There’s a lot of hype today about start-up CEOs with idealistic ambitions and outsized company valuations.
Personally, I find the now familiar ultra-utopian mission statements and flaunting of how much capital a company has raised to be a bit misguided. There’s nothing wrong with big pie in the sky ideals, but if you want to affect change you need to be realistic about the model and method which you will use to grow your company.
Last month, the Business Roundtable, a group of influential chief executives, sought to redefine the role of business in society. I think enterprise should have a goal beyond the bottom line, but it gets a lot harder when your company is publicly traded or beholden to a set of investors looking for a big exit. Because ultimately, social responsibility aside, the CEOs job is to generate returns for their shareholders or they won’t occupy that role.
Capital markets are for investors looking for capital returns ultimately complicating things for founders who want to put impact ahead of profits. So if you’re going to set out to change the world for the better and are also citing how many billions your company is supposedly worth, there is going to come a reckoning when those investors want to realize those gains.
Before starting Excelerate America, I had worked with a lot of accelerators and start ups. I always thought the model of investing in 10 companies hoping one could go big and cover the losses of the others put an unhealthy burden on the one to grow exponentially and exit with outsized returns.
Your role as founder doing work you love gets challenged when you’re beholden to investors wanting massive near term returns. I also never really understood the infatuation with raising rounds of capital and placing make believe valuations on companies. It just seemed more practical to start small and achieve real bottom line results rather than rushing to be something big before you’re ready.
I think small businesses are vital to prosperous local communities. They create meaningful opportunities for the people who live, work and shop there. The closely held local enterprises are the ones who care the most about their communities and the people they serve. When you start talking about big capital rounds and distant investors, you can expect that the company’s sense of obligation to the community will become distant too.
Building a small business should be fun and make a community stronger.
So when I started my company, I wanted to foster a sense of possibility for people wherever they were and regardless of background. Most small businesses don’t fit the capital market model and don’t need too.
There are plenty of alternative methods to finding capital necessary for growth. Seed funding and bootstrapping are common with the majority of small businesses that matter. The big issue for me wasn’t getting started, it was building a business that could last and quickly achieve profitability.
I think that’s the issue with so many small business startups. They start but don’t make the jump quickly enough. In fact, roughly half of small businesses fail in the first year and nearly 90% don't make it five years.
That means the majority of the enterprises don’t last long enough for these aspiring founders to realize their vision and make a lasting impact. That’s the problem I wanted to solve and not by raising massive rounds of capital to sprinkle on the lucky few, but by investing in new platforms to help these ambitious entrepreneurs excel and grow a business that they love and make a real difference in the communities they serve.
At Excelerate America, we believe that connected local economies led by compassionate people is the future of small business.
We hope to power communities by creating small businesses that give a damn. We know that entrepreneurs who build better businesses can change the world.