Many of us exist inside a tech-bubble. We have on demand pizzas, insta-styled food photos, taxi app, YouTube yoga classes, and ingredients for overpriced meals delivered to our mailboxes… all of it a product of convenience, but none of it that important. What makes us different as an impact venture capital fund is that we back people who build stuff that matters. Impact businesses disrupt the norm to create a better, more sustainable and more equal society (not just so you don’t have to walk 5 minutes to the pizza place).
So what does it really take to have a successful impact business?
A sense of purpose.
There is still a need to raise awareness that you can generate wealth and have a positive impact on people and the planet. They are not, as some would have you believe, mutually exclusive. Our society still needs to see more of the world’s brightest and most determined people from a variety of backgrounds choosing to set up their own impact businesses but instead people are choosing the “safe” route of being an employee or creating yet another photo sharing app. Yet being an employee is rarely a ‘safe’ option. It means having no control over your destiny, it means getting up each morning to dance to the beat of someone else’s drum. When you run an impact business you instead wake up in the morning and you know exactly why you get out of bed. When the going gets tough, you can cling on to the knowledge that you are changing lives and every sale/deal/partnership you nail keeps your passion burning brightly. You have a sense of purpose second to none.
Solve a meaningful problem.
We define impact businesses as those that are founded with a clear intention of solving a social or ecological challenge which threatens society. Social problem solving is inherent in the business model of these organisations and grows with the company, the aim being that
more sales = greater social impact.
(Side note: we are not philanthropists or a venture philanthropy organisation. Organisations in these fields subscribe to a different agenda and have a different investment thesis.)
When we talk about solving meaningful problems we’re looking at true systemic change, not sticking plaster solutions. So how do we do it? We do it by working with companies who place incredibly intelligent, smart autistic developers into banks to help solve big technology problems instead of using the top 5 consulting companies. Not only is this more cost effective (they are often quicker), but it can provide better solutions, because sometimes to solve an atypical problem you need a mind that thinks differently to a neurotypical one. Second, but no less important, this venture also provides much needed employment and social inclusion for people with autism. The more auticon grows its business the more impact it has on the autism community through the generation of employment opportunities and in changing workplace attitudes to autism.
We do it by changing the way mental health issues are understood, putting the patient at the centre of solutions, and viewing data differently. Mental health issues can affect every area of someone’s life and the impact goes beyond the individual to their friends, family and colleagues, and the experience of intervention is often disjointed and frustrating. Imagine if you could capture every single therapeutic interaction between a therapist and their patient, every response to the “medicine” administered at every point in time, at every clinical interaction then be able to visualise what works in an personalised way for each patient.
Imagine being able to take that collective knowledge, and use deep learning techniques, natural language processing engines and sophisticated artificial intelligence practices, to give every therapist a 360 view of their patient, collecting the whole from its individual parts. Imagine no more. Ieso Digital Health has done exactly this, and has demonstrated clinical effectiveness in over 15,000 patients they have treated to date. They have a proven track record of delivering better than average recovery rates with fewer missed appointments, and the more contracts they win with healthcare providers the bigger impact they will have on improving lives with their personalised approach to mental health services.
Seek markets with BIG potential.
What is big enough? Local, Regional, National, Global Impact? Here at Ananda we concentrate on growth businesses with a European reach and the scope and potential for Global impact. Systemic change requires an ambitious vision and relies on large investments to sustain that vision financially to create significant, lasting change.
But from tiny acorns, mighty oaks grow, and small is where most social innovation begins. So where do impact businesses go next? Scale is key. To be able to scale you need to demonstrate repeatable business. Select the market segment that’s easiest to access and big enough to be financially sustainable for your micro business. Work out your impact KPIs from the beginning and start to demonstrate how they are baked into your business, remember:
more sales = more impact.
Your business model makes a big difference. Choose a business model that makes it cheap to acquire new customers and delivers impactful results.
Build your brand first. Once your brand is built and one area is solid you can develop the business to cover a broader market. You can then start to demonstrate impact at scale. Don’t lose your vision in the process.
Develop a first-rate value proposition.
When you’re speaking to investors it’s important you know how to position your company. At Ananda we love a first-rate impact value proposition supported by an underlying impact business model. For a value proposition to succeed with Ananda, it must:
- Solve a social or ecological problem in a relevant and scalable way
- Have impact baked into the business model. The more turnover = the more impact
- Put impact at the centre of the business. We’re not in the business of charity, funded by a commercial business. No tradeoffs. No transfer models. No CSR-based models
- Have a business model, story, team and traction to attract the amount of capital needed to solve a problem at scale
- Not be sentimental. We don’t fund those in love with saving the world, and we don’t deal in “social romance”, we look for solid business models.
How to structure your value proposition generally? If you’re starting out I strongly recommend that you do a business model canvas, then move onto a value proposition canvas. Even if you’ve had a business for years it’s valuable to do an annual business model and value proposition canvas session.
Example structure: Our (product and service) help/s (customer segment) who want to (job/activities to be done) by ( reducing/avoiding) and (increasing/enabling — this is the impact!)
Your value proposition should define your product development and sales proposition not the other way round.
“What’s my customer’s compelling reason to buy?”, rather than “what’s my compelling reason to sell them my product?”, Source: Octopus Ventures
Have a strong, mission driven founder.
The impact of the drive and determination of a strong founder is well documented. At Ananda we recognise that impact entrepreneurs always have a special connection to the problem they are trying to solve. It’s essential to bring on board initial clients, employees and investors along the way and take them on your journey. We look for founders that live and breathe their business. An impact entrepreneur that sends mixed messages will convey lack of trust.
A strong intrinsic motivation predisposes many impact entrepreneurs to be fiercely attached to their business and they can struggle to separate themselves and their identity. They are strongly encouraged by all around them to focus on just one thing for a 10 year commitment. I certainly have found myself in this position, but to succeed you need to optimise resources and people’s contributions and abilities to reach your goals.
As with any company, an impact driven business will almost always outgrow the skillset which was originally important for the company. As investors, we ask ourselves; will the founder/team be able to attract additional talent and let go of their influencing role for the greater good? We will need to exit at one point in time. For impact to be truly huge and global it can sometimes require change in the form of the team or via an exit.
I write from both sides of the table. Time to flip to impact entrepreneur.
Impact entrepreneurs — Who are we and why do we do it?
As impact entrepreneurs, through our lens (life experience, character, ethics, desires, frustrations — which is why diversity is crucial in the impact space) we spot opportunities for fundamental change. We use our networks (or create them from scratch) to create groundswell from grassroots to government influence, and our knowledge (tech, activism, marketing, supply chains etc.), and we are like a dog with a bone.
We understand we have to work with the status quo to create that change even though this frustrates us and we seek and establish business models that sustain our vision for this systemic change. This can take a long time. You get good at making many allies and maybe a few enemies too. Your vision is not everyone else’s and change is always difficult. But you don’t give up.
Ananda have backed some amazing impact entrepreneurs and are incredibly founder friendly (speaking from experience here) but attuned to the realities of scaling an impact business.
Perfect partners to get you and your business where it needs to be for optimal impact.
Join us. Build stuff that matters.
Written by Zoe Peden,
Proud Impact Entrepreneur and Investment Manager @Ananda Impact Ventures