Welcome back.
What does authenticity mean? In business - everything.
At a large scale, heroes of authenticity are often B Corps like Patagonia and Warby Parker, which started with - and have by and large stayed true to - missions of corporate stewardship (something like: doing right while doing well) both in their products and for their customers and people.
But, today, we’d like to focus on authenticity when its perhaps hardest - in the fledgling phase of business when it’s enough simply to keep the lights on, when early pressures make it tempting, often reasonable, to compromise your founder’s vision.
For starters, we find a lot of small businesses struggle with the notion of authenticity itself, because it feels as if it has to be perfect, crystalline. But authenticity isn’t clarity - it’s commitment. You don’t have to be certain, you just have to be honest about what feels right, and stay close to that compass as you evolve.
Though hard to practice, the person we suggest listening to above all during this critical early time is: you.
After your own inner voice, supplement with select trusted advisors, often family, friends, a current or former colleague or two. More often than not, these are relationships that predate your search for answers - or money - as you plan, plot and build.
Okay, But What’s My Authenticity in the First Place?
As distractions, concerns and priorities mount, it’s hard to maintain your understanding of what is authentic to you, and easy to start questioning whether you ever understood it to begin with. Your north star, seeming clear and defined at the outset, can suddenly appear blurry, in a kind of LLC-induced atmospheric haze.
Following are five prompts to help you define or rediscover that authentic center:
Ask Yourself: Why did I want to start this in the first place?
Strip away the investor decks, the market research, the comparison game. Go back to the napkin sketch, the voice note, the late-night Google doc. What problem were you obsessed with solving? What didn’t exist that you wanted to see in the world?
Write Your “No Matter Whats”
List five things on which you’re unwilling to compromise - your personal non negotiables for the business. They could be product quality, tone of voice, pricing model, how you treat employees - there are no wrong answers. These are the breadcrumbs of your authentic identity.
Talk to People Who Knew You “Before”
Authenticity is often recognized by others before we recognize it ourselves. Ask people who knew you before you became a founder what they see as your superpower and obsessions, as well as your blind spots. Their answers will undoubtedly contain the truth, stripped of performance.
Test Quiet Before Seeking Validation
Take a short break from external input - no Medium articles, no podcast advice, no fundraising talks. Instead, spend a few quiet hours with your business, alone. What decisions feel aligned? What ideas excite you (beyond just the market)?
Prototype the You-shaped Business
Try building a small thing that’s purely yours - no filters, no collaborators, no compromise. A product mockup, a sample menu, a brand voice document. Then ask: Does this feel like me?
In our experience working with early stage businesses, we often observe how little the direction from those who “know better,” those who have been successful in their own right building or investing in other businesses, substitutes for the intuition you have for how your product or service should exist in the world.
Breakout companies, those that succeed when most fail, write their own rules, rather than copy an established playbook. It’s the hardest thing to do for a nascent enterprise - challenge the status quo. By definition, few will support it.
Airbnb was an absurd idea until it wasn’t. Even the earliest investors in the company couldn’t believe it was a viable proposition.
Money, Honey
If we’re being frank, it often comes down to money, the balancing act between an authentic strategy and its execution and the practical constraints that crop up when pursuing profitability, or even simple solvency.
Unfortunately, founders often feel the need to compromise how they grow because the people who would give them money want to do it another way. Thus, many agree to proceed in that other direction when it’s counter to their instinctual - often untaught and therefore unproven - notion of what’s right for what they’re creating.
It’s instructive to remember, with history as reference, that the smartest people in the room can be - and often are - wrong. That the most successful people in business are often wrong. This is not to denigrate intelligence, wisdom, experience or past success. To be plain, there are sober limits to the application of intuition and “gut” intelligence. Economic stewardship and monetary policy, for instance, are not areas where intuition alone serves well - at least not unless combined with reliance on expertise, extensive data, and comprehensive analysis.
But in the realm of new business, of creativity and change making, what has come before, and the limits to vision that come with it, are as easily a trap as a guarantee of a better path.
That’s the distinction in our minds. When we consult with companies, we add value to clients’ management and operations, planning and team growth. But, ultimately, it is the founders themselves who know their products - what they do and how they should enter the marketplace.
The truth is: conclusions based on market research are wrong as often as they are right. Because with a new thing - and every new business is a new thing - there is no precursor, no model.
How often are the costs of following accepted wisdom quantified after ventures fail? Hardly ever, because how does one do so in the aggregate? Thus, those failures are never ascribed, as they might be, to a reliance on the analysis itself, to the fact that conventional methodology led to incorrect, perhaps stale or safe, decision-making and trend forecasting.
If we don’t learn from history, we are doomed to repeat it. But so, too, if we learn the wrong lessons, believing them right, and apply them all over again.
To be clear, we are describing the specific ecosystem of start ups and small business as opposed to economies at scale, where data, precedent and knowledge are of vital importance.
It’s more-than-understandable, but a reliance on “past as prologue” in business is grounded in the reasonable notion that there can be something like a guarantee in investing, that giving money to a founder to build a business is anything more than a gamble. It’s not. Investing will always be high stakes poker with the burnish of Park Avenue or Sand Hill Road, where board room chairs are covered in mohair even if tables aren’t felt.
