Why Now Is a Great Time to Launch an Impact Startup

By Jack Mardack

The idea that an economic downturn is a good time to start a new business has become an endearing cliche. But the growing list of examples of successful startups that took off during a recession suggests that this idea has some basis in truth.

I lived it firsthand in 2008 when I was on the founding team at Eventbrite. A combination of financial discipline and strategic focus got the fledgling company through the dark tunnel of the Great Recession and onto a path of hyper-growth and eventual IPO.

At that time, companies like Uber, Slack, Venmo, Square, WhatsApp, Cloudera were still “in diapers.” If there is a recession playbook for startups to take away from these examples, it’s not just that you should cut expenses, conserve capital, and prioritize profitability. The big takeaway, in my opinion, is that a downturn is usually a catalyst for enormous change that can create totally new markets, as well as transform existing ones, very quickly.

It’s these big, fast changes during a recession that create an outsized opportunity for entrepreneurship.

Today, as the tech world collectively braces for the "Recession of 2022," it’s become clear to me that this time the opportunity for entrepreneurs is excitingly different from the last recession. One difference is the potential for change feels much bigger this time because of the ways in which the last two years have prepared us for change. We’ve experienced a societal “values shift” and we want very different things now.

The other difference is that, even as many new advantages have been created for all entrepreneurs, there are some extremely powerful advantages now available that will specifically impact entrepreneurs.

Why now is a great time to launch an impact startup

Reason #1: Impact investors are beyond eager

It’s not an exaggeration to say that in a few years companies that don’t have a clear commitment to positive impact will have a hard time accessing capital, and it's not just startups. Companies of all sizes are going to be held to higher behavioral standards—by investors and by the capital markets. Just last May, SEC Chairman Gary Gensler called for greater clarity on guidelines for assessing the ESG (environmental, social, and governance) merits of publicly traded companies.

Meanwhile, the magnitude of capital that has shifted to “impact funds” is growing. The impact-investing market grew 42% between 2019 and 2020; Citi announced it was committing $1 trillion to sustainable finance by 2030. This means much more money earmarked for early-stage investments that promise to deliver positive impact. For founders who can articulate an impact thesis, along with their business plan, it’s going to be a game changer.

Well before the pandemic, the idea that positive impact and profitability are no longer mutually exclusive was gaining momentum. This was supported by evidence that purpose-driven brands have a distinct advantage over the competition.

A Porter Novelli study shows that purpose-driven brands are more likely to inspire trust, recall, and loyalty in their customers, with 71% indicating that they’d buy from a purpose-driven company over an alternative if cost and quality were equal. Other evidence shows that impact-driven companies have better retention.

Companies that do good will win because they will attract capital and customers better than the competition. The dynamics through which positive impact and commercial success come together to create unbeatable advantages for early-stage companies are increasingly better understood as well. Investor faith is growing in this model and an appetite for investments that meet these criteria will continue to increase.

My advice for today’s founders is you want to put yourself in this asset class. Be intentional. Be creative. This world is far from perfect and that is your opportunity. We have huge problems to solve—from the climate crisis to injustices and inequality around the world. Now is a time for the boldest of visions and for creating business models that align well with positive impact.

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Reason #2: Today's talent wants a deeper purpose

The above-mentioned value shift has also changed the landscape for hiring and keeping talent. Employees are no longer shackled by geography; they have more options and opportunities. And it’s not just about a bigger paycheck. It means gravitating toward companies that do things consistent with their values as human beings.

In terms of the workforce, my advice to fellow founders is this: No matter your purpose, your access to talent that is aligned with your mission is larger than ever. Because of today’s worker mindset, millions of talented folks are ready to make connections with employers that align with their personal values. The best and brightest around the world now INSIST, not just on flexibility, but on meaning from their work. Hire them!

Create and launch an impact-driven startup

Amazing things can happen when you create an impact-driven startup and open your doors to all the impact-motivated talent of the world. Entrepreneurs who reach for this will find they suddenly have access to the massive capital that is increasingly being reserved only for impact investments and will have their pick of talent from around the world.

It all boils down to the simple fact that companies that do good, will do better.

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