5 Mistakes Mission-Driven Entrepreneurs Should Avoid
I recently had the opportunity to speak with Jenn Kenning, CEO of impact-advisory firm Align Impact, about what areas mission-driven entrepreneurs need to look out for or be aware of when building a business. With her insights in mind, here are five mistakes that fall into the “wish someone had told me earlier” category.
1. Discounting the importance of mission authenticity.
Having your mission baked into the company’s DNA is as important as driving value. While every business can have its own specific mission, it is important for all businesses to be inclusive and find a balance that accommodates those interests across stakeholders, whether that's shareholders, customers, vendors, employees or the planet. Becoming a certified B Corp is one way to hold yourself accountable to your peers and the world.
2. Undervaluing your team.
No matter what business you are in, people are your most important asset. Per Kenning, when Align looks to invest in early stage businesses, it evaluates leadership and incentives in place to make sure the team is indeed an asset and not a hidden liability. While it stands true that no company is built by any single individual, the adage holds even more significance for businesses trying to tackle the social and environmental problems that require large-scale collaboration. As the leader, your goal is to build a team that will stand the test of time and represent the brand and mission of the company on all fronts. This means that your team needs to be appreciated, well-compensated and appropriately incentivized to contribute to the long-term growth of the business.
3. Not addressing risks beyond business-as-usual.
As entrepreneurs, we often have the appetite to take on more risk than the usual human being, but this doesn’t mean we shouldn't make contingency plans for ourselves and the business. Two things stand out: First, having a disaster-recovery plan, and second, having a three-to-five-year personal financial and strategic plan the same way your business does. You’ll need to make sure that things like an estate plan, keyperson insurance and healthcare directives are not just waiting to be put in place, but are there from day one.
4. Compromising on values alignment with board and advisors.
Oftentimes, as entrepreneurs, we take capital from wherever we can find it. This can be a huge mistake if your investors are not aligned with your mission and timeline. In addition, you'll want to seek out diversity among your investors so they bring more than money to the table. The goal is that they should also bring their expertise, skills, networks and willingness to be a brand ambassador. Kenning says this is by far the most significant thing she attended to while re-capitalizing Align. Investors being aligned with your company’s values will allow you to avoid mission creep when you entertain an exit at some point in the future, while also ensuring they're your biggest supporters when you hit a rough patch (which will happen).
5. Trying to maximize valuation as quickly as possible.
Valuation is usually where deals can break down when investors and the entrepreneur don’t see eye to eye. It is important to note that setting the valuation too high or too early can have negative impacts on the future of the business. First, if the valuation is based on some neck-breaking growth expectations, any minor setbacks can cause the company to struggle to raise "follow-on" rounds, or be forced to have a down round (i.e. new round at a lower valuation). In some cases, larger or absolute amounts will need to be raised to accommodate higher valuations in order to acquire significant client interest, which can be a challenge in some parts of the market. If a valuation is not making sense, or the business is too early to come to an agreeable solution, use a SAFE or a convertible note to move the decision to a later date. If valuation is necessary, aim for the middle ground where the investor and the entrepreneur can meet for the long-term benefit of the business and the mission.
Lastly, if you think, "I don't need a formal board" -- think again. Your board could be your second-biggest asset after your employees. Surrounding yourself with people who bring other skillsets and perspectives to the table is key to building a successful enterprise. In addition to your board or advisors, take advantage of resources like executive coaches or entrepreneur consultancies, which can support you through a sense of community and hold you accountable to your goals. They could be the push that helps you take your vision to the next level.