Socially Conscious Startups
Changing the Conversation Around Innovation
In 2011, Chamath Palihapitiya left Facebook and founded Social Capital. Since then, Social Capital has raised over $1 billion and made a few home-run investments, including Slack, Flatiron Health, and Box. While other firms show off their software-only investment strategies, or proudly report a track record of backing major technology franchises, the first thing Social Capital points out on their website is that “…the starting lines of birth are unevenly distributed,” followed up by “Our mission is to advance humanity by solving the world’s hardest problems.”
It’s a dream shared by most investors (and entrepreneurs): to back (or build) a company that simultaneously generates healthy revenue and makes a measurable positive impact in the world. Historically, it has been the business of nonprofit organizations and governments to provide social programs. The question is, do startups and venture capital have something to add in this space? And perhaps more fundamentally, how can companies and investors reconcile the inherent selflessness of social impact with the drive for revenue that makes for successful startups?
More than a Marketing Play
A first step to answering these questions is to recognize that under the broadest sort of definition, a company like Warby Parker is a “social impact” startup. Rather than thinking about environmentalism or distributing a product to people in need as a marketing tool for generating good optics, or as pure charity that cuts into the bottom-line, companies like Warby Parker make impact an integral part of their business model. By partnering with VisionSpring, Warby Parker has contributed to a quantitative increase in economic productivity in countries where people do not have adequate access to eyeglasses, through their One for One model.
Another clue may be the sort of language that so-called social impact investors use. Whereas nonprofits focus on the humanitarian impact of their efforts, social impact entrepreneurs are much more likely to attract investors by emphasizing the underserved markets they are addressing, or the underutilized economic and brain power they are accessing.
Shift Labs is creating stripped-down, low-cost medical devices for markets lacking in medical infrastructure; SimpleCitizen streamlines the process of applying for a green card or other immigration documents; and Pigeonly provides low-cost services allowing inmates to stay in contact with friends and family. These companies all have at least two things in common: they are targeting underserved markets, and they have all attracted investment from Y Combinator. And there are plenty of other examples of startups focusing on making things that underserved populations want.
Return on Impact
The success of the startups highlighted above hinges on aligning investor, entrepreneur, and market incentives. But beyond successful strategy, there is a powerful trend taking hold in the startup space that is building momentum for social impact startups. 36% of millennials think that the primary purpose of business should be to improve society, and over 50% think that corporations should be doing more to address resource scarcity and inequality.
Millennials are more willing than previous generations to forgo short-term profits for long-term social impact, but perhaps even more importantly, most believe that it is possible to achieve competitive returns without sacrificing social or environmental ideals. While beliefs and ideals alone are not enough to upend the way that investing works, the trend is an important consideration as millennials get ready to receive the largest intergenerational wealth transfer in history.
Younger generations are more interested in investment with a measurable social impact
At Penn, BREAUX Capital is putting these principles into action by providing a fintech solution and financial wellness platform for black male millennials, a segment of the population that is underserved by big banks. They are pioneers in the “cultural banking” space, which combines traditional banking services with the trust and connectedness of a peer community.
Another Penn startup, SpectrumScores, connects LGBTQ+ patients with the right healthcare providers to meet their needs. These startups are built around the social challenges they are solving, and they are sending the message that innovating to address problems in underserved markets is not only possible, it’s profitable.
Nathan is an Innovation Fund Project Manager. He’s a graduate student studying Materials Science and Engineering, and has a master’s degree in physics from Boston University, where he helped develop self-assembling organic building-blocks for next generation solar cells.
Weiss Tech House Innovation Fund is dedicated to funding, promoting, cultivating, and supporting student entrepreneurship in the Penn community. Working on a startup? Interested in partnering? Want to get involved? Drop us a line at firstname.lastname@example.org.