Forming an emotional connection with a customer provides a company with an intangible competitive edge, which a higher quality or lower cost competitor is not always able to overcome.
A captivating origin story is truly the icing on the cake for a startup. It can help a founder connect with investors, employees, customers and other stakeholders and, more importantly, help form a lifelong connection to a brand that, with luck, can even outlast the founder him or herself. From a marketing perspective, it can be a goldmine of perpetual goodwill as the strong connect consumers feel when they purchase goods or services from a company whose founding story moves them, excites them and motivates them cannot be replicated, no matter how glitzy the advertising campaign.
Forming an emotional connection with a customer provides a company with an intangible competitive edge, which a higher quality or lower cost competitor is not always able to overcome. Think of some of the most iconic brands of our time and their origin stories – the story of how Apple was founded in the garage of Steve Jobs’ parents’ house, how Uber was born on a winter’s night in Paris when the founders Travis Kalanick and Garrett Camp couldn’t find a cab, how Elon Musk sold all his paypal shares to fund Space X and plough money into Tesla when the latter was teetering on the verge of bankruptcy are but a few examples of ‘fairy tale’ origin stories that have permeated into popular culture.
Such companies which are able to carry forward their success into IPOs often find that they have a subset of shareholders who are fanboys or fangirls of the founder and stick by the company through thick and thin. Frankly, I see no difference between Elon Musk zealots who have pushed the Tesla share price up to $1200 (a valuation that defies explanation by any financial model known to corporate finance), and ARMY, the highly devoted fandom of Kpop band BTS, who conduct highly organised campaigns to get every one of their records to Number 1 on the Billboard charts. This level of trust and brand loyalty which a strong origin story can engender is exactly why an origin story is so important for founders.
As in most things in life, there is a flip side. If investors or consumers find out that they have been duped by a founder, the brand loyalty built up over years can disappear in an instant. The most recent example of this has to be the founder of Theranos – Elizabeth Holmes, the enigmatic black turtleneck à la Steve Jobs-wearing Stanford wunderkind who allegedly created a revolutionary technology which allowed blood testing to be done via a single drop of blood! Once it was discovered that she had lied about her technology, the whole company came crashing to the ground, and a $9B startup vanished overnight. While I fully admit that founders often tastefully exaggerate their beginnings in order to build up the ‘myth’ of the company’s origins, there are certain lines which cannot be crossed. There is also a risk that if the brand gets too intertwined with the founder, customer loyalty can vanish overnight if the founder meets an untimely demise. This was always the worry with Apple and the sad passing of Steve Jobs, but fortunately Jobs had a very able successor in Tim Cook who was able to steer the company through a potentially tricky situation.
As an investor, I always ask founders what made them come up with the idea for their company. A unique and compelling origin story definitely gives them an edge over other more anodyne stories, but it is the job of an investor to separate style from substance. Similarly, several investors are known to turn down founders for funding if they come from privileged backgrounds, believing that rich founders have no incentive to work hard when they can “roll out of bed wearing silk pyjamas”. If this was a well-established investing principle, well then adios Microsoft, Facebook and Snapchat, all of whose founders didn’t exactly come from penury!
At the end of the day, what matters most is the ability of the founder to sell his or her vision. If it comes with a unique story along with that, all the better. If the founder doesn’t have a great origin story, well, that’s why marketing departments exist! You can create a story around a product or a service instead and use that to create a sense of brand loyalty instead.
Source: Business World