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Fundraising Now? Remember Morality Impacts Valuation

morality impacts valuation

Startup founders are trying to figure out how to fundraise through a pandemic and economic crash. New talk of capital efficiency is gratifying, but there was another lesson from pre-COVID-19 valuation struggles. Morality matters.

Venture capitalists and early-stage investors have told all of us, founders are critical to a startup’s valuation.

These investors also tell you the founder’s role cuts both ways. As a unicorn approaches an exit, the balance sheet needs to make sense. But importantly, headlines around WeWork, Uber, and Juul that may be fading into memory too fast were a signal.

These companies were a signal for founders and their early investors to reexamine their understanding of morality and valuation.

“Morality� is it too strong a word?

Most of us almost never use the word morality when talking about entrepreneurialism. It is a strong word driving deep into what’s in the soul, and publicly at least we work to avoid judging others. Like many of us, I’d rather focus on my own actions, and associate with others who I can learn from, and who I admire.

That’s probably why we don’t hear morality used often at business events. It’s a high stakes word. But we do hear it quietly standing behind other words we use more frequently, like reputation, purpose, brand, optics and litigation risk.

WeWork’s founder was been accused of self-dealing, which in turn has thrown the company’s IPO into question. Investors saw the enterprise’s nearly $50 billion valuation eroded right as they were headed to the public markets.

The founder stepped aside. Juul and its $38 billion valuation came under the spotlight after deaths and illnesses connected with vaping. Juul’s founder resigned.

Uber is still living down reports of its founder’s past behavior, and California pushed to treat drivers like full-time employees and take on the associated costs.

When the pandemic finally evolves into something more predictable, we can only wait for cannabis startups to find their way back into the news.

Whether we believe a company is moral, or not, actually matters. As Marie Ekeland, founder of venture capital firm Daphni has suggested, it matters if a company represents what you want the future to look like. Alternatively, if a company is seen as faking it, tremendous value can evaporate. The conversation boils down further to whether the leaders of these companies can be trusted.

What people say behind your back

Amanda Hesser, the founder of Food52, has talked about this saying when we think about reputation, it’s kind of how people speak about you when you’re not in the room. Columbia University professor Sheena Iyengar has called out authenticity as being at the root of whether a customer, partner, or investor will do business with you.

Iyengar suggests if you know who you are, and why you want to do what you’re doing, then you’re better at explaining it, and also you’re better at being more concrete about what choices need to be made and what you’re looking to do when you make each choice.

These ideas are right. Will people vouch for your character based on what they have seen of your actions. Do they believe you are transparent about your motivations and consistent in honoring what’s at your core?

A cynic can point to the fact that despite headline-grabbing behavior at Uber, the company continues.

Juul got far before events caught up with it. WeWork still does not appear on the verge of folding. The leaders who have caught the spotlight, have not seen their wallets hurt in any substantial way that we can see.

That may be true.

But what’s the logical conclusion of that lesson? Maybe it doesn’t hurt that much to push the line on ethical questions after all. In fact, the founders involved could argue, as could investors, that by pushing the line when others weren’t willing, much was gained. And the founders are only martyrs for the investors they made money for. And they are compensated for their troubles after stepping down.

This may also be true… up to a point.

Investors step in

Investors balking at companies right now, that appear to be morally compromised are not wrong, and there is an alternative. Companies that prompt employees to speak up about ethical lapses tend to be more profitable. Companies ranked by Ethisphere as among the most ethical, outperform the large-cap sector over five years by more than 14 percent.

As Jerome Dodson of Parnassus Investments, Jane Gladstone of Evercore, Julie Gorte of Pax World Funds and others have suggested — there’s tons of research that show companies that care about gender, equality, who care about diversity.

These companies care about the environment and they actually perform better. Because the research is so compelling, the largest investors, BlackRock, Vanguard, State Street, who are all the stewards of index funds — now represent the top three holders of almost every company. These companies have now started voting in sync with that because that’s just what’s best for their shareholders.

Fintech steps up

There are fintech companies that are especially well equipped to help best practices and morality rise to the top. I’ve had the chance to work with many of them to see it firsthand.

Harmonate, based in San Jose has developed private fund data operations tailored to the complexities of tracking social impact investing. One of their investors, JTC Group has developed a specialty in this arena through a recent acquisition.

Trust also comes into play supporting bankers who are now moving vast amounts of stimulus funds out to communities. They are trying to avoid getting it into the wrong hands. Fraudsters, organized crime, and others are stepping up to the trough.

Banks need to weed them out but do so in a manner that does not hurt small businesses. Enterprise AI firm Symphony AyasdiAI has developed a capability to reduce trust-eroding false positives to ensure the money that can have a social impact doesn’t get siphoned away or the wrong person is pilloried.

Property technology company Grace Hill in South Carolina has refined digital training for multifamily housing teams to not just make it through the COVID-19 pandemic with health intact — but by building better relationships with renters.

The action includes training in the full range of customer service skills that bring in revenue. And that includes a better understanding of how to cut out discrimination, sexual harassment, and biases that can destroy the reputation and moral purpose.

Impact

We all have been talking about impact investing for some time. And maybe we’ve been talking about it for so long that we’ve stopped taking it too seriously. Founders building their venture from the ground up, and the venture capitalists that back them as angels and seed investors, should not pay lip service to reputation, brand, or morals.

