How to decide what company to found and what is the role of passion in all this?

 

“Your work is going to fill a large part of your life, and the only way to be truly satisfied is to do what you believe is great work. And the only way to do great work is to love what you do.” Steve Jobs

“Bezos first got the idea to start an Internet enterprise in 1994. While surfing the Internet in search of new ventures for D.E. Shaw & Co. to invest in, he came across the statistic that World Wide Web usage was growing by 2,300 percent a month. Bezos immediately recognized the expansive possibilities of selling online and began exploring the entrepreneurial possibilities of developing an Internet business.”Entrepreneur.com biography of Jeff Bezos and Amazon

So who is right? Do great businesses naturally arise out of passionate tinkering with a problem in your garage or out of finding a great market opportunity through a process of elimination? This is a question I am often asked by wanna-be entrepreneurs and I have always found the trite answer – follow your passion – to be a pretty unsatisfying one and one that doesn’t really bear out with my anecdotal experience of what drives success.

Why do we care so much about passion?

For sure, the majority of start-ups that I see as an angel investor are start-ups that were founded out of some personal passion. This makes sense. Starting a start-up is hard emotionally. People will tell you that what you are working on is crazy. Potential investors will not return emails. Friends will question whether it wouldn’t be better for you to go work at a big company for a while first. Family will lament that you are throwing your life away. In those early days before you have traction, customers, revenue – objective measures that there is something there – it is frequently passion that will sustain you.

But watch out! Passion happens to also be a very useful tool of persuasion – people want to join endeavors, partner with and invest in founders that come across as passionate. Passion, as they say, is contagious. As it is a useful tool, it is often co-opted by founders and CEOs in a useful way to drive the success of their business. From early days in a startup accelerator, there is often coaching provided to startups that they need to articulate their passions front and center when it comes to pitching their startups. We are encouraged to “talk up our passion” for an area, and it typically finds a home on page 2 of a pitch deck, right behind the title page.

At some point down the road, a company typically will work on a vision or mission statement that becomes the embodiment of the organization’s reason for being. This is almost universally understood to be a critical, if not “the” critical, ingredient for success. Without exception, all successful companies have strong visions. Internally, a strong vision leads to team conviction that helps set direction, creates a framework for decision-making and broadly aligns an organization to execute in the desired direction. Externally, a strong vision helps customers see themselves in your product or service and hence helps you build fellowship and traction in the market.

So, why is passion a possible red flag?

There are three errors we make as observers looking outside in at successful startups.

First, we assume that the articulated passion today was present at the founding of a company. Amazon’s mission today is “to be earth’s most customer-centric company”. But Amazon wasn’t founded because Bezos was particularly passionate about customer-centricity. Or, that at the inception of the company, Bezos believed that customer centricity was an important problem to be solved. If anything, it was that Amazon wanted to be the largest bookstore in the US. The rest would come much later.

Second, we assume that passions cannot change and evolve over time. As Amazon grew, entered new markets and came to be seen as a trustworthy place to buy goods online (at a time when trust was a bigger issue) this customer focus became the “true north” of the company. When you hear Bezos talk today about the company he has built and where it is going he exudes passion for this customer mission. But that doesn’t mean it was in the furthest reaches of his mind when the company was founded.

Third, we assume that “passion” at the founding of a company is not subject to revisionist history. The canonical example here is Facebook. It is possible that the world’s most successful social network was founded “to give people the power to share and make the world more open and connected” or to “give people the power to build community and bring the world closer together”. Or, if you believe the movie, it might have just started as a lark to rate women at Harvard. Start-ups start for lots of reasons that don’t make for a very good narrative, it’s easy to see the temptation for embellishing it a little.

Many times, one can observe a combination of all three. At the end of the day, what passion drove someone to start a company is largely driven by the story they tell. Be careful in comparing your unmasked thoughts, dreams and desires against the PR- release-like veneer of others.

What does the empirical evidence tell us?

Here is a thought exercise. What you care about as an entrepreneur is probability of success. Which if you could observe it is the number of “passion” startup successes divided by the number of passion startups compared to the number of “rational” startup successes divided by the number of rational startups. Unfortunately what we tend to see is just the absolute number of successes of each (and even then probably are overgenerous in putting startups in the “passion” bucket for the reasons above). So imagine that 80% of startups are “passion” driven and the average success rate is 5%, while 20% of startups are rationally-driven and their success rate is 10% (ie. double). You would still end up running into many more passion startups just because of the sheer overwhelming number of passion startups that start.

I see a lot of startups but can really only speak anecdotally from my own observations. It would be great to be more empirical. If someone can suggest a way to do this, or has seen a report on this, then let me know!

Passionate about what?

Domain versus function

Let’s not forget that when we talk about passion most folks naturally think about passions for a particular domain. For travel, for making architects more efficient, for making the best cup of coffee. But there are also “functional” passions. You might be passionate about sales and marketing, or for reverse engineering machines and making them more efficient or for finding valuable applications for machine learning (merely a functional tool after all)?

The passion that has driven me is to build impactful things. Early on in my career impactful meant eyeballs and money, as I mature and grow I have learned that impact tends to mean also positive impact on people and society. Within the context of that, I feel just as at home helping launch a digital bank for the migrant population as I do building an insights platform for free genetic tests to help people understand their health.

Many entrepreneurs are, at their core, builders first and foremost. Their energy comes not from solving a particular problem but from problem-solving.

It’s time to celebrate that.

Uniqueness

One thought I recently had as I tried to parse the common wisdom about “passion” was that perhaps when VCs talk about this they are not talking about just any sort of passion but really that counterintuitive, non-sexy passion. You know, the thing you are really passionate about but no one else is.

For example, the startup ecosystem is so very overweighted in music, dating, travel startups and new social networking ideas. We are all passionate about dating, about listening to music or following bands, about spending time on Facebook and going on great vacations! Those passions don’t separate you from anyone, they just make you human. The don’t give you some sort of unique advantage.

Final thought

It goes without saying that if you are lucky enough to be passionate about a space that is transforming, disrupting or structurally growing fast, then this is the best outcome.

The question is what if that alignment doesn’t happen. Do you follow your heart or your mind? And how do you go about evaluating this. There is an answer but you’ll need to wait for my next article!

 

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