Startups that aim to tackle important and extraordinarily difficult social problems are inspiring in concept. However, social impact startups require founders to craft and walk a special tightrope to success. On top of the myriad challenges that all startups face, these startups must balance delivering a substantial social impact with generating profits or creating wealth. They may deliberately target ill-defined markets or serve disadvantaged populations. And as a result, social impact startup founders face different challenges than more conventional startup founders and have fewer models to emulate.
Nonetheless, using the focus, innovation and drive of entrepreneurs to address the big issues that afflict society, the economy, and the environment is one of the most promising ways to uncover answers and make breakthrough progress.
At a Founders Network event on August 25, 2022, social impact startup founders had the opportunity to come together with FN members to discuss the challenges they face. The event provided a forum for dual-purpose founders to share insights and helpful experiences, make introductions, and offer information resources.
“The idea is to create a smaller group for people who share the same perspective,” Ting says. “In our case, the reason we exist is to have a social impact. You face different challenges. The point is to create a subset of the entire Founders Network community where people who can identify with those challenges can provide each other with support and resources.”
This initial event was open to FN members and social impact founders in the broader startup ecosystem. It is part of an ongoing Founders Network initiative to better connect startup founders in particular sectors. During the month of August, these sector events were open to the public to give outside startup founders a taste of the Founders Network experience.
“One of the values of having something like Founders Network is to provide each other with moral support through what can be a very difficult journey,” Ting says.
Here’s a peek at the social impact startup sector and the challenges these founders face.
A growing market
Social impact startups strive to consciously, systematically, and sustainably serve or solve the needs of local or global communities. These companies take on problems such as education, access to clean water, conservation of natural resources, healthcare in underserved populations, and more. For example, Ting’s company, CivImpact Labs, is focused on launching news, communication, and social applications that better inform the public, reduce political polarization, and positively impact society and democracy.
According to recent data, the social impact market had a total of $286 billion in assets under management as of 2020. And research indicates that this figure is expected to increase due to growing consumer spending in companies that are making a positive impact.
Vying for funding
Social impact startup founders face many of the same challenges as other founders. According to one report, their top concerns are: finding funding, business planning, finding mentors, business strategy, marketing, sales, financial literacy, and digital literacy.
However, while finding funding tends to be the top concern for most founders, social impact startup founders receive less funding then founders in other sectors. According to one report, out of the $193 trillion in the global financial market, socially responsible investing (SRI) represents $7 trillion and impact investing represents just $114 billion.
While one recent report found that more than 60 percent of early-stage entrepreneurs in the U.S. cite a desire to make a positive impact as a reason for starting a business, true social impact startups differ greatly from traditional startups. That’s because these startups must always balance what’s good for the financial viability of their venture with achieving the social impact they are focused on.
“The reason we exist is to create social impact,” Ting says. “We wouldn’t do these things if we didn’t have social impact as the goal. Some founders can’t identify with that: taking on a large problem for a questionable financial gain.”