Maslow’s Hierarchy of Startups

How companies cater to our inner motivations

Why do people do the things they do?

In 1943 psychologist Abraham Maslow attempted to answer this question in his paper “A Theory of Human Motivation”. This paper was the basis for what we now know as Maslow’s hierarchy of needs.

Maslow refined this theory until his death in 1970 and his final version breaks human needs into eight categories. There are four basic needs:
(1) biological and physiological needs,
(2) safety needs,
(3) social needs, and
(4) esteem needs.

Once these basic needs are met, there are four higher-order needs:
(5) cognitive needs,
(6) aesthetic needs,
(7) self-actualization, and
(8) transcendence.

According to Maslow, we’re only capable of focusing on the the next need in the hierarchy if our previous needs have been met.

You don’t have to be psychology expert to recognize his theory in action. Think back to the last time you had a hard time paying attention to an important meeting or lecture that was right before lunch. You probably zoned out for a bit, salivating over the thought of biting into a toasty sandwich and washing it down with an ice-cold lemonade.

When your basic physiological need for food has not been met, there’s no way you can meet your higher-order cognitive need for information.

There’s an app for that motivational need

Maslow died in 1970, long before the creation of the World Wide Web. I’ll bet he had no idea that thousands of small companies would emerge to help people meet each of their major motivational needs.

Lets look at examples of companies in each area, keeping in mind that the most interesting companies meet more than one motivational need. Over time, this will become a necessity.

Biological and Physiological Needs Startups

There is a large market here, because every single person needs these services. As a result, there is also heavy competition.

Safety Needs Startups

These needs are generally easier for governments to provide, but companies help fill critical gaps.

Social Needs Startups

The coolest thing about the Internet is how drastically it has changed our ability to connect with people across the world. Social needs are no longer limited by our physical location.

Esteem Needs Startups

Self-confidence is a need that companies can only meet indirectly. You can directly sell someone food but you can only provide people with tools to foster their own self-confidence.

Cognitive Needs Startups

Aesthetic Needs Startups

Self-Actualization and Transcendence Startups

The bottom of the pyramid has the largest market and the most competition

It’s harder to meet higher-order needs until you have met basic needs. It follows that there are lots of companies focused on food delivery and social networking and relatively few companies focused on transcendence.

Most basic needs are heavily saturated with startups but there is still room for growth. Two notable outliers with growth potential are Health & Wellness and Financial Security:

• Health & Wellness: Consumer health technology is rapidly moving from fitness toys to real medical applications. Advancements in sensor technology and data analysis will open up possibilities for new products.
• Financial Security: The flexible work economy fostered by companies like Uber, Lyft and TaskRabbit are giving people new opportunities to generate income. This, in turn, will enable new services at all layers of the pyramid.

It’s also humbling to remember that startups in all these areas are catering to the most fortunate segment of the population. Non-profit projects like Charity Water are helping people meet the basic need for water in countries like Ethiopia and Rwanda.

To stay interesting, companies will have to meet multiple needs

It’s difficult to neatly bucket companies in this framework. Many companies already meet multiple needs. Over time, meeting multiple motivational needs will become a necessity.

Three examples of companies that meet multiple needs are —

• Lyft: The primary reason that Lyft has been a strong contender against the larger and better-funded Uber is that they provide more than just transportation. Lyft is a social experience. You fist bump the driver and sit in the front seat and have a conversation. It also gives you a small slice of transcendence. Often you’ll hear someone else’s story and get a better sense of how riding Lyft is helping someone else reach their goals.
• Everlane: On the surface, their business fulfills a very basic need— clothing. However, they’ve been successful because they’ve created a brand that stands for transparency around factories and production. When people buy Everlane, they’re not just getting clothes. They get self-confidence from supporting an ethical, independent retailer.
• Facebook: Facebook is primarily recognized for meeting social needs but they’re experimenting at all levels of the hierarchy. Positive feedback from the like button meets the esteem need for recognition from others. The acquisition of Instagram and experimentation with Facebook Paper pushes the company toward meeting aesthetic and cognitive needs as well.

Meeting multiple needs will become a necessity to differentiate. Luckily, its not difficult to do and often has positive externalities. Take Warby Parker’s model of buy a pair, give a pair glasses, for example. Could you apply it to food delivery? A company that donates a meal for every meal that you purchase is more compelling (and, in turn, defensible) than one that just delivers food.

Over time, more companies will meet needs higher up the chain

As it becomes easier to meet our biological & physiological and safety needs, we’ll be able to focus on self-actualization and transcendence.

Right now, companies are just testing the waters around these areas. I predict that in the near future, we’ll see more companies emerge that are focused on helping people reach their full potential.

Kickstarter is my favorite example of this. Anyone with an idea can reach thousands of like-minded people who can help that person reach their goals. Before the internet, this would not have been possible.

This is exciting because it’s a new way that we’ll be applying science and technology to make people happier and more fulfilled.