Impact-driven startups are winning the war for talent. Here’s how you can do it too.

Any successful founding team will know that talent is key to building winning startups. According to one study, not having the right team was the third most common reason for startup failure. As a result, startups are going all out to try and attract and retain talent. Think ping pong tables, free fruit, and equity stakes.

However, with a booming tech industry, it’s becoming increasingly challenging to win the talent war. High flying grocery delivery company, Instacart, demonstrates just how competitive the talent market is. After raising a round in March 2021 valuing them at $39bn, in March 2022 they cut their own valuation by ~40%. This was in part, to make stock options more attractive for new talent.

While compelling, these sorts of strategies have clear implications for investor returns and the broader prospects of the company. In another part of the market, a very different strategy is helping startups to win talent. Impact-driven startups are showcasing their inspirational visions and impact credentials to convince the best and brightest to join their cause.

Why does impact matter to talent?

Young professionals (who tend to be the target for startup recruitment) are increasingly searching for ways to make a positive contribution in the world. For example, more millennials and Gen Zs aspire to make an impact on society than wanting to have children. Yet, most do not feel that they are able to tap into this need. According to Deloitte, while 60% of millennials feel some form of accountability for protecting the environment, fewer than 40% feel that they can exert a ‘significant’ amount of influence on the issue. It’s a similar story for social equality, with 53% feeling accountable to the cause but only 33% able to influence it.

Work offers an exciting opportunity to be able to make a difference, after all, it is where we spend a third of our lives and where we have some of our greatest achievements. But this opportunity seems to be missed by the majority of employers. 76% of millennials believe that the organisations they work for have no greater ambition than to make money.

Therefore, companies who can offer employees a meaningful way to tap into these needs are more likely to attract and retain the best employees. This is especially true for startups who are in the business of taking on big challenges. By choosing to tackle social or environmental problems, startups will have an advantage when it comes to attracting and retaining talent.

Despite impact being a relatively new trend, there is some emerging evidence of the appeal to talent already. In a letter to the European tech industry, a group of impact startups wrote: “We know that startups who have a clear purpose-driven mission also have easier time recruiting and retaining the best talent.”

Similarly, in Atomico’s State of European Tech 2021, 80% of respondents agreed that ‘social and sustainability impact is an important determinant of employer choice’,

For a case in point, Oyster is a recent unicorn company that puts impact at the core of their business. They have a dedicated webpage on impact, have published an impact thesis and an annual impact report. Here’s what new president, Ellen Silver, former VP at Facebook, had to say about joining the team: “I needed my next role to be at a company where my work mattered — where it would make an impact and improve people’s lives. That’s why I’m thrilled to announce that I have joined Oyster as President.”

All in all, we take this as clear evidence that being impact-driven and communicating that to prospective talent can help to win the fierce war for talent. The next question is how do you do that well?

How can startups leverage this trend?

For this to work, a startup must genuinely be an impact-driven business. Current and prospective employees are a savvy bunch. Impact is personal, it’s about values alignment. Over claim on your impact aspirations and you’ll soon be facing a mass (and potentially bitter) exodus. Here’s a blog on how to build an impact business, published by Balderton and Big Society Capital (BSC) and another one on what ‘counts’ as an impact startup also published by BSC. At a minimum, there are a few steps.

Step 1: Define your impact goals and strategy (your impact thesis)

Like the commercial aspect of a startup, it’s helpful to have clarity on your impact thesis: what change you want to create in the world, why, and how. This helps align everyone internally and can be a powerful way to attract talent and get them excited about your mission. For example, check out Oyster’s pre-series A impact thesis.

Step 2: Execute for impact

As we’ve said, here you must walk the talk. This involves making (sometimes tough) strategic decisions around product design, go-to-market strategy and business model to optimise for impact. For example, Ophelos is looking to enhance the impact of their ethical debt collection play impact through designing for accessibility. Oyster is creating impact by nudging it’s global employment platform more towards emerging markets, connecting talent in these countries to jobs in developed markets.

Step 3: Measure your impact

The history of international development, social policy and charity is full of examples of things that did not go to plan. The same is most likely true for the emerging impact venture movement. Regardless of how compelling an idea sounds, impact can’t be guaranteed until it is measured. We’re seeing some exciting examples of rigorous impact measurement across the venture ecosystem:

1. Wagestream’s six-monthly assessment of how their financial wellness product is being users and whether it improves outcomes for users

2. Second Nature’s detailed studies in partnership with academics and the NHS to assess whether their behavioural science platform helps users lose weight and prevent diabetes

3. Carbon Cure’s data tickers tracking number of deliveries of environmentally friendly concrete and emissions saved

Step 4: Evaluate, learn, iterate for impact

Data shouldn’t be collected for data’s sake. This should lead to gradual evolution in the thesis, execution, and communication. For example, in Oyster’s first annual impact report they talk about how their thesis is evolving as they learn from execution.

Step 5: Communicate progress on your impact journey

Finally, with all the hard work in place, it’s important to communicate with stakeholders about your impact ambitions and progress you’re making. This can include formal impact reports, like this from Planted or briefer updates about specific achievements, like this post from Wagestream:

All of the above signals to current and prospective employees the impact intent of your startup and how sincere you are in pursuing your mission. Embedding this into recruitment and people management can help attract and drive retention of top-tier, mission-aligned, talent to your cause.

Final thoughts

Startups are in a constant competition for acquiring and retaining talent. For those that are genuinely solving an impact problem, they have an advantage over the rest, as talent increasingly wants to be making a dent in big social and environmental challenges. Being able to articulate an impact purpose, demonstrate progress against it, and communicate this in a clear, structured and evidence-based way is turning out to be a game changer for winning talent.

Impact Edge Consulting is an advisory firm that helps startups and startup investors leverage impact as a source of competitive edge. We’ve helped many of the organisations mentioned here develop their impact practice and the resources we’ve linked to. Find out more about why we launched and what we do . Get in touch if you’re interested in leveraging your impact to win top-tier talent.