Here’s A New Way to Lock in Your Startup’s Values
This article originally appeared in Term Sheet, Fortune’s newsletter about deals and dealmakers. Subscribe here.
Startup culture is easy to criticize for its focus on hype over substance, for excluding people that don’t fit the stereotypical startup bro mold, for its worship of disruption at all costs. I pegged the ugly parts of startup culture as a major factor in the industry’s recent string of scandals, fraud, and ethical lapses in my recent feature. What starts as a simple rule-bending to get to the next funding round, or press hit, or customer, can easily (and quickly) blossom into a culture of blatant rule-breaking.
Plenty of founders know the importance of making culture and values a priority from the beginning. (They also know “culture” is more than just ping pong tables and coldbrew on tap and “values” are more than just “make the world a better place.”)
Obvious Ventures, a firm focused on “combining profit and purpose,” today announced a modest proposal: Why not bake your company’s values directly into your term sheet? Today the firm unveiled something called “World Positive Term Sheet.” It’s a template that startup founders can use to get their investors and employees on board with the company’s values. In Obvious co-founder James Joaquin’s words:
At the highest level, all [term sheet] elements cluster around two themes: economics and control. At Obvious Ventures, we think it’s time to add a third category to the term sheet: values. Given that the task of building a huge company is a long and arduous journey, entrepreneurs and investors should make sure that they are well aligned on the values that define the ‘why’ of a business beyond the business plan describing the ‘what’ and the ‘how’.
I asked Joaquin if he thinks startups will actually adopt this, given how hard it is for most of them to merely survive, let alone get their investors to agree to sign a squishy, feel-good term sheet. “We see first-hand a mega trend of young entrepreneurs founding companies around a core mission and value set,” he said. “As this happens with greater frequency, it will become more important for founders to make sure they find investors aligned with their mission.” And of course, there’s the evidence that diverse and woman-friendly workplaces perform better.
Joaquin believes this could help with the startup world’s ethical issues I described in, too. “My theory is that a cocktail of transparency and values-based leadership is the vaccine for rotten culture and fraudulent behavior,” he said.
Obvious also published a B-Corp cheat sheet so companies can determine if they should commit to their values in a more formal way. Venture or private equity-backed B Corps include Etsy, Sungevity, and Laureate Education.