Entrepreneur Mindset

The Importance of Culture

Organisational culture significantly impacts employees by enhancing their confidence, motivation, and inspiration. It consists of beliefs and attitudes about workplace practices, subtly influencing all work. A strong culture fosters high employee engagement, leading to meaningful connections with the company and long-lasting positive effects. Companies with a robust culture, emphasising teamwork, community, and inclusivity, experience up to a 72% higher employee engagement compared to those with misaligned or needing improvement cultures (Morgan, 2024).

A well-crafted and innovative corporate culture can significantly elevate a company above its competitors and support long-term success. Such a culture can foster a positive workplace environment and create an engaging, enthusiastic, and motivated workforce which can improve performance quality and productivity as well as lead to favourable business results. It can also a attract high-value employees and reduce employee turnover. All these factors can enhance the company longevity and provide a strong competitive advantage. This culture also helps clarify goals for employees and contribute to workforce diversification (Trever,2024).

Did Facebook Overpay for WhatsApp?

Fig 1: Did Facebook pay too much for WhatsApp? (Quora, 2024)

Meta, then known as Facebook, announced in 2014 that they would be acquiring WhatsApp for a total of $16 billion, with an additional $3 billion in restricted stock units provided to WhatsApp’s founders and employees vested in the four years subsequent to closing (citation needed). 

This move was considered rash by critics, with some wondering how Meta would turn any profit off of the app, which at first glance, seemed to generate no revenue from users whatsoever (citation needed).

Many quantitative attempts to justify the acquisition fail due to this exact reason. Seemingly, this acquisition yields no direct financial benefit to Meta whatsoever. With that being said, what could possibly have motivated a $19 billion dollar deal for a company that had only reportedly made $20 million in the past year.

Upon further analysis, it becomes evident that WhatsApp was, at the time, an incredibly cost-effective operation. With the largest identifiable cost being distribution costs on the Google Play Store and IOS App Store (citation needed), it could be that Meta saw this as an opportunity to capitalise on a fast-growing service with minimal costs. By acquiring WhatsApp, they also effectively deny their competitors the chance to acquire the potential benefits of this acquisition.

Come 2021, Meta finally revealed how they had been using WhatsApp to market ads on their other platforms; Facebook and Instagram. Many businesses were using WhatsApp to communicate, and conduct transactions. These businesses were presented with the option to run ads on Meta’s other platforms that would direct users to initiate a conversation on WhatsApp.

Along with the addition of the ability to purchase such ads from the WhatsApp Business platform itself, Meta reported quarterly advertising sales of $25.4 billion, up 46% from that of the same period in the previous year. This could suggest that the acquisition was, in fact, worth the controversial price tag at the time.

What are the Problems Bringing in New Investors?

Lack of Investor Education

One significant challenge in attracting new investors is the lack of investor education. Many potential investors lack the necessary financial literacy to make informed decisions, leading to hesitancy and mistrust. Without a solid understanding of investment fundamentals, individuals are less likely to commit their money, fearing losses and scams. This educational gap hinders their ability to evaluate the risks and rewards associated with various investment products (U.S. Securities and Exchange Commission, 2012).

Addressing this issue requires enhancing financial education initiatives. Policy makers and financial regulators recognize the importance of financial education in contributing to a well-functioning market. Educated investors are better equipped to understand market fluctuations, recognize reliable advice, and avoid fraudulent schemes (Kim, 2012). Consequently, raising financial awareness through schools, workplaces, and social media campaigns is crucial (U.S. Securities and Exchange Commission, 2012). Asset management companies also bear a significant responsibility in educating potential investors to foster trust and confidence in the investment process (Kim, 2012).

Complexity - information overload

Investors with excessive information or overloaded with information might be one of the challenges to attracting new investors. The IOP Science article discusses that one of the challenges in attracting new investors is the complexity and perceived risk of financial markets. Many potential investors find the variety of investment options and the intricacies of financial products daunting, leading to reluctance. This complexity creates a barrier, as people often feel they lack the necessary knowledge to make informed decisions. (MGaleeva & Kadeeva, 2021). 

Based on other research, too much information can overwhelm investors, leading to poor decision-making or reliance on default options. There are three main causes of information overload. First, the company might have a sheer quantity of information. Then, investors have too many options to choose from and the last is the similarity between different options. (Bloch, 2023).

To solve this problem, companies should emphasise the need for concise and relevant information as well as both information providers and investors should work to manage the flow of information effectively to ensure better investment decisions. With a clear investment decision and understanding of the company, it is more likely to help bring in more new investors. (Bloch, 2023).

Too much diversification

Purchasing a variety of assets helps investors diversify their holdings and lessen their risk of missing out on big gains or losses. Rather than placing all of their money in one firm or a small number of assets, investors diversify their holdings among many companies, industries, nations, and asset classes.

You won't win much either if you've overdiversified or made mistakes, but you won't lose much either. Additionally, you can pay more than necessary in fees or take on more risk than you had anticipated. (Funds Europe, 2020).

The timely acquisition and sale of financial assets per anticipated price variations is known as market timing. Investors can utilize it for both short- and long-term time horizons, depending on their preferences regarding risk and return. (YEC,  2021).

References

Morgan, P. (2024, February 20). Understanding the importance of corporate culture after the Great Resignation. Forbes. https://www.forbes.com/sites/paulamorgan/2022/08/19/understanding-the-importance-of-corporate-culture-after-the-great-resignation/

Tarver, E. (2024, April 22). Corporate Culture Definition, Characteristics, and Importance. Investopedia. https://www.investopedia.com/terms/c/corporate-culture.asp

Kim, Y. (2012, September 26). SEC Studies Financial Literacy Among Investors. Berkeley Law. https://sites.law.berkeley.edu/thenetwork/2012/09/26/sec-studies-financial-literacy-among-investors/

U.S. Securities and Exchange Commission. (2012, Aug 29). Study Regarding Financial Literacy Among Investors. https://www.sec.gov/files/917-financial-literacy-study-part1.pdf

Bloch, B. J. (2023, March 21). Information Overload: How It Hurts Investors. Investopedia. https://www.investopedia.com/articles/financial-theory/11/negative-impact-of-information-overload.asp

MGaleeva, G., & Kadeeva, E. N. (2021). Problems of attracting foreign direct investment into the regional economy. J. Phys: Conf. Ser. 1730 012118. https://iopscience.iop.org/article/10.1088/1742-6596/1730/1/012118/pdf

Funds Europe. (2020, March 23). Challenges in attracting new investors. Funds Europe. https://www.funds-europe.com/challenges-in-attracting-new-investors/

YEC. (2021, Dec 22). 10 Good Reasons Not To Seek Investors For Your Business. Forbes. https://www.forbes.com/sites/theyec/2021/12/22/10-good-reasons-not-to-seek-investors-for-your-business/