The Rise of Funding Tech Entrepreneurs as Social Impact

Aiding startups drives bottom-up innovation and job creation in scalable, self-sufficient ways.

Nonprofits and NGOs had been working for decades before social entrepreneurs or social enterprises came around. The difference was in how they operated. One relied on donations. The latter built their own path to sustainability. A social enterprise might even sell to the people they are helping. This had been thought of as exploitative when dealing with the poor in the past, but it makes perfect sense when you consider stories from the CleanTech social enterprise d.light and how they could sell a solar light product that allowed a street vendor to run their business after the sun went down thus generating more daily income. (also kickstart pumps)

Ashoka was an early pioneer supporting social entrepreneurs through programs, residencies, and training. In their Changemakers fellowship program, they would fund the entrepreneur for three years while they got their ideas off the ground and found sustainability. That sustainability could be found through revenue, donations, or investment. Ashoka also started to pair their entrepreneurs with corporations through their Hybrid Value Chain model to focus on building products for new, mostly ignored low-income markets in emerging countries like Mexico and supporting small farmers with irrigation tools they needed.

But, there was an issue with the for-profit social enterprise structure. Nonprofits have very specific governance demands. They had to fund themselves with pure donations. They couldn’t make money off their activities. Then along came the B Corp or Benefit Corporation. The first triple bottom line (3BL) organization structure. It allowed for-profit social enterprises to commit to a ROC (return on community) through social or environmental practices as well as ROI (return on investment) in comparison to the traditional structure of for-profit companies that left doing good to often underfunded and unsupported corporate social responsibility (CSR) departments. This helped lead the way for a changing world where a corporation’s impact was being demanded to be net positive on the world.

You don’t have a mission without a margin

Patagonia, Ben & Jerry’s, Warby Parker, and Allbirds are all examples of B Corps. In 2016, when Benefit Corporations were founded by the creators of AND1, there were zero. Today, there are over 2,500 Certified B Corps in over 50 countries across 130 different industries. It was a true revolution of what business could be.

Also at this time, there was an explosion of support for small business entrepreneurs in developing countries via microfinance and microaction organizations like Kiva and Samasource. It brought rising populations into the digital world as smartphone proliferation made the Internet accessible.

With the rise of the Internet, awareness of software and technology applications rose too. Silicon Valley venture capitalists and startup accelerators began to fund young tech companies not just in the US, but also from emerging nations like Nigeria, Indonesia, and Vietnam. Tech investors like Techstars Social Impact and Obvious Ventures started focusing on purpose-driven entrepreneurs across three investment pillars of sustainable living, healthy living, and people power.

“The 500 Startups Vietnam fund has invested close to one-third of our capital on impact investments that address matters like financial inclusion, education, decent work, and even sustainable food,” explains General Partner Eddie Thai. “That one-third accounts for three-fourths of our capital appreciation. Such numbers support the hypothesis that some of the greatest opportunities are in serving the least fortunate among us.”

VC (or venture capitalist) became a common job title everywhere in the world. Everyone saw the successes in Silicon Valley and wanted to generate their own on their home turf. India, China, Russia, and nearly every major country started to fund novel or lookalike technology to what had been successful in other parts of the world.

What this attention led to was many large nonprofits, NGOs, and other international development organizations to start taking notice at the amount of positive change these tech entrepreneurs and their companies had on the local environment. The rapid pace of scale, the number of new jobs, and the innovation and outcomes they provided for the people involved were unparalleled in the social impact space.

Governments took notice and began to fund bottom-up innovation in the form of venture funds, startup accelerators, and direct investments. The European Union started a grant program that will award nearly EUR 80 billion of funding by 2020. Canada subsidized in-country software developers with a research and development tax credit. Everyone was looking at startups as a way to help propel their country forward, specifically in regions that needed more development. It was working.

Social impact organizations also started to take this approach. If you’ve watched Inside Bill’s Brain, you’ve seen it first hand with how the Bill & Melinda Gates Foundation takes the world’s hardest problems like disease, clean water, and climate change and puts a team of entrepreneurs and technologists to work in combating it.

MEST, is an Africa-wide tech entrepreneur training program founded in 2008, that has since expanded to create an internal seed fund, and hubs offering incubation for technology startups in  Accra, Ghana; Lagos, Nigeria; Cape Town, South Africa; and Nairobi, Kenya.

"In MEST's twelve years of providing critical skills training, funding, and support in software development, business, and communications to Africa’s tech entrepreneurs, we estimate 50% of the startups we work with are socially focused. As startups continue to see other 3BL startups scale, we only expect that percentage to increase," said Veronica Mulhall, Head of Marketing at MEST.

The startup scene has exploded in every corner of the Earth and along with it has come major social change. Bottom-up innovation has produced countless new opportunities for the people involved.

One startup example, SweepSouth, has created over 20,000 new jobs in South Africa, which has close to 30% unemployment. They are expanding to Kenya and beyond this year. 

“A pure profit-driven approach to entrepreneurship is incredibly outdated, particularly in emerging markets where societal progress is key to the sustainability of businesses and the economy,” says Aisha Pandor, CEO of SweepSouth. “We believe it’s a no-brainer to do good while doing well, and are hugely encouraged by the increase in the number of investors and funds available to help support companies that promote positive social impact.” 

Samasource founded by the late Leila Janah — whose life mission was to ‘build a successful business that lifts people out of poverty not by giving them money but by giving them work’ — helps to connect thousands of digital workers into the international business scene by training datasets for machine learning and artificial intelligence. It’s working. So much so that 25% of the Fortune 50 use them.

At scale, d.light has continued building out products and opportunities empowering over 100 million people and reducing 23 million tons of carbon emissions with help from investors like Acumen and Nexus Venture Partners.

In addition to the already changing tide, the current outbreak of coronavirus (COVID-19) is uniting people, startups, and governments to solve all sorts of problems. Universal basic income is being considered more seriously, continued learning and remote education is being prioritized, flexible distributed work is not just a nice-to-have but a necessity. These challenges and many more to come are ripe for disruption.

What’s clear? The evidence is here. Now it’s our job to empower the right empathetic leaders with no fear.