Each season, about 40,000 businesses apply to appear on the TV show Shark Tank.
What do these investors want to know?
What problem are you trying to solve?
How are you going to solve it?
Why is your business the best business to solve this problem?
Why are you competent enough to run this business?
In sum, they want to know
Will your existence add value to society by solving a problem?
This is the case every business owner has to make in order to get funding. Very simply, if they don’t have a viable solution to a real need and can’t prove that they can run a business that can successfully deliver this solution, the investors aren’t interested. Millions tune in weekly to watch a show like Shark Tank because it is intuitive for people to think in these terms when a business is in its earliest stages.
Now, imagine a show where a panel of investors sat behind desks and instead of having a business owner pitch why their business was going to solve an important problem, the investors were simply handed a folder full of spreadsheets and charts. The folder may have crucial information like a business’s balance sheet, cash flow statement, and sales projections, but, if the investors only looked at the financials of the business, they would still be unable to answer the most critical question every business should be able to answer, which is
Will you add value to society?
No matter the size or age of a business, investors should never stop asking this question—and businesses should never stop answering it. As we have seen with the recent Facebook whistle-blower hearings, this question is so important that if investors stop asking it, it can eventually result in action from the U.S. Congress to determine its answer.
The societal impacts of social media platforms have been a topic of concern for years and new research seems to show that the platforms are proving to be harmful to many of their users. Facebook, for example, which owns Instagram, is now having to make a case before Congress that it deserves to continue conducting its business.
During the congressional hearing, one senator likened Facebook to the big tobacco companies who are “pushing a product that they know is harmful to the health of young people.” Regardless of the fact that Facebook is one of the largest companies in the world by market capitalization, the senator accused the company of failing to perform its most basic function as a business, namely, to add value to society or, at least in this case, not harm society.
At some point in the life of a business, investors seem to find it less relevant to ask the most fundamental question of any business, a question that early-stage investors (like the investors on Shark Tank) expect businesses to answer—Will you add value to society?
While the “sharks” might not be considered values-based investors, they understand that in order to invest in a company an investor needs to know what problem the company is trying to solve and if it is capable of solving it.
Public investors have the same opportunity to ask similar questions about the companies they choose to invest in. What is more, they can apply their own judgment to the company’s answers.
And, as we’re finding out, if investors fail to hold businesses accountable for more than their bottom lines, Congress will.
As one senator makes clear in Facebook’s congressional hearing,