By Cecile Blilious
As we move further into the 21st century, the global community faces an array of difficult challenges. Over one billion people are struggling with water scarcity, a problem particularly salient in California due to the ongoing drought. Alternatively, in places like Africa, the fight against dangerous diseases such as Ebola has captured the world’s attention. In order to overcome the challenges that face us all, we all must accept the responsibility to act. We each have a role to play — every individual, every city, every country and every business.
The question then becomes, how can we all contribute to overcoming these challenges? As individuals we are best positioned to act as independent, helpful agents; cities are best positioned to create effective local solutions; and national governments are best positioned to enact guiding legislation and provide assistance. Technology startups and businesses meanwhile, are particularly well suited to use innovation to create effective solutions to global challenges.
To date, tech start-ups have shown flashes of enormous potential. Green-technology startups have made it possible to recycle previously unsalvageable material, and biotech companies are revolutionizing medicine for first and third world ailments. While these accomplishments have made a notable effect, much more can be done to foster an environment wherein tech startups dedicate themselves to creating socially minded solutions.
Through proper investment strategies and corporate practices, tech companies can be encouraged to actualize their potential and foster social improvements that resolve global challenges, as I will outline below:
Invest in social returns as well as financial returns
Impact investing strategies have turned the focus to the social benefits of investments, without losing any emphasis on financial success. Impact investment firms assess returns in both profitability and measurable, global impact. This relatively new form of investing has grown quickly. In 2014, $60 billion was invested with impact, a 30% increase from 2013, and annual investment into impact funds is expected to increase more than six fold within the next ten years —with projections indicating that it will surpass $400 billion per year by the end of the decade. Moreover, impact investments are targeting and achieving market-rate returns at an 80% clip.
Merge the mission
A challenge often encountered by startups is a singular focus on finances, causing them to lose focus of the overall big picture, including improving a company’s product and social mission. From the outset, a company’s business model should be focused on achieving all of its missions, from making a profit, going public, perfecting a product or maximizing social impact. This model should be consistently assessed throughout an organization’s lifetime. If a company makes changes to become financially stronger, constant check-ups should be taken to ensure that none of its social goals are abandoned, and vice versa.
The need for merged goals applies to investors the same way it does for corporate leaders. When investors understand that social returns and financial returns are equally vital within a company’s activities, they allow the company to maintain focus on its social agenda. The success of companies that strive toward these merged goals has contributed to the continued growth of impact investing. For tech startups in particular, social benefits and financial profits easily come hand-in-hand, and they have drawn attention from Impact Investors.
Effective social assessment
In order to most effectively quantify and measure social returns, companies need to use the resources available to them, including B-Corp certification, which should be pursued as early as possible. While maintaining B-Corp certification, other impact measurement tools, such as Sinzer, can provide valid measures of social impact. Additionally, internal monetization standards and tools should be created to complement these external resources, whether through data tracking or effective polling of a target population. By using a combination of these tools, leadership and investors can gain an accurate picture of a company’s ability to gain social “returns” together with financial returns. Measurement tools set a standard for a company and are critical in providing company leadership with a more in-depth understanding of their performance. This allows them to make necessary changes, and verifiably demonstrate success.
Technology startups and businesses are positioned at the intersection of ingenuity and aggressive growth strategies. The world cannot afford to overlook the technologies that these companies are creating. While impact investing has had a strong beginning, we need more investors to adopt this model to maximize the social impact generated by technology startups.
While many entrepreneurs create technologies of minimal social impact, others do great good. When socially minded businesses and investors execute the proper strategies, they can spread an impact that benefits us all.
Image credit: Flickr/Rodrigo Soldon
Cecile Blilious is the co-founder and managing partner of Impact First Investments, an Israeli impact investment firm. Cecile has extensive experience managing foundations focused on creating social good and has served as CEO or in leadership positions at a number of Israeli high-tech companies.