The 5th P

My partner and mentor Michael Moe wrote the best selling book Finding the Next Starbucks in 2007 in which he uncovered insights on how to find the next rising star company using a rubric called the 4Ps.

4Ps

The 4Ps in a company are great people, leading product, huge market potential, and predictability in its business model. The best growth companies have these 4 core characteristics.

People — When it comes to recognizing tomorrow’s big market winners, there’s no shortage of interesting ideas, but it’s the quality of the people on the team that usually determines the level and pace of success.

Product — A company needs to develop a compelling product that people love not only today, but tomorrow as well, to be truly durable. Companies that dominate a niche own a disproportionate share of the profit in their market. Startups that offer better products can overtake the leaders.

Potential — “Megatrends” are forces that drive change, productivity, and ultimately growth throughout the economy. The Internet, globalization, consolidation, and outsourcing are a few examples. Megatrends create tailwinds of opportunity, influencing how large a market can become and how quickly. Where they intersect with the growth sectors of the economy — technology, healthcare, media, education, and business and consumer services — represent the greatest potential, and the best places to focus energy and resources.

Predictability — a company needs to build competitive advantages to drive a great startup into a transformative and valuable company. There are two forms of this predictability either based on a technology advantage or a culture advantage. As Warren Buffett says, you need to build a large, wide moat around your castle.

I want to introduce the 5th P into this equation — Purpose.

Purpose

A company with a 10X Purpose is one on an unyielding mission to not only make an impact on the world, but a transformative impact. In effect, putting a dent in the universe. Having an authentic purpose is a necessity in many ways.

There is a tangible mindset shift towards working for a meaningful purpose. According to a recent Deloitte survey, 6 out of 10 millennials said a sense of purpose is part of the reason they chose to work for their current employer. Furthermore, 77% of connected millennials, those most active on social media, said part of the reason they chose to work where they do is because of the company’s sense of purpose.

Also, today startups are easier than ever to start, yet as hard as ever to build into a valuable company over time. Building a team requires having a purpose that’s inspiring and galvanizing to help any team get through the inevitably many difficult problems of building a company.

Finally, in today’s technology landscape, there are gigantic technology companies with seemingly infinite resources. For a young company to differentiate, they need a purpose that can help attract talented people in the face of large competitors.

Our purpose at GSV is to work with the most dynamic founders and investors in the world to help build companies that have an impact, particularly in areas that will affect humanity the most — education, sustainability, communications, business intelligence, etc. That is a purpose that we are all incredibly excited to work and live for.


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