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3 Old School Lessons for New School Entrepreneurs

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Lately, I've observed a trend among young entrepreneurs in impact. They're certain that impact will change the world; that focus on social values is the recipe for transforming the communities in which we live, the jobs at which we work, and the fabric of how we interact. The trend is marked by a serious exuberance about the possibilities ahead, and the sheer catalytic nature of the endeavor on which they're about to embark.

Now, here's the thing: I believe deeply in impact. I believe in its ability to shape, and expand, the intersection of business and benefit. I believe in the power of markets, and investment, to move institutions in ways that policy debates often can't. But I also believe in the basic business and management principles that underpin high-performing organizations of all kinds. And it's that belief that has made me take notice of this trend, that's both entirely understandable and ultimately problematic: The tendency to forget about the business basics when we're so excited by the social benefit just beyond the horizon.

To counter this tendency, I've found myself offering anecdotes, shaped by my own experiences, to a number of young entrepreneurs. These entrepreneurs are often storming out of college, or graduate programs, ready change the world, even if they're not always sure how. My goal is to help them merge their desire to do good through business with the reality that they'll need to be good at business. Once I realized that stories stick, I started keeping track of the stories that stuck best.

I call my favorite of these parables:

The Texas Banker Test

Imagine you're heading down to Texas to pitch a banker on your world-changing idea. You want him to invest in, or lend to, you. You manage to get a meeting, get on his schedule, and show up at the appointed time, dressed just as smartly as you possibly can. You sit down in front of him and say that you, "want him to invest in your social enterprise." What's he going to do?

He's going to lean back in his chair, put his boots up on his desk, look you square in the face, and say, "I don't need to know about socialism, I need to know about making money!"

And in his context, he's going to be right!

o What's the Lesson? Language Matters
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Everybody has their own language, and not everybody hears the same thing. This was a critically important realization for me. Just because someone disagreed with what I said didn't mean they disagreed with what I meant. Sometimes the words I used got in the way of the message I was trying to convey. So I learned to adapt.

Rarely, in the non-impact business world will I use the word "social" to describe a business. Not because there's anything inherently wrong with it. And not because I don't believe in the mission (remember, I'm a firm believer in Impact). But because people who inhabit the traditional business worlds don't always know what we mean with our "impact words." They hear "social" as non-profit...and when they control the capital, and you're pitching a business, "non-profit" isn't what you want them to hear!

So, use the language they use. You might be surprised to find that they agree with what you're trying to do, once they understand what you're trying to say.

Also understand:

The Time Value of Attention

Most investment pitches don't last very long. They take a long time to set up, but they don't last very long. Particularly if you're pitching as part of a group, you're probably going to get five minutes of an investor's time. There are all kinds of advice for what to do in this kind of setting. How to sell yourself, how to grab an investor's attention, how to stand out, etc. And you should read the various viewpoints. But I'm going to tell you what not to do:

Don't spend the first half of your five minutes talking about all the good you're going to do. By the time you get to the second half of the pitch, the investors won't be paying attention!

o What's the Lesson? They're looking for something, don't give them what they don't want.

The investors you're pitching to might believe mightily in impact. They might love your mission. They might love your passion. But they're sitting there to invest in a business. If you can't convince them early on that what you've got is a viable business or business idea (or, worse yet, if you don't even appear to try to convince them), no matter how much time they give you, you won't have their attention whenever you get to the investment part of your pitch!

Which brings me to:

The Audience Knows Itself, Make Sure You Know Them Too

At a pitch, don't argue with investors over the definition of investing. If you do, the one thing you won't end up with is investment!

o What's the Lesson? Meet the Investors Where They Are.

Every investor, no matter what they're looking for, has criteria they use. If you decide that their criteria are wrong, you might end up with a lively debate, but you're not likely to end up with their money. No matter how strongly you believe that an investor should invest in your idea for a non-profit, if they walked into the room looking for for-profits to invest in, there's next to nothing they can do. Similarly, if you're going to try to convince an investor that they should target lower returns because of the good you're doing, that conversation is unlikely to be fruitful.

At the end of the day, a venture investor isn't going to make a concessionary rate loan. An angel investor isn't going to make a grant. And most government agencies probably can't invest in your idea. You've got to figure out what kind of capital people are able to deploy, and talk to them on those terms, no matter how badly you want them to switch strategies on the spot.

None of these stories are complicated. The lessons in them probably aren't even new. But they've helped me countless times (including as I've lived them), and so I hope they'll help others who are just getting started. Someday, I'd love to see an Entrepreneur's Guide to Talking Impact, full of the lessons everyone's learned along the way, and written as enduringly as How to Win Friends and Influence People. So call these parables a small first step, and feel free to add your own below. After all, we're just trying to make the world a better place, one good story at a time.