The second big difference during challenging times is the mindset of the founders and entrepreneurs – unicorns see a crisis, proficorns see an opportunity. And central to this is the idea of “skin in the game.”
In unicorns, founders are left with a small stake after multiple rounds of funding. While the value of their holding increases (on paper), the investors become the majority owners of the company. It is not uncommon to see founders with just a 10-20% share in the company they founded. As a result, the investors call the shots. The founders become glorified managers in the very company they created. They are simply working to increase the wealth of the investors – for whom the company is just one among many investments. In other words, the founders have very little skin in the game.
As a result, when investors see a crisis because of capital and liquidity issues, the founders are forced to see the world the way the investors see it. It is time for “crisis management.” Customers are not the priority; protection of the invested capital is. And for that, if employees have to be fired, so be it. If customer service has to be reduced, so be it. Survival is the only goal that matters. This crisis mentality permeates all decision-making. It is like there is no tomorrow or the day after – just today that needs to be gotten through. Very few investors have the luxury of giving the founders the operational freedom to think long-term and make their own decisions.
In proficorns, a different mindset operates. The founders have no investors to report to. They have complete skin in the game. The company is their life’s work. If the company dies, they lose a part of themselves. Proficorns become what they become by going against the flow. And this is where founders of proficorns see a crisis as an opportunity. When others are panicking, it is time to sit with a cool head and think ahead – look beyond the immediate to the new world that will be created once the tempest fades away.
Tomorrow: Proficorns vs Unicorns (Part 4)