🚀 Is impact venture a contradiction?
Founders Factory Startup Bulletin #39
We bring you a round-up of startup and investment stories, key learnings from founders, and insights from the Founders Factory team.
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I’m going to start today’s newsletter by doing something we’re not used to doing—comparing two companies in our portfolio.
First of all, Bower Collective. BC is a refill subscription platform for sustainable home and hygiene products. Their principal aim is to give a platform to planet-friendly products, while also eliminating plastic waste from the home.
Secondly, Notpla. They have created plastic alternatives using seaweed, essentially creating a sustainable packaging that can dissolve or biodegrade. You may have heard about them—they won the Earthshot Prize in 2023.
Both of these companies are approaching the same, very broad problem, albeit from different angles. One is about nudging consumer behaviour towards more sustainable choices, the other is giving businesses better, more sustainable alternatives.
In short—both are thinking about impact in very different ways. The belief that impact is all one thing is not just outdated, it's misguided. In today’s newsletter, FF venture designer Alexandra Simmons busts a number of misconceptions around impact ventures and impact investing.
Also in the Startup Bulletin:
Our top recommended reads this month
Highlights from Founders Factory & our portfolio
Opportunities, events, job roles & more
🚀 Impact Venture Building: 4 Common Misconceptions
By Alexandra Simmons, venture designer at Founders Factory/Nesta Mission Studio. She is co-founder of Timepeace, a platform fostering social integration for refugees and asylum seekers, and has acted as a business consultant for numerous impact ventures.
❌ Impact ventures aren’t profitable
“Impact venture building—isn’t that like charity?”
There’s one huge misconception which clouds the world of impact venture building, which is the idea that you are trading off profit for doing good. This is often met by the opposite statement: that you can’t consider a business to be impactful if it is making a profit.
I spend the majority of my time trying to convince people that this simply isn’t true. Impact venture is a very specific intersection, an overlap of the venn diagram between philanthropy/charity and traditional investment. The key definition of an impact venture is this: it is defined by a business model where impact is correlated with, and driven by, commercial success. e.g. if you remove the impact, you remove the business proposition, and vice versa.
❌ Impact is binary
There’s a trend towards viewing impact as binary—either you are doing good, or you’re not. The truth of course lies somewhere in the middle, between traditional investment (which emphasises returns above all else) and charity (which offers no returns). Between these you can find a broad spectrum, where different types of businesses can have different sorts of impact.
Many people refer to the ABC of impact. This is:
Acts to avoid harm—the venture is mitigating or reducing ESG risk, AKA negative outcomes for people and/or the planet
Benefits all stakeholders—beyond just avoiding harm, the venture has a positive outcome for people and/or the planet
Contributes to solutions—the venture is intentional about generating a positive, measurable change for people and/or the planet
Most businesses fit into the ‘avoids harm’ category, given external pressures and ESG considerations.
The ‘benefits all stakeholders’ category clearly go beyond this, and are something we like to call impact-aligned. Flight-free travel platform Byway, for instance, which encourages more sustainable and responsible travel.
The ‘contributes to solutions’ category, meanwhile, refers to businesses that we would call impact-driven. This includes businesses like Ogma (from our Venture Studio), which is widening access to speech and language therapy for children, a service that can have huge educational and socio-economic benefits down the line.
❌ Impact is intangible & hard to quantify
How can you measure an abstract concept such as ‘doing good’. In short—it’s complex, but it can be done.
Our stage appropriate model has impact KPIs for each stage of a business (concepting, MVP, early scale, scale, and scaled), with information on what type of data you should be collecting at each stage in order to measure each indicator.
You can find our full Impact Venture Measurement model here.
NOTE: Data is a critical tool in impact venture building—it not only helps you communicate progress, but offers a valuable feedback loop for improvement.
❌ Impact is a niche of the market
Investors may have traditionally avoided going down the ‘impact’ route for fear of finding themselves trapped in a small niche of the market. But the reality is that the rate at which the impact market is growing, it is fast becoming one of the biggest investment opportunities around.
This also plays to another big misconception: that impact is a vertical. Rather, I would see impact as a horizontal, stretching across almost every sector from fintech to health to climate tech. In terms of a broad investment thesis—it doesn’t get bigger than this.
This is excerpted from an article that Alexandra wrote for our blog. You can read the full guide to impact ventures here:
🚀 Highlights from Founders Factory & our portfolio
Founders Factory launched two new accelerators based in Perth, Western Australia. One will be focused on the future of mining, in partnership with Rio Tinto, while the other will invest in nature tech and biodiversity, backed by the WA Government. Across both programmes, we’ll invest in 70+ startups over the next 3 years
Unwritten closed a $3.5M seed round, led by Connect Ventures, with investment from Planet A Ventures, Sand River, and Adapt Nation Capital
HealthKey closed a $1.3M seed round, led by Aviva Ventures with backing from Ascension, Oxford Capital, and Cur8 Capital
Gridshare launched their first crowdfunding campaign to offer the opportunity to co-own a newly constructed solar farm. Built in our Fastweb Venture Studio, Gridshare aims to democratise access to renewable energy by allowing people to crowd-invest in solar
We hosted our biannual Investor Showcase, inviting 12 startups to pitch to a room of 100+ investors from a number of Europe’s leading VCs. Read more about the startups pitching here
Opportunities
Women in Fintech Breakfast (May 8th, 9:30-11AM, London)—we’re keen to welcome ambitious women founders for this casual networking event, an opportunity to meet like-minded founders, investors, and industry leaders. Register your interest in attending: https://lu.ma/di1hke0e
European VC Impact Survey—Founders Forum, in partnership with European Women in VC, are surveying European VC partners & LPs on the impact of European venture capital. You can complete the survey here
💼 Jobs
We’re growing our team in Perth, Milan, Berlin, and London. Check out a number of our open roles below.
Venture Studio Lead, Contract (Berlin) - must be German-speaking
Venture Builder, Contract (Berlin) - must be German-speaking
See you next month 👋
Interested in reading more of the same insights? Check out the Founders Factory blog, and previous newsletters.