The number of social impact startups has risen dramatically in the last few years. And who can blame them? The job of the entrepreneur is to solve problems, and the biggest problems that exist are those that affect everyday people. Even companies that aren’t mission-driven at their core are fighting the good fight, from hosting company-wide volunteer days, to partnering with nonprofit organizations, to working with local governments for social causes, and more.
And what’s better, there are now more investors looking to invest in impactful companies than ever before, which means that there is no better time to launch a world-saving startup than now.
But is it enough?
In 2011, entrepreneur, investor, and philanthropist Peter Thiel famously declared:
We wanted flying cars, instead we got 140 characters.
His belief was that technological innovation was evolving at a slow rate, and that the world needed more ambitious entrepreneurs to tackle larger problems rather than merely building new apps and social media platforms. And while the finer points of his argument are up for debate (click here for his full manifesto), there is no denying that more entrepreneurs should be taking a stand against the challenges that face our future.
If you are one of those founders who’s ready to take the next step towards making the world a better place for everyone, you’ve come to the right place, as this extensive guide will show you what you need to build an impactful company.
Getting Started on Your Social Startup
Once you’ve decided to build a startup with a social inclination, there are a few considerations that you must keep in mind before committing to your venture. In the VentureBeat article, “How to build a world-saving startup”, Rob Wu (founder and CEO of CauseVox, and Graduate of the Washington, D.C. Founder Institute), offers some advice for aspiring social entrepreneurs looking to start impactful companies. Below are two of the biggest points:
Put the Business First
As counterintuitive as it may seem, it’s important to remember that you are still building a company that requires a scalable business model to survive and grow. During the formative stages of your company, ask yourself these questions:
-
Who exactly is the demographic I am trying to help?
-
How big is my target market and is it big enough support a startup?
-
How much will my customers pay to purchase my product or service?
Conduct extensive research into your target market by interviewing similar companies, charities, and nonprofits, and constantly monitor how your customers interact with your company and offering.
Don’t Quit Your Day Job Yet
Startups have a very high fail rate, so Wu recommends that aspiring social entrepreneurs to keep their current jobs before committing fully to launching a startup. Why? Because most startups die at an early stage, you need to make sure that you can keep your company funded yourself before it’s strong enough to focus on full time.
However, there are a few possibilities that can you can take advantage of to help you grow your startup while keeping your day job, depending on where you work.
-
Take a sabbatical. Taking an extended leave of absence from your job enables you the opportunity to explore your passions and side projects without fear of losing your job.
-
Look into Corporate Social Responsibility (CSR) Programs. Some companies have programs that help employees participate in mission-driven activities outside of the office.
-
Do some volunteering. Quite a few corporations pay their employees to do outside volunteer work, which is a great way to learn about your market and meet potential customers.
Start a Nonprofit?
If you’re looking into starting a nonprofit organization, remember that if your current startup isn’t generating any profit, you can’t simply turn it into a nonprofit. Here are the key elements of a nonprofit company, according to the article, “How Is a Nonprofit Different from a For-Profit Business?”:
-
Nonprofits undertake activities whose goal is not primarily for profit.
-
No single person owns shares of the organization or interests in its property.
-
The nonprofit’s property and income corporation must never be distributed to any owners but are recycled back into the nonprofit corporation's public benefit mission and activities.
Build Your Team
While countless founders dive into the world of entrepreneurship primarily with the goal of attaining instant fame and wealth, you may be surprised that there are still plenty of like-minded entrepreneurs out there who are looking to solve a problem just like you. In fact, launching a social good startup pretty much requires you first form a team who are as dedicated to a mission as you are.
With the creation of social impact startups on the rise, more and more related organizations are forming to keep up with the demand. Here are a few resources for founders looking to connect with other socially-minded people.
-
StartingBloc (Worldwide)
-
Center for Social Innovation (New York)
-
Forge Portland (Portland)
-
Green Spaces (Denver)
-
Impact Hub (San Francisco)
-
Propeller (New Orleans)
-
Global Social Entrepreneurship Network (Worldwide)
-
Social Entrepreneur Network (Europe)
-
Meetup.com (Worlwide)
Pitch Your Social Startup
When you have a company that’s up and running, you’ll most likely need additional capital to expand, which means you may have to pitch your company to investors. Now, there are nearly countless resources available on the internet that cover how to craft a pitch that will win over investors - and many of them are useful - but when it comes to pitching a social good startup, there are other considerations that need to be taken into account.
