Social Impact Startups. What Are They & Why You Should Care
Sigma School
7th February 2024
I've always been intrigued by the world of startups and the positive impact they bring to the world, from contributing to economic dynamism with new innovations and inventions to creating new jobs to simply making life easier for the average Joe.
It's amazing. and impressive how entrepreneurs raise tons of funding and create such a lasting impact on the world.
From being a Student Venture Capitalist in UK, to a working on a short stint at a local VC firm, I've always been on the look out, exploring new ideas and hunting for the 'next big thing'. But one thing I realised over the years is that doing business, raising funds and making profits is no longer enough. Don't get me wrong. It's amazing, but I believe there has to be more effort and funding going into social impact initiatives.
Many in the world face daunting social problems that the average person couldn’t believe. From climate change to education inequity to extreme poverty. There's just so much more potential yet to be executed upon.
Yes, some may argue that we've been making significant strides and progress thus far. For example:
But is it really good enough?
The world is still off track to realize the global goals by the end of this coming decade, in most aspects, especially in education, which is widely proven to be able to bring one out of the poverty cycle. Many children are still dropping out too. According to a report by UNESCO, by 2030, only 60% of young people will be completing secondary education. There is a real risk that the world will fail to deliver on its education promises without a rapid acceleration of progress. Also, based on today’s trajectory, different research teams came to a similar projection on how extreme poverty would look like in 2030.
Half a billion are expected to remain in extreme poverty by 2030 if current trends of economic growth and levels of within-country inequality persist.
Seems like a big decline over the years, doesn't it?
Take note on the purple curve. The one for Sub-Saharan Africa.
In 1990, more than a billion of the extremely poor lived in Asia, namely China and India alone. Since then those economies have grown faster than many of the richest countries in the world.
This shows that poverty was not concentrated in Africa until fairly recently. The projections suggest the geographic concentration of extreme poverty is likely to continue.
This also shows that poverty declined during the last generation because the majority of the poorest people on the planet lived in countries with strong economic growth.
Tldr; Even at this pace, we're still not going to achieve the goals outlined in the Sustainable Development Goals, by 2030.
A social entrepreneur is a person who pursues novel applications that have the potential to solve community-based problems. These individuals are willing to take on the risk and effort to create positive changes in society through their initiatives.
Definition from Investopedia.
Simply put, they are entrepreneurs who are interested in starting a business for greater social good, and prioritise implementing widespread improvements in society, over the sole target of making profits. One key thing to note: They are also not a non-profit organisation. They're still businesses and still aim to make a profit.
Basically, these are startups with social, environmental, educational and health-related values, while making a profit out of it. Many initiatives have been founded with this goal in mind, such as the foundation Ship2B, which promotes technological projects with a high social impact, or programs like BBVA Momentum, which supports entrepreneurs with innovative and sustainable solutions for social and environmental problems.
Poverty is not a created by poor people, it is created by the economic system. Poverty cannot be eradicated by putting money (charity) into the hands of people, because it requires an endless inflow of money. That’s why we created micro-credit institutions for the poor to start social businesses that generate revenue and become self-sustaining, where surplus money is ploughed back into the business.
- Muhammad Yunus
This is a quote by Muhammad Yunus, a Bangladeshi social entrepreneur, the father of Microfinance. To make any social impact initiative effective, it has to be self-sustaining, by generating revenue on its own. Else, it would require an endless flow of money to those in need, which would be completely unsustainable in the long run.
I'm sure we've all heard of startup unicorns, what about impact unicorns?
Impact unicorns are basically startups with the goal to improve one billion lives.
Today, it's awesome that there's an increasing number of social impact startups that aims to solve these problems with innovative solutions. However, these startups often don’t receive the necessary exposure they deserve because of low marketing budgets, small teams, and poor funding.
Social impact investments are still pretty new, still developing and growing in the world. Yes, they're gaining traction fairly quickly. But to meet the global need, much more capital will need to be directed for impact investing. There are over 1,340 active impact investing organizations across the world who collectively manage USD 502 billion in investments focused on bringing about positive change. However, trillions of dollars are still needed to effectively address the critical social and environmental challenges that face the world today, such as those outlined in the Sustainable Development Goals set by the United Nations General Assembly.
This report shows that one in four dollars of professionally managed assets (amounting to USD 13 trillion) now consider sustainability principles. There is great potential for these investors, who have already aligned their capital with their values, to more intentionally use their investments to fuel progress through impact investments.
Also, one big signal of a larger shift in the global financial markets would be the growing consideration of Environmental, Social and Governance (ESG) Factors in investing because an increasing number of people are recognizing that their money should do more than just make more money. People are starting to recognise that their investments can also seek to fuel meaningful, sustainable, social and environmental impact.
Well, the good news is ESG factors will soon be a necessity in investment decisions.
While this is considered big news especially for the MNC's, it's still considered a good signal for the growth of social impact initiatives in the startup scene.
Proud to be part of ASEAN!
Southeast Asia is starting to experience a boom in the small business sector, and startups with ethical intentions are beginning to really make a difference.
Here are some examples of inspiring social impact startups born and bred in Southeast Asia. Check them out!
Saora industries provides safe and clean drinking water to underserved communities, with a focus on sustainable solutions environmentally & financially. This company includes the revolutionary creations of the ‘Waterlily’ and ‘Chlorinator’ filtration systems.
