‘It’s not just what you do, but the why’: Threshold Ventures cofounder Emily Melton on the success of startups

The economic fluctuations caused by the COVID-19 pandemic and high inflationary environments have impacted the investments and strategies of entrepreneurs over the past two years, emphasizing the need for purpose in a successful startup. 

“As an entrepreneur, you really have to change your mindset,” said Stephanie Tilenius, founder and CEO of Vida Health, while speaking at Fortune’s Most Powerful Women Summit in Laguna Niguel, Calif., this week. She described a transition from a heavy growth mindset during the 2001 boom to sustainable profitability during recent market downturns. 

The key to finding profitability is timing. “This is the moment for a lot of entrepreneurs,” said Phaedra Ellis-Lamkins, cofounder of Promise, during a panel moderated by Mandela Schumacher-Hodge Dixon, CEO of All Raise. Especially for women and people of color who have previously led businesses, she believes there is a momentum to continue pushing toward their ventures. “I think this moment is also going to make some amazing companies better, and it’s going to make them more sustainable.”

Adding to this momentum, the current economic environment makes it easier for startups to recruit talent as there are fewer companies competing for the same target market.

This gives entrepreneurs the space to really hunker down and build an enterprise they are passionate about, which is what Emily Melton, cofounder of Threshold Ventures, believes sustains businesses in the long run, despite any temporary economic fluctuations.

“We ask not just what you do, but ‘the why,’” said Melton. “Because ‘the what’ almost always evolves and changes over time, but ‘the why’ doesn’t.” To be a founder of a company involves high economic risk, and the motivating factor behind starting the company needs to be something that is going to outweigh that risk.

The why is often ingrained in the DNA of purpose-driven organizations and is translated in their strategy, said Anilu Vazquez-Ubarri, partner at TPG. Vazquez-Ubarri has been able to build businesses that are internally impact driven, and doesn’t accept the philosophy that these business models are not profitable, in fact, she says partnering with these companies gives TPG a “competitive edge.”

Regardless of which problem a business sets out to solve, a startup only works “if the people who are doing the work are passionate and committed to it,” said Vazquez-Ubarri.