Does ‘Nobility Blindness’ Hurt Ed Tech Startups?

Just because a start-up is operating not just to make money but also to do good, it is no reason to apply less-than-rigorous due diligence when deciding whether their business is worth an investment. Ki Mae Heussner, writing for GigaOM, says that sometimes the companies which are “cloaked in nobility” of their mission get a pass when it comes to a shaky business plan, which does neither the investor, the company itself nor the people it is attempting to help any favors in the long run.

Andrew Kassoy addressed this when he spoke at the EdGrowth Summit in New York last week. He said that investors can become so enamored of the company’s mission that they elide it with the company being a good and sound investment. There’s no need to pretend that doing good must preclude making money, and it is people who feel there’s something bad in seeking profit that must be given a second look.

Kassoy was speaking on a panel about how entrepreneurs, executives and investors build companies that are simultaneously market- and mission-driven and, to me, his comment was one of the more refreshing ones offered by the speakers.

Will Ethridge, COO of Pearson North American Education, also took part in the panel but emphasized “false dichotomies.” “I don’t think there is a trade-off between being mission-driven and being profit-driven,” he said.

Kassoy took exception with that, saying that a company’s chief goal must be shareholder value. He said that if startups feel that they will always have control over their mission even after accepting outside investment, then they’re being either unrealistic or intentionally obtuse.

Although mission is an important factor in company success, especially if it is operating in a sector like education, that doesn’t mean that it gets a pass on actually crafting and holding to a realistic path to profitability. A particularly noble goal certainly shouldn’t blind investors and other market watchers to the meaning and consequence of the path being absent or incomplete.

I don’t think mission and market motives are incompatible. But I agree that it’s important to look at companies in the context of what’s really driving them and consider the compromises they may make in the pursuit of their goals, as well as who benefits most from the value they create and to what degree. There are always trade-offs — if companies want to be trusted, they need to give windows into how they’ll draw their lines and be honest about where they stand.

01 25, 2013
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