Profit is what lets a startup keep its purpose

Brian Bishop, a chief executive brought into a local startup as an experienced operator who could offer credibility with its investors, arrived expecting the kind of clarity he knew from investor-backed companies. He soon found a different way of working, and it changed how he talks about money.

The biggest difference, he said, was the number of concerns that were not about money. In the investor-backed world he knew, the message was simple: here is your profit target, go. He described that world as "financial performance first, last, and always." In the startup, he said, social pressures and other goals pulled attention away from money matters, because staff sometimes valued those aims more.

The divide showed up in the basic question of why the company existed. His advice to a portfolio manager, the investment firm employee who oversees a company it owns, was to expect that more and more employees will care more about noneconomic factors than about EBITDA, a standard measure of operating profit. The portfolio manager asks whether the company exists to make money, Bishop said, while employees say it exists for a purpose, to solve climate change or world hunger or something equally large.

Bishop argued the way to bridge that gap is to show that one goal pays for the other. He put it this way: "you can only accomplish that purpose if you make money that supports that activity."

Waiting too long to make that case carries risk. Bishop warned that "the only way you can really get people's attention back to financials is to have a stressed financial situation, at which point it might be too late to really fix it." His answer was to bring both aims together so the company accomplishes both goals at the same time.