Success for startups is often elusive, but there are underlying characteristics that can give growing companies a leg up on the competition, especially when it comes to the most important factor—recruiting and retaining top-tier talent. At Norwest, I have found that companies that have a purposeful mission—one that hinges on giving back and making an impact in society—are increasingly better able to hire and retain talent.
An example is one of Norwest’s portfolio companies, Udemy, which focuses on providing affordable education to people everywhere. Udemy most recently engaged in a fierce battle for a talented engineer who had offers from some of the most successful startups in San Francisco. The company was able to hire this engineer and beat out the other three offers—in large part because this engineer believed Udemy’s mission aligned with what he wanted to do to help the world.
When I first heard this story—and many other similar ones in several other mission-driven companies in our portfolio—I started to dig in and said to myself, “This makes sense, but why is this becoming more important now?” The convergence of a heated market for talent in areas like San Francisco/Silicon Valley, Los Angeles, and New York, combined with an increasingly vocal millennial talent pool with an increased need to self-actualize fully at work and in life, makes this the perfect storm.
More than eight out of 10 millennials want and expect companies to make a public commitment to be good-doing organizations, according to Horizon Media’s 2014 Finger on the Pulse survey. The millennial mentality is different than that of any of the preceding generations; they seek to make real good in the world, sometimes at the expense of economics or titles. Of course, this is not unique to millennials, but it is more pronounced among this generation—and something I certainly hope all generations learn from.
Companies that haven’t taken this dynamic into account should do so immediately. Millennials have finally come into their own, constituting much of the workforce for the first time. They are now the largest group of active voters and consumers. They are extremely influential, not only because of their sheer number, but also because they are the first digital-native generation, adeptly attuned to technology at a time in which it’s become a major avenue for communications and power, as well as the biggest differentiator among companies.
Competing for talent with voracious tech giants like Google, Facebook, and Amazon can be tough for any startup, and I always ask potential employees to follow their passions and pursue a cause they believe in. That often means looking at companies in meaningful sectors like health care and education. In fact, I recently talked to a talented Stanford-educated engineer who turned down a lucrative offer at Snapchat to work instead at an edtech company. Her reasoning? She didn’t feel as passionately about ephemeral messaging as she did about helping improve education and lower its cost.
Founders of companies also behave in similar ways—perhaps a key contributor to edtech’s startup boom. Edtech has seen massive growth, witnessing over 503 percent growth in investment from 2010 to 2014, with all indicators pointing to further growth at a brisk pace this year.
Health companies like Omada and Health Catalyst have also seen a lot of growth in young talent and investment. Health Catalyst recently raised $70M, and Omada raised $48M. Both companies have had an easier time hiring and retaining talent, in large part due to their mission-driven focus: They’re committed to helping deliver the best treatments to reduce chronic diseases like diabetes, among others, using technology breakthroughs.
It’s no longer enough for companies to align with the right charities, or do the occasional volunteer work; instead, they have to bake those positive values into their corporate identity to attract the best talent in the most influential generation. Fighting with traditional perks and salaries alone won’t stand a chance in today’s highly competitive talent market.
