Every startup appears on some grand social (or environmental) mission these days. And in fintech, “financial health” is definitely en vogue (nice job, Financial Health Network). Like most of our founders, we at Core believe that the real purpose for starting something new is not ultimately to make a killing, but to leave the campground better than how we found it. Still, people approach their mission wildly differently, ranging from cynical to sanctimonious. In my experience, the majority of mission-driven entrepreneurs are well intentioned, but ultimately lazy about their mission. Few are hard core. These are the misfits Core likes to back.
The lazy missionary (which describes most of us) has good intentions, appreciates mission is good for PR, hiring and government relations, and cruises on the “tech is the great democratizer” narrative. One of our founders wrote to me, “Having buy-in [on mission] across the team pays dividends long term and feels like something worth investing in, but is hard to make time for in practice.” Almost everyone in our industry, even Core itself and our portfolio, could do a better job in realizing their mission, and building better businesses as a result. After 15 years of investing in mission-driven fintech companies, here are the five practices of the best I know.
1. Write it down and keep it real
The hard core have a clear, written mission statement, and they express it to employees and investors, alike, daily. Oddly, many mission-driven companies don’t do this. Writing it down once is pointless. Many keep it real by repeating it in all board and all-hands meetings, “so everyone understands that it is a primary objective and lens for making decisions.” Another Core founder told me, “Mission is the top overarching goal for everything — any policy or process or rule should be trumped by the golden rule of ‘What will best help us accomplish our mission in the long term?’” Some best practices for how to keep it front and center:
- Build a culture that rewards being a missionary.
- Put it in the performance review process.
- Publicly praise exemplars.
- Hire people with a personal connection to your customer.
- Assign a person that interviews for cultural and mission alignment.
- Ask someone to share their take on the mission at the end of each meeting.
- Frequently tell stories about the people and communities you impact.
- End every week’s company all-hands with a quote from a user.
All this is obvious. Raise your hand if you don’t do these things regularly (I won’t tell).
2. Align your business model
One of our most valuable company’s founders said, “The best form of achieving our mission is when it’s organic to our business model.” Do you generate material profits when a customer has bad outcomes? Or do you realize your mission by discounting your product or setting up a foundation or volunteering for a day? These are fine and noble things to do, but they suggest your business model is not naturally aligned with your mission.
Core’s premise is that companies that solve a genuine need for their end-users will become more valuable companies. In our recent impact report, Mercenary Impact, we even mathematically calculate the correlation between social impact and enterprise value. I have found the hardest thing here for founders is to be intellectually honest about the downside scenario for the customer, which many businesses compensate for with punitive fees or worse, like taking possession of a home as an extreme example. The most common trade-off leaders make here is between short- and long-term benefits. Can you forego the penalty fee in favor of lower churn and greater long-term value?
3. Solve for long-term interests
Almost no one sees themselves as predatory, and indeed I know many payday lenders who believe with conviction that they are on a mission. They believe they treat their customers with respect, transparency and convenience relative to a bank, which serves this customer with disdain, complex products and even more expensive overdraft fees. I believe being missionary demands a long-term orientation to obsessively serving your customers’ needs. Offering a cheaper widget has its merits, but often accounts for unintended consequences. Just consider the old Stanford marshmallow test.
The only way to do this, one of our founders told me, is to “stay as close to the communities we serve as possible by remaining involved with user research, user outreach, and customer service work. Pre-pandemic, this meant doing regular field work; during the pandemic it means listening intently through remote user testing and customer reviews and issues.” Another founder, of a publicly traded fintech, echoes this sentiment; he’s “always thinking about the long-term health of our customers when building products (and why we’ve avoided some predatory products).”
It’s a legitimately difficult trade-off between short- and long-term business benefit. In finance, I often think of it as the value of a fee today versus the net present value of trust. “A purely profit-seeking organization might maximize short-term revenue through extractive fees, but I believe they would struggle to build trust and to create a years-long financial relationship with [our customers],” a successful fintech startup CEO shared, and I couldn’t agree more. Regardless of whom you serve, not nearly enough fintech founders obsess about building trust with their customers.
4. Measure the externalities
The fabled management guru Peter Drucker preached, “What gets measured, gets managed.” Still, with exponentially greater measurement tools than were available in Drucker’s day, relatively few mission-driven companies regularly measure their mission honestly. We see lots of one-off anecdotes and vanity stats. Net Promoter Scores are more common. We see little consistent data pertaining to mission, whether in board docs, weekly all-hands, the media, or recruiting materials.
I don’t see how one could claim to be mission-driven without measuring it. How many people are you helping? What is the income distribution of your customer? How much are you saving them? How much are you delighting them? In what other ways are you helping your customers (by reporting credit, for example)? And consider your team metrics as well. If you care about diversity, measure it.
Core has measured the externalities of our investments for over a decade. Every year, we ask for a handful of data points and produce an annual report, our “impact audit.” We publicly shared our latest here. And just like our partners are aligned with great financial outcomes, we tie 100% of our annual bonus and 10% of our carried interest to our mission results.
5. Create a Ulysses pact
Speaking of tying ourselves to the outcomes we care about, Ulysses famously ordered his men to bind him to the mast of his ship so that he would not follow the Sirens’ temptation. He ordered them to ignore his pleas, even to kill him if he broke his bonds. With billions of venture capital seeking outsized returns, no tech founder is free from the many temptations that might dilute their missionary ambitions. Creating a Ulysses pact is only for the hard core. But it can take many forms.
Hire a team and/or form a board that will quit if the authentic mission gets lost. Partner with government or other stakeholders that demand you fulfil your mission. One of our investors, for example, requires us to maintain a high ratio of low- and moderate income (LMI) consumers to all consumers served by our portfolio. Make a pact with your board. Reward mission delivery, expansion, creativity and risk-taking. Become a B Corp. Publish your commitments. Commit to Founder’s Pledge.
One of my favorite founders not in our portfolio wrote, “We’ve built a public brand through PR and partnerships that would generate untold shame if we ever tarnished it. It sounds weird to say that these are the reasons we stick to our mission, but as we both know, the siren call of perverse incentives can be tricky to avoid unless we load the scales so our behavior matches our intention.”
But remember that this Ulysses pact is for your mission as you conceive of it. As we all know, no good deed goes unpunished, and there will be louder, holier-than-thou detractors holding you to account and claiming heresy at the slightest provocation. While the temptation will be to claim your own righteousness — after all, they’re undoubtedly shortsighted, misguided, not capable, and unrealistic — my advice is to always listen openly to your detractors, for their Sirens’ call is not temptation. It is a challenge to do better.
Also: How “Mercenary Impact” is our Core Innovation. My case for why guaranteed retirement income will become required by law. Felicity Hassan and I suggest some ideas for increasing diversity at work.
Author: Arjan Schütte