How to impress VCs (and anyone else) before you generate any revenue

written by Manaén Yosef Stürenberg Herrera, Founder & CEO of mypurpose academy

Founding a startup is playing the business game on hard mode. As an early-stage startup you lack all things established businesses or businesses running a different model have. You lack time, money, people, a product, a clearly defined target audience you can sell to, appropriate channels to even address potential customers, a brand, and so on.

This tweet by Garry Tan, current President at YC sums it up very well:

Now, how can you, a founder of an early stage startup who, by definition, has none of these even get a chance?

If you look at startupschool.org, YC's free programme and MOOC, you will get a hint at something many partners have said repeatedly: Until you have all things Garry mentions in his tweet, there is only one way to impress others – impress them with your achievements. If you are logged in into startupschool.org, you will notice that they offer you a weekly reflection tool that helps keep track of your goals and your key metric.

I have been using startupschool's tool more or lees frequently. However, I found myself being more and more demotivated since it took so long until I could even track the first outcome. And then it hit me: YC – and many other acceleration programmes and VCs – focus on outcomes only!

The case for high output management

A reason for this can be tracked down to the popularity of High Output Management, book by Andy Groves, founder and CEO of Intel. Andy Groves has had a deep impact on the Silicon Valley and startup culture through frameworks such as OKRs. As an engineer, he emphasised the importance of aligning all necessary elements in order to create products and services that ultimately add value. His approach lead to a massive increase in productivity and value creation for societies in general. And the founders massive successes such as Stripe, Shopify, and many others swear by Andy's advice. Rightly so!

The assumption of Andy's thesis, however, is that there is a clear path to value creation and a more or less clear understanding of what you customers want. In his book, he uses the example of a breakfast factory where the proposition is clear: The breakfast factory offers you a nice breakfast (general value proposition) with perfectly boiled eggs (USP). But it does not get too much into detail of how the entrepreneur even realised that there was a demand for a breakfast with perfectly boiled eggs.

This is no mistake of omission by Andy since, as the title clearly suggests, his focus was on maximising output through a conscious and scientific (re)alignment of already existing processes. His success and the success of those startups that succeeded based on his advice clearly proofs him right! It was, and remains to this time, a way to maximise good and the benefits for societies as a whole.

But what about you? What about the founder who still has to figure out what her general value proposition and USP should be in the first place? How can someone who has not gotten from zero to one impress anyone?I have struggled a lot with this question for a long time as well.

First, I needed an answer to this question out of self-interest since I, too, want to impress VCs, potential co-founders or early employees so they join and support my projects. Second, I have had many requests throughout the last years to either join a startup or serve them as a freelancer. There was, however, an information asymmetry: I could only know the things the founders or customers were willing to tell me and I had to always weigh it with a grain of salt since I could not be sure to a certain extent.

The case for high input management

This is where I came up with the Purpose Framework and the Purpose Index. These tools are meant to help me look beyond what others might want to tell me to get a clear understanding of what they want to achieve, how they want to achieve their goals and – most importantly – how I should measure their input towards said goal. Since I work with early stage startups and/or individuals who are considering entering the startup world I know I cannot expect outcome, yet. But I should be able to asses input. If Andy Groves proposes to measure and maximise outcome, I am proposing to measure and maximise input. In other words, the Purpose Framework and its tools point at the necessity for high input management.

This is good news for early stage founders since it means they are now able to impress others even before they have generated any significant outcome. To be clear, I am not proposing to get rid of outcome tracking at all. What I am suggesting, though, is to complement the classic KPIs with a new set of indicators that measure your input, i.e. your conscious effort to achieve meaningful outcome. VCs still should make their decisions based on their fiduciary responsibility to generate and maximise the economic and ideal outcome for their LPs as well.

But not all outcome is created equally. All paths lead to Rome. But not all paths are equal. The history of capitalism and startups is paved with unethical behaviour and harmful companies being built on the premise of maximising outcome at any cost. In the end, you could cheat your way to outcomes in order to impress investors (here is the latest example).

Having a clear sense of purpose is a way to discriminate between the available paths for you. You can pick the path where you maximise your outcome by optimising your input. Maximising your input means you align your efforts with an authentic motivation to achieve meaningful outcomes. It also creates transparency regarding the way you want to generate outcomes. Others are, then, able to evaluate your progress towards success and have a clear proof of your purpose. Let me brake down for you how the Purpose Framework helps you to impress others on your way to meaningful outcomes.

Purpose Framework (free download)

Impress with vision

In the early stage, investors want to bet on the founders, not necessarily on the product. The Purpose Framework clarifies your motivation to start your own company in the first place. It digs deep into your implicit belief system and generates a cohesive and coherent story of how your core belief or principle necessarily leads you to attempt to solve a problem. For many, this might sound like fluffy marketing lingo. And it is, to a certain degree. But I would argue that marketing, at its core, is all about conveying a compelling messages that leads to a desired action.

You could, of course, try to coerce or trick people to buy your products – or you could be explicit, honest and transparent about your motivation. It should be self-evident why the latter is better, not just for your external image but also for how your co-founders, team members and investors perceive you. From my experience, you yourself will need to remind yourself what lead you to start your company in the first place since, as you might already know, the startup journey is playing the business game on hard mode, indeed!

Having a clear sense of purpose means having a north start that guides you and reminds you what really matters. It is the foundation for all strategic considerations and the necessary condition to align all vectors/people working with and for you to achieve an outcome.

Impress with input

A common trap for inexperienced founders is to succumb to what I call vision porn. Having a clear sense of purpose or vision for a better future releases endorphins and you get all the pleasure without any of the work. You get addicted to narrating the story and seeing the impact it has on people's brains. I believe this is one reason why founders sometimes choose the easy path, even if it means to trick people to buy in into their story.

We need a way to demonstrate that we do not only have a compelling story but that we also are putting in the necessary effort in alignment with our values in a way that maximises future outcome. The Purpose Index does that. The Purpose Index is a figure (%) that summarises what you were able to realise from your pre-defined purpose. If the Purpose Framework is the north start that guides you, then the Purpose Index is the degree to which you were able to align your actions with that star to achieve the desired outcome.

Impress with meaningful (monetary) outcome

A famous German author said there is no good unless you do it. Being purpose-driven means that all your actions and the product or service you offer aim at benefitting someone else. In consequence, this means that if you are not generating any economic results and are not receiving any positive feedback from your stakeholders, you might still be on the way but cannot boast of achieving your goal.

A business is, in the end, a business, i.e. an entity meant to generate and maximise profits. This is essential for purpose-driven companies. If you are having a positive impact, consider it your ethical responsibility to do even more good. This is the signal that investors ultimately want to see. They are in the responsibility to maximise outcome for their stakeholders, mainly their LPs but also for society in general.

More and more investors are now looking for indicators beyond outcomes. They want to know that outcomes are achieved in a way they and their LPs can be proud of. The Purpose Framework and its tools offer investors, potential co-founders, employees and other stakeholders a way to investigate a companies purpose and have an assurance that your startup is worth their time, energy, talent, and money. We are now looking at a meagre economy for the next, at least, 18 months. People have to make tough calls and decide who is worth their remaining resources. Stand out from the masses and proof that you are able to maintain a clear sense of purpose and are capable of realising it – even under odd conditions!