Identifying the precursors of incredible: How we evaluate social impact ventures at SAP.
The SAP One Billion Lives Initiative was founded on the belief that SAP is uniquely positioned to help solve the world’s biggest social problems through the best we have to offer, our people, our technology and our resources. Our audacious ambition to improve one billion lives is realised by developing a portfolio of lean, sustainable, shared-value impact ventures, operating at startup speed, with the support of SAP.iO’s Venture Studio.
Evaluating potential impact enterprises is incredibly difficult. At some level, we want every one of these ideas to improve lives to succeed. We could never have helped to establish the 1BLives initiative if we weren’t deep-down, optimists who believe that people, with the right help, are capable of achieving incredible things.
The harsh reality remains, scaling a start-up is incredibly difficult. According to an article in FastCompany, “Why Most Venture Backed Companies Fail,” 75 percent of venture-backed start-ups fail. This statistic is based on a Harvard Business School study by Shikhar Ghosh. In a study by Statistic Brain, Startup Business Failure Rate by Industry, the failure rate of all U.S. companies after five years was over 50 percent, and over 70 percent after 10 years.
Being an impact enterprise makes the odds for success even worse. A 2001 survey, published in the Harvard Business Review, found that 71% of social enterprises lost money, even without factoring in indirect costs covered by their parent non-profit.
Evaluating Ideas and Teams.
This is a space that we take very seriously and invest a lot of time and energy into as a team. Something we take pride in, and hold ourselves accountable to, is that every single idea submitted is read and evaluated. No exceptions. This means we have reviewed every one of the 650+ ideas that have been submitted and evaluated since the program’s inception in 2016.
In 2018, more than 130hrs were dedicated to evaluating and shortlisting teams. Our relationship with the SAP.iO Venture Studio is critical here, employing the same venture-capital and start-up accelerator foundations that are used to guide our investments in taking down audacious commercial opportunities for SAP gives us an incredible benchmark from which we can continue to optimize our approach.
The difference between ‘Good’ and ‘Incredible’
After reviewing more than 650 1BLives submissions over the last 3 years, we’ve learned a lot about what is good, what is Great, and what is incredible. Put simply:
Good teams build proposals which address our investment criteria and demonstrate:
- Sustainable shared-value & capitally-efficient testing
- SAP’s Right-to-Impact
- Opportunities that are SAP scale
Great teams go beyond this baseline to help provide evidence that they are investable, by demonstrating:
A strong team. Teams that are formed by, or recruit, a diverse capability across areas like development, Go-to-market, general management and evidence of success help to set themselves apart.
Validation and traction. Teams who can walk-the-walk, or back-up their written description with evidence demonstrate that they are driven and capable enough to get things done. Be it as simple as a mock-up of the product, an interview to validate their thinking with an industry expert, potential user or buyer show they have the drive to do the almost impossible: to take an idea and turn that into impact at massive scale.
An exciting opportunity. We talk often about SAP’s right-to-impact because its critical to the long-term viability of a potential impact venture. We could have the best team of founders, with the drive, experience, and capability to realize their impact vision, but if we don’t have a strong case for why we as SAP have not just an ability, but the right to impact in this space, the odds for success are limited.
Incredible teams do all of this and more, and here things become a harder to define. Incredible teams can be imitated, but you cannot disguise or hide incredibleness.
Incredible ideas draw the ecosystem around them in like gravity, customers ready to buy a product that doesn’t exist yet, partners ready to invest time and resources to help you scale, contributors hustling to join the team to help out in any way they can.
Incredible teams have an x-factor, a secret sauce — whatever you call it. Incredible teams make you sit back in your chair and say “wow”. If you find one, please tell us about them and encourage them to get involved!