it looks good to the press to talk about their interest in achieving wealth. Such a discussion may worry potential customers that the CEO will be gone immediately after the IPO and the company will fall apart right after.
The general rule is that the long-term goal of an IPO is more difficult to achieve because it usually takes longer to reach the lower limit of sales -- $100 million -- and profitability needed to persuade the general public to invest in IPO shares.
Seeking to be acquired is a less ambitious goal – generally a venture does not need to be as big in order for a big company to buy it.
Finally, and most difficult to articulate are short-term goals -- a series of real-options that help your startup learn faster than competitors how it can get customers to pay for a product that meets their needs before it runs out of money.
As a startup CEO, you should understand the concept of real options and apply it. Jeff Bezos has been using this concept since he founded Amazon. He looked at e-commerce and placed his first bet on making money selling books online. If he succeeded at that, he would apply the profits to selling compact disks and videos, and if that succeeded, he would move on to other product categories.
Real options are inexpensive bets that are designed to help your startup learn the most it can in the shortest possible amount of time while spending the least amount of money. If you make the right series of bets, you are more likely to get the most learning out of your limited resources.
That will put you in a position to get customers, grow enough to raise more capital and set a new series of short-term goals.
Turning your vision into reality requires setting the right goals. A mission statement can help you recruit and motivate top talent; a long-term goal can make it easier to raise capital; and short-term goals enable you to make the most effective use of your limited resources as you chase your startup's mission.
The author is an Entrepreneur contributor. The opinions expressed are those of the writer.
Peter Cohan is president of Peter S. Cohan & Associates a management consulting and venture capital firm. He is the author of Hungry Start-up Strategy: Creating New Ventures with Limited Resources and Unlimited Vision (Berrett-Koehler, 2012).