Fortunately, the fine folks at Securing Water for Food cover what socially-minded investors look for when interviewing entrepreneurs, in their article, “The Art of the Pitch: How Startup Social Enterprises Pitch Impact Investors (Devex Impact)”. Here are some of the most important things to keep in mind.
Focus on the Story
Instead of going down the usual route of describing what your company does, how it works, who its customers are, and the expertise of your team, instead turn your pitch into a story by describing the overall social issue you’re trying to solve, how it affects the average person, and what your company does to solve it.
Detail a Plan to Scale
Event the most philanthropic investors are attracted to companies that have the capacity to grow. Before you pitch your startup to investors, ensure that you have a scalable business model and that you are able to accurately convey its potential. It’s okay if your company is starting small and only catering to small number of people, but if you’re still only serving that same set of people five years down the line, don’t expect any investment anytime soon.
Brand Your Social Startup to Get Customers
While it may be true that the vast majority of consumers aren’t as interested in social causes as they are in, say, apps that make their lives easier, there is a growing number of people that are drawn to companies that offer solutions to social problems. So, just because your startup doesn’t produce a fun new app or shiny piece of hardware, it’s still possible to attract a sizeable audience.
In fact, the Startup Grind article, “How Impact Businesses Use Storytelling to Build Movements”, by Rohan Potdar, dives into the various ways that social startups employ a personal narrative to boost awareness and drive engagement. According to that article, these are some of main components to an effective story-based branding strategy:
-
Be Real. Your company’s marketing campaign should feature real people in real situations to establish trust with your audience while clearly describing the problem your product or service solves.
-
Be Positive. The visuals of your marketing campaign should exude positivity, so it’s important you focus on themes hope in the face of despair, triumph over adversity, etc., as this will portray your company as a viable solution.
-
Be Meaningful. Only use visuals and messaging that are relevant not only to your company, but are relevant to the social problem your company is solving. Highlight the impact that you are creating and its importance to the society at large to establish credibility.
Fund Your Social Startup
Raising funds for any startup is hard, but because social enterprises can be a hard sell, raising funds for a startup with a social mission can be even more difficult. However, don’t despair yet, as there are still plenty of funding options for you and your social startup; you’ll just have to work a little hard for them, that’s all.
According to Rob Wu in his previously mentioned article, these are some of the best methods and resources for aspiring social entrepreneurs:
-
First customers. There are a couple of ways to capitalize on the revenue from your first customers. For example, you can charge upfront for your product or service, or you could do pre-sales to help cover manufacturing and distribution costs. What’s great about these tactics is that you can also test pricing strategies and revenue models while bringing in funds.
-
Fund it yourself. While this is definitely a more expensive and risky route, sticking to your day job to save money for your startup nonetheless does have one major upside: you get to keep 100% of your company, a stark contrast to exchanging a percentage of your startup for investments.
-
Raise investment rounds. As previously stated, relying on angels and venture capitalists for funding will mean that you have give up part of your company. However, the amount of money that raise from investors is significantly higher than self-funding or your first customers. Also, there are plenty of investors out there who specialize in social enterprises, including:
Stay True to Your Values
If you’ve settled on your mission and are seeking funding, don’t alter your vision simply to attract the interest of investors. While sticking to the values of your company may make it more challenging to find investors that are looking to invest in startups like yours, it’s better to hold out for a investors whose values align with yours and will contribute value to your venture that goes beyond mere capital. However, if you associate with investors who don’t sympathize with your mission or if you change your values just to bring in investments, you will only increase the chances of conflicts of interest later on, which will be catastrophic for your company’s success.
Join an Accelerator
Accelerators foster the growth of early-stage companies, and usually offer some sort of mentorship, office space, and funding. Like investors, while many of them are geared towards highly lucrative startups, there are still plenty of them that cater to social enterprises. Here are some top accelerators that are interested in impact startups:
The Founder Institute is inspiring and empowering entrepreneurs to build impactful and ambitious companies around the world. Click here to learn more about our "FI for Good" initiative.