Buffett, The Betting Man
Warren Buffett is possibly our modern age’s most sophisticated gambler, his approach illustrative of the speculative nature of the industry, the value in letting companies be themselves and a lesson in authenticity in his own right. He is disciplined, thoughtful, and, most importantly, ever cognizant of the scope of his role as an investor, maximizing due diligence to know a company inside and out, backward and forward, such that he gains insight into leadership’s quality and mentality. Then, he buys for value, when he is confident he understands and does not have to question strategy and direction. As he has said, “We own portions of outstanding businesses with outstanding managements."
He has also been wrong, though in the context of being more right than the rest of us.
Famously, Buffett extensively tests the products made by the companies in which he invests, and uses the services his portfolio companies provide. He has said at a minimum he must understand a company’s ten-year trajectory, marrying long term perspective with a remarkable capacity for identifying companies that are undervalued for what they make or do. At a fundamental level, he thinks like a business owner, viewing his investments as the three-dimensional companies they are rather than two-dimensional line items on a spreadsheet.
The Art of Compromise Sometimes Means Not Doing So
A good idea becomes a successful business when you figure out how to make and sell it in the world. Nobody understands intuitively how to do so better than a founder.
As we mentioned, here is the rub: At times, in order to get the money you need to make the product in the first place, or to expand the business, you field the advice, sometimes the insistence or demands, of those giving you the funding, as is their prerogative as investors. But what happens when they want you to pivot left, and you believe you need to pivot right.
It’s a difficult moment, because forgoing funding could mean losing the whole venture in the first place - never realizing the product or the growth you know it can achieve. What a considerable risk. However, it’s worth asking whether insisting on your own direction, even your intuitive sense alone, even when those with means and experience tell you otherwise, is, in fact, the smart path.
The entertainment industry has its own riddle of a similar nature. Writers are always told to create for the sweet spot between two existing, successful franchises in order to attract the interest of producers. In other words, directly reference what has come before. Writers learn to describe their scripts in such terms: “It’s like A meets B.”
The implication is, if you can’t delineate your concept without referencing previous shows or films, it’s not valuable. You need to be able to say: It’s like “X-Men meets Little House on the Prairie.” Or, it’s like “Stranger Things meets Murder, She Wrote.”
But, of course, when groundbreaking shows and films do get made, more often than not, they have rewritten that rule.
Every show - or business - is one of a kind. Even in industries rife with competitors.
Your Truth Can Set You Free
We know well a company that makes an innovative fitness product. At a critical juncture, when the future of the company was in doubt, the founder took on investors, a small, hyper-successful group with a track record in start up funding. The lead investor told him to refashion the product’s positioning and market strategy. As a first-time founder, he felt out of his depth and without credibility. But nobody knew the product like he did. After all, he had invented it in his garage, based on his impression of what was missing in the fitness landscape. He felt, in his founder’s gut, that what the new investor group was suggesting wasn’t authentic to the product or brand he believed the company needed to be. But, they had the money and experience; he acquiesced.
Often, money not only talks but means control.
New strategy implemented, the business sputtered along. It wasn’t a failure but also never the extraordinary success for which everyone hoped. Eventually, the founder realized that the core business was compromised and that, even though the product was his invention, the company no longer reflected his sense of how it should be positioned and marketed.
His course of action was to extricate himself and start anew, pursuing an original part of his vision with a new company, without the product, that returned to the impulse and passion he had in that garage. He regretted he didn’t trust himself early on. Of course, there was no guarantee that the company would have succeeded even if he had. It could have flamed out all the same, since he needed those investors at a critical juncture when cash was tight and his options limited.
But, in the end, as he came to realize, the financial lifeline they provided meant the raft he climbed aboard wasn’t his to pilot.
PE Can Be Pee-Ew
We would be remiss if we didn’t address the controversial rise of private equity in business capitalization. One of the compromises in the PE age is that decisions are made several steps removed from an understanding of the product or service the purchased companies provide. To oversimplify: to private equity, every bottom line looks the same.
Though there are certainly examples of companies that have done well with investment from PE, what’s also emerged is a more damning tale of companies hobbled beyond repair when PE gets involved. What’s presented as a saving grace ends up crippling a troubled company further while generating a return for the firm in the process.
That value proposition is by definition skewed if what’s good for PE isn’t necessarily good for the company it buys, like a doctor prescribing treatment to a patient on which the doctor makes money even when they know the treatment won’t help - or worse, might hurt - the patient.
In her new book, Bad Company: Private Equity and the Death of the American Dream, journalist Megan Greenwell delves into this corrosiveness, subject matter with which she has first hand experience, having lived through such a takeover when she was editor-in-chief of Deadspin.
To return to Warren Buffet: If he thinks like an owner, viewing his investments as the companies they are, private equity too often seems to think as an investor only, viewing companies as vehicles to maximize what they can extract, without a genuine interest in the organization, its business or its people.
It’s a strategy that might be permissible, but it doesn’t feel authentic.
So when it comes to strategy, often the best of them are grounded in a founder’s intuition, born of the deep, personal understanding of the value, worth and ‘why’ of their enterprise.
Life’s rewarding experiences are rarely found on well marked highways but along dirt roads without much signage, where one finds the promise of the unique and unknown. The same can be said of an authentic approach to business.
Wishing you all a safe and celebratory holiday weekend.
Onward.
BC + CA + EH