Economics should not be the driver for morality… but if that’s what it takes. We live in an age where powerful people appear to get away with trying to obscure the truth. But that can be ripped out into the open more than you expect. Bank on it.

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10 Entrepreneur Podcasts Every Founder Should Listen To

podcast
Podcasts are one of my favorite content mediums, and I know I’m not alone. Podcasts are inexpensive, typically free, they’re incredibly diverse, they’re usually updated on a daily or weekly basis, and you can listen to them while doing other things—like driving, doing chores, or exercising. Here are ten entrepreneur podcasts every founder should listen to.
As an entrepreneur, podcasts are even more important, since they’re perfect ways to feed your ever-growing hunger for more information. But with more than a million podcasts with more than 30 million individual episodes, it’s hard to know where to begin if you’re looking for an entrepreneur podcast to help guide your entrepreneurial endeavors.
I’ve assembled this list of my top 10 favorite podcasts for entrepreneurs.

Top Entrepreneur Podcasts

These are some of the best podcasts for entrepreneurs currently available:
Entrepreneur Cast

1. The Entrepreneur Cast

The Entrepreneur Cast is an aptly named entrepreneur podcast hosted by renowned marketing experts Jayson DeMers and Sam McRoberts. Both have started multiple businesses, and they tend to focus on entrepreneurship from a marketing perspective, while also often diving into relevant aspects of psychology, such as persuasion and incentive.
They give a firsthand perspective on the biggest challenges new entrepreneurs face, and they offer a fresh, front-line perspective as business owners who have both created (and sold) successful businesses, authored best-selling books, and are currently active in their own businesses.
Tim Ferriss Show

2. The Tim Ferriss Show

Consistently one of the top-rated and most popular podcasts in the world, the Tim Ferriss Show features Tim Ferriss, the author of The 4-Hour Workweek. Ferriss often talks with special guests, including rockstar entrepreneurs from Silicon Valley, professional athletes, and even politicians—all sharing their perspectives on success, productivity, and living well.
Marketing School

3. Marketing School

The podcast, Marketing School is hosted by well-known marketing experts Neil Patel and Eric Siu. Episodes are released daily, and each episode usually ranged from 4-8 minutes. Truly, straight-forward, bite-sized content.
Neil and Eric pack a ton of useful content into each episode, cutting out all the fluff until all that’s left is pure, dense, knowledge from the minds of two marketing experts.
Entrepreneurial Thought Leaders

4. Entrepreneurial Thought Leaders

The term “thought leadership� gets thrown around a lot, but Stanford University’s podcast series, Entrepreneurial Thought Leaders attempts to explore it right. With it, you’ll hear one-hour speeches from Stanford faculty, venture capitalists, and of course, entrepreneurs. It’s a perfect length of time for a workout or long commute.
Planet Money The Indicator

5. Planet Money: The Indicator

Planet Money is a great podcast by itself if you’re interested in learning more about the economy, but The Indicator is even better for entrepreneurs. Every weekday, you’ll get a bite-sized chunk of content, which can include interviews, news, and even interactive games.

No matter what, you’ll walk away with a better understanding of the current economy, and some new things you can try as a business leader.

Smart Passive Income

6. Smart Passive Income

Do you think passive income is just a buzzword, or an urban myth? Try listening to Smart Passive Income. Hosted by passive income millionaire Pat Flynn, Smart Passive income will help you learn marketing, business. You’ll also get investment tricks you can use to increase your income and reduce your number of working hours.
How to Start a Startup

7. How to Start a Startup

In one of the most aptly named podcasts on this list, How to Start a Startup teaches you… well, you can probably guess. Hosted by Sam Altman and a variety of other people from noted incubator Y Combinator. The podcast isn’t regularly updated—but there are 20 informative lectures you can listen to from years back, and they definitely hold up to current standards.
James Altucher Show

8. The James Altucher Show

The James Altucher Show is one of the most popular podcasts in the world and has been host to business leaders like Mark Cuban, Richard Branson, Arianna Huffington, and Peter Theil. You’ll hear personalities and entertainers like William Shatner, Coolio, and Tony Hawk.
It’s all about achieving greatness, establishing financial freedom, and finding your own path.
How I Built This

9. How I Built This

Another great podcast from NPR, How I Built This is hosted by Guy Raz, who takes deep dives to explain how some of the best-known companies in the world got to where they are today.
It’s always a great way to remind yourself that amazing companies and entrepreneurs often have humble beginnings and there are solid lessons to learn from each episode.
Gary Vee Audio Experience

10. The GaryVee Audio Experience

Hosted by entrepreneur Gary Vaynerchuk, the GaryVee Audio Experience is a podcast that explores the startup mentality, motivation, and practical advice for entrepreneurs. It’s a nice blend of interviews, speeches, and fireside chats, so try a few episodes to get a feel for the format.

Discovering New Content

These entrepreneur podcasts should get you started on the right track, but if you’re like most listeners, they’re going to whet your appetite for more.
Ask for podcast recommendations from your colleagues, and keep an ear out for exciting new podcasts as they start getting distributed. Please write in and let me know the real hidden gems out there we all are still waiting to discover.
Image Credit: Andrea Piacquadio; Pexels

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