MB on VC: The Importance of Purpose

Explainer
Research

Humans draw more from intrinsic than extrinsic motivation. And people who work on interesting problems are generally more intrinsically motivated and are happier people. They’re also shown to have greater longevity.

In their acclaimed Self-Determination Theory (SDT) of human motivation, Edward Deci and Richard Ryan introduce the causal relationship between intrinsic motivation and optimal motivation, performance, and well-being. They show that these outcomes arise from genuine interest and a sense of personal value for the challenge at hand (i.e., problem-solving) and, as a result, they tend to be more sustainable and drive optimal outcomes.

After almost 20 years of working with founders and startup leadership teams, I have found that teams that embrace problem-solving as a natural function of startup life are the ones that accelerate faster and build better cultures.  They also uncover opportunities for expansion more often.

In her book Grit, University of Pennsylvania and Wharton professor Angela Duckworth offers a list of case studies proving that the blend of an individual’s or group’s passion and perseverance for long-term goals is a reliable predictor of success.  

The simple summary of these studies is this: people who do things because they are personally rewarding (not because of external rewards or pressures) are reliably more successful over the long-term. This is why BIP Ventures searches for founders and leadership teams that are compelled and clear-minded about their purpose.    

It’s also why we seek to avoid partnering with “wantrepreneurs”— those who want the rewards that come with being an entrepreneur but none of the pain of daily and hourly problem-solving.

Intrinsic Motivation and Entrepreneurial Success

In my experience, I have seen a logical, predictable relationship between intrinsic motivation, grit, and entrepreneurial performance. The logical flow goes like this: teams that are more purpose-driven are grittier, and grittier teams take on and solve more problems than teams that are deterred by challenges. And that constant focus on problem-solving yields better overall business performance over time. Here are three things we know.

Passion Yields Persistence

When entrepreneurs are personally passionate about and interested in their work, they tend to perform better. This is likely because intrinsic motivation is associated with persistence, creativity, and problem-solving. These teams tend to be more willing to experiment and take calculated risks, and more capable of thinking outside the box.

Intrinsically motivated people are 2.5 times more likely to stick with a task when it gets difficult because they are genuinely interested in it and to find it challenging. They also are more likely to believe that they can succeed. (Study by the University of California and published in the journal Motivation and Emotion) Not surprisingly, these tenacious people are 1.5 times more likely to achieve their goals because they are more likely to stick with them, even when they are difficult. (Study by the University of Chicago and published in the journal Psychological Science)

Passion and persistence are especially critical success indicators because founders and their teams need resilience to endure every phase of the Gartner Hype Cycle – including the Trough of Disillusionment.  

Motivation Thrives on Autonomy

While the most successful startups tend to be those that are connected to the market and solving a real-world problem, perceived autonomy is a significant predictor of entrepreneurial intent. In other words, innovators are fueled by a sense of freedom to create and sell their solution.  

People who are intrinsically motivated are 1.5 times more likely to report feeling happy because they are doing things that they enjoy and find meaningful. They tend to have a stronger sense of self-determination, which is an important factor in happiness. (Study by the University of Pennsylvania and published in the journal Psychological Science)

Grit Predicts Startup Performance

Lists of studies show how intrinsic motivation of entrepreneurs positively affects their startups' innovation performance. For startups that are solving the most perplexing and challenging problems in our world, risk-taking, experimentation, and creativity are jet fuel.

People who are intrinsically motivated tend to come up with 30% more new ideas than people who are extrinsically motivated because they are more likely to be exploring and experimenting. They are 20% more likely to take risks needed for creative problem-solving and outcomes. (Study by the University of Rochester and published in the journal Creativity Research Journal)

“Purpose is what separates entrepreneurs from ‘wantrepreneurs’.”

Purpose Matters

People who work on interesting problems are generally more intrinsically motivated and are happier people, and they are shown to have greater longevity. What’s more, intrinsic motivation is more likely to lead to happiness than extrinsic motivation. People with grit and purpose are 2.5 times more likely to be satisfied with their lives because they are doing things that they enjoy and find meaningful. (Study by the University of Chicago and published in the journal Psychological Science)

None of this is to say that being an entrepreneur is always happy or satisfying. We know that the opposite is often true. Being an innovator is one of the most challenging – and rare – professional paths people can take. Depending on your source, somewhere between 0.6% (U.S. Census Bureau) and 2.5% (Kauffman Foundation) of Americans start a business each year. It’s not for the faint of heart.

But for those who have the vision, desire, tenacity, mental toughness, and sense of meaning to see an idea through every phase of its growth as a business, it might be the most rewarding. And it’s certainly the most impactful role in the economy.

How We Apply Knowledge About Grit and Purpose

Our mission at BIP Ventures is to identify and capture extraordinary opportunities for the people we serve. It’s not enough to identify extraordinary opportunities, we have to capture them. We are a fiduciary to investors and a steward of founder dreams. Being a steward of founder dreams means that we bring more to the party than just money. It means that we commit ourselves to being a “partner in problem-solving." And that is why we are investing so heavily in our Performance Engineering team (more on this in future articles).  

We want to position our portfolio companies to win – on every front. Success in venture demands a relentless pursuit of excellence in many areas of focus. And that means that we solve big and small problems...weekly, daily, and hourly.  

We are looking for partners who have that mindset and who want to leverage our platform to greatly increase their odds of success.  

What's your entrepreneurial purpose?

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