With the aim of promoting innovative and sustainable value to urban society, Evoware saw an opportunity to use seaweed to replace plastic. Their seaweed-based solutions are used for food wraps, coffee cup sleeves, dry seasoning sachets, and soap packaging, among other things. With 70% of all plastic waste in the ocean coming from food and beverage packaging, this startup has the potential to drive monumental change.
Impact Terra has the goal to improve the livelihoods of rural smallholder farmers through the use of digital solutions such as smartphone apps by providing them with real-time agricultural information, access to markets, and proper access to financing options. Their platform also collects data on farmers, such as their location and details about crops, which helps financial service providers deliver financial products that meet their needs and correspond to their specific risks.
The Tree Dots' primary focus is to revolutionise the traditional food supply chain, mainly by redistributes unsold, yet still consumable food supplies–reducing food waste at its early stages. This company is improving the current state of the food industry by matching inventories with buyers who can utilise the otherwise wasted products.
Ruma is building a collective economy to help low-income communities in Indonesia with limited access to products and services that could improve their lives. The goods currently available to most Indonesians are usually of a low quality and at a higher price than similar products sold in department stores. By employing local entrepreneurs and raising awareness through information, this company unites the power of millions of low-income individuals to boost their quality of life through access to high-quality and affordable technology, household goods, and clothing.
Koompi creates practical and entry-level laptops for Cambodian youths who wouldn’t usually have the means to buy these modern-enablers. They created their own operating system with to assist professional and educational environments across the ASEAN region. Koompi aims to not only sell laptops but to reach out to a new generation of techies.
Salt considers themselves as a ‘social movement’ and more than just an innovative product–a sustainable and cost-effective, ecologically designed lantern activated by salt water. The technology is based on metal-air battery technology and requires the basic solution of salt and water to make the lamp emit light. Salt has also been involved in the sponsorship of tribes and local communities, providing those them with lamps to aid their safety and improve their quality of living.
Enablecode is a software company that employs computing experts with disabilities. Established in 2014, this startup was built from a team of freelancers who have been working together on a variety of web projects in Ho Chi Minh City since 2010. Their goal is to use technology to deliver services and run a strong business as a means to raise awareness of those living in a disabled condition.
The goal is to create a social movement, where impact founders and entrepreneurs are supported in the same way that commercial entrepreneurs are.
- Tobias Stralin, McKinsey partner
Gotta thank these impact funds for the growth on social entrepreneurship. If you're a social entrepreneur, you'd definitely want to check these guys out.
For pre-seed and seed companies based in the U.S. and Israel with a focus on AI for social impact.
With a focus on providing support to entrepreneurs attempting to build something that advances business and society in revolutionary ways. “
A foundation that engages in scouring for and choosing the leading social entrepreneurs across the globe, who it refers to as Ashoka Fellows.
Geared toward social impact startups working to create a healthier and more sustainable future, the accelerator provides access to training, products and technical support. Startup founders will work with Google engineers and receive mentoring from over 20 teams at Google, as well as outside experts and local mentors.
Google.org issued an open call to organizations around the world to submit their ideas for how they could use AI to help address societal challenges. They providecoaching from Google’s AI experts, Google.org grant funding from a $25 million pool, and credits and consulting from Google Cloud. They will also be offered the opportunity to join a customized 6-month Google Developers Launchpad Accelerator program, including guidance from their nonprofit partner, DataKind, to jumpstart their work.
WSA Young Innovators is a special recognition for young social entrepreneurs under 30 years of age, using ICTs to take action on the United Nations Sustainable Development Goals (UN SDGs).
Since 2011, they have supported the work of 36 innovators who address pressing global issues, from healthcare delivery to college persistence and sustainable construction in developing nations.
The Prize seeks out innovators who are spearheading transformative early-stage projects in the fields of the environment, heritage conservation, and social justice. The J.M.K. Innovation Prize is open to nonprofit and mission-driven for-profit organizations that are tackling America’s most pressing challenges through social innovation.
MIT Solve advances lasting solutions from tech entrepreneurs to address the world’s most pressing problems. Solve is a marketplace for social impact: They find tech entrepreneurs from around the world and broker partnerships across our community to scale their innovative work — driving lasting, transformational change.
Notley is a catalyst for social innovation unlocking opportunities with today’s impact organizations and changing communities. Their mission is to scale and support businesses, nonprofits, individuals, and programs making positive change in the world.
The Skoll Foundation drives large-scale change by investing in, connecting, and celebrating social entrepreneurs and innovators who help them solve the world’s most pressing problems.
The Catalyst Fund awards small grants for early-stage, innovative, and unconventional ideas that address serious global challenges.
The SEIF Awards target European impact entrepreneurs who develop or make innovative use of technologies to tackle social and/or environmental challenges and contribute to the UN SDGs [Sustainable Development Goals]. Each Award grants the winners CHF 10’000. Theyprovide finalists a unique opportunity to increase their international awareness, gain reputation and present themselves to a top-class jury.
This is for the younger entrepreneurs! It's open to the most influential social entrepreneurs between the ages of 13 -19, who have found a solution or innovation to address a basic human need.
Thanks for checking this out! Hope you learned a thing or two about social entrepreneurship and the current state that we're in right now.
Before you go out there and pitch to VC's, here are some good resources to refer to when preparing your pitch deck.
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