It’s difficult to imagine that behemoth companies like Facebook and Google were once humble startups. Jeff Bezos started Amazon in his garage at the age of 30. Today, he’s the world’s richest man, with Amazon accounting for nearly 50% of all online sales in the US in 2018, and reporting a market capitalisation of $755.7 billion at the beginning of 2019.
We’re often told that companies are here to change the way we live for the better. Facebook has sold itself as being the world’s social network, connecting billions of people around the globe, and has even set its sights on launching its own digital currency, Libra, which could theoretically bring financial infrastructure to those in the developing world who have no access to banks.
Whether or not these companies are actually changing the world for the better is debatable. Monopolistic tendencies, partnered with numerous privacy concerns have muddied their image. Along with a growing focus placed on rampant bullying and mental health issues arising from social media use, these problems are taking the sheen off of the whole notion of global connectivity and community. It is undeniable that big tech has the resources, knowledge and influence to do a lot of good in the world, but many people just aren’t seeing it.
Should we instead be looking towards startups to offer the kind of philanthropic initiatives that could spawn real social change? Small grassroots companies are finding market gaps and interesting investors who see the potential for startups to make a real impact while still generating revenue. We’ve taken a look at how this is possible.
Changing the world costs money, and that’s a cold, hard capitalistic fact. There is no shortage of good intentions, but without the finances to hire staff, build a product or service and market it, the only thing that will change in the world is that another company will have contributed to the statistic that 90% of startups fail.
VC investment has historically been drawn to the future unicorns waiting in the wings, but that may be a simplistic generalisation going forward. Today, there is a new subsection of startup funding gaining traction. Over 1000 startups are now listed on Crunchbase under the ‘Social Entrepreneurship’ umbrella, with 617 of these categorised as for-profit companies. In total, these 1021 companies have raised more than $1.6 billion in funding.
Big Business Leading the Way
The above stats are encouraging, but interestingly enough, there is not necessarily a widening gulf between the philanthropic ideals of small startups, and the profit-hungry rigidity of larger companies.
In 2018, Larry Fink, CEO of one of the world’s largest asset management firms, Blackrock, sent shockwaves around the investment industry by proclaiming, “To prosper over time, every company must not only deliver financial performance, but also show how it makes a positive contribution to society.” Making such a public push for social responsibility as the head of an economic powerhouse that holds more than $6 trillion in assets put Fink in a position to encourage change with CEOs on Wall Street and beyond.
How big an effect this will have is a matter of contention. Figures quoted before Fink’s Blackrock open letter noted that out of the then $193 trillion in the global financial markets, only $7 trillion qualified as socially responsible investing (SRI), while impact investing represented $114 billion. A key distinction between the two is that SRI focuses on minimising socially negative impacts of investments in general, while impact investment directly aims to finance projects that have positive social impact as their primary goal.
Salesforce is another company that has pledged business practices geared towards social change. In 2017, it announced a $50 million initiative to fuel social impact startups. This Impact Fund specifically targets four areas of investment to promote startup incubation: workforce development and education, equality, environment, and the social sector.
Incentives for Socially-Minded Startups
There is a growing ecosystem of programs that offer startups direct investment and mentoring resources. Ship2B has offices in Barcelona and Madrid, and directly targets and promotes technological projects with high social impacts. It also offers access to its existing ecosystem of companies, thereby promoting a collaborative environment for startups to promote social change.
Another resource is BBVA Momentum, which offers a five-month program consisting of training, strategic support and potential access to funding opportunities, all designed to promote growth and networking opportunities for socially-minded entrepreneurs.
The access to such schemes varies between countries around the world, as Ship2B’s co-founder, Xavier Pont, noted when he pointed out, “The U.K. is 15 years ahead of us. They started with accelerators, incubators, funds and consulting firms. At a certain point, these investors manage to get the government to make a firm commitment to impact investing and social entrepreneurship.”
The Startups Saving the World
Perhaps the most widely known socially-minded startup, Change.org has amassed over 150 million users in 196 countries by providing an easily accessible platform to create philanthropic and educational campaigns that raise awareness and generate support for social issues.
Recognising the power of technology to positively impact the planet has led to Code.org becoming a key driving force in making coding education more accessible for all. This Seattle-based startup works to expand computer science programs in schools, and to increase women’s and minorities’ participation in this field.
The ongoing problem of rampant food wastage is being directly addressed by Karma’s app-based marketplace that allows users to buy unsold food at discounted rates. This is helping restaurants and shops to reduce their waste levels, while giving lower-income families access to reasonably-priced groceries and meals.
A startup producing an actual physical product, Stockholm-based Altered has developed a nozzle that can be fitted to standard taps, reducing water usage by up to 98%. For its cost-effective and eco-friendly manufacturing, this climate change-targeting company was declared winner of the 2018 Climate Solver Award.