From what I hear, one reason that startups fail is that their visions don’t line up with their investors’. A vision disconnect between the people who are the startup and the people feeding money to the startup leads to an end to funding, replacing some founders, or some other kind of nasty outcome.
The disconnect’s origins make perfect sense. A team of founders and a team of investors both spend lots of time developing their own hypotheses (about business opportunities or the direction of technology or a specific industry), and by the time startup meets investor to raise funding, there is often little overlap. Founders spend their time executing the details of specific visions, while investors meet with many companies and hypothesize broad visions; it’s easy to see why the two sides’ hypotheses don’t often overlap. Unfortunately for the startup, whether the investor funds the startup is exactly the same question as whether the two sides’ visions overlap!
Let me give an example. One of my friends (let’s call him Adam) is building a company that makes data visualization software for wealth managers. Adam told me about his first interaction with one of his prospective investors:
He got really excited when I first explained my company to him, especially when I told him about the partnerships we’ve landed. Then he started asking me these weird questions that had nothing to do with the company. “Are you guys incorporating social?” he asked. “Not in the near future… that doesn’t really fit in our product,” I said. “OK… how about mobile?” “No… not yet.” “Local?” “I don’t think our product has synergies with location either…” After each “no,” he looked more and more disappointed, and I was confused about his questions and dwindling enthusiasm, until I realized it was because he really wanted to invest but my company didn’t fit into any of the theses of his firm – social, mobile, and local!
So Adam didn’t get money because his vision for data visualization for finance didn’t overlap with an investor’s vision for social, mobile, and local.
Interestingly, there is a very parallel relationship in the global health world between non-governmental organizations (NGOs) and donors. Just like startups, non-profit global health NGOs need to raise money to fund their worldwide personnel, materials (any medicines or malaria bed nets, for example), administrative costs, transportation, and any physical capital. So they turn to (often international) private donors to raise money. But just like investors, these donors have their own personal visions for what kind of health solutions they want to see.
One example I picked up in my global health class is the influence of neoliberal philosophy on donors in the 1970s. (Take this interpretation of global health solutions with a grain of salt, but consider it.) According to Professor Salmaan Keshavjee at Harvard Medical School, the economic crisis in the 1970s led to blaming government regulation as the crisis’s cause, and a “justification” to revive a decades-old philosophy of neoliberalism – which argued for the free market’s ability to distribute resources and questioned efficiency of most government intervention. This neoliberal spirit manifested itself not only in the election of conservative leaders like Ronald Reagan and Margaret Thatcher, but also in the shifting policies of global health leaders like the World Bank president Robert McNamara. For health policy, the neoliberal current was the call for free market instead of public sector solutions to distribute health care. The example of people like McNamara set the tone for pro-neoliberal donors.
One instance of this is the influence of international donors in swaying the Ugandan health care system to implement user fees. User fee programs required citizens to pay for medicine, a reversal of medicine previously freely offered by the government. As you can imagine, in a poor country like Uganda, user fees had the effect of substantially reducing access to healthcare, and many families ended up unable to pay to maintain even their basic health. User fee programs were part of this broader neoliberal philosophy that called for free market rather than public sector health care solutions. Even though Uganda’s national health care system worried about the risk of such programs on citizens, it had to implement them because the alternative was to have no money at all, and some Ugandans were worse off because of it.
What are the lessons between the NGO-donor relationship and startup-investor relationship? One key takeaway is that so long as both sides’ priorities are matched, such situations don’t have to occur. The next question, then, is whether or not there exist enough donors with priorities closely aligned with those of NGOs and developing nations (I’m going to focus on the problem for these actors because they seem to be the worst off). And based on the dreadful state of health in many developing nations despite billions of dollars of funding, my guess is that not enough of these vision-aligned donors exist. If that’s true, how can we create more of these? Building potential donors’ awareness and empathy to win them over to the priorities of health organizations on the ground (rather than the donors’ intellectual priorities) might be the answer.