For a long time, social impact startups, or mission-driven startups, received little attention. Passionate founders brought energy and a dream to do good for the world, but on its own, it was not a differentiator.
Many investors looked at mission-driven startups as if they were nonprofits and fatally flawed given they weren’t focused on profits.
Today’s business environment, however, has changed. Now, the script has been flipped and mission-driven startups have advantages over the competition. Here are five reasons why.
1.Recruit top talent
Right now, it’s harder than ever for startups to attract the high-level talent they need to succeed. Big companies like Google, Facebook, and others are going on a talent offensive and snapping up talented candidates at a feverish pace. Since the average startup lacks the reputation or capital to compete with them, this creates a giant hurdle for them to overcome.
But mission-driven startups can attract top talent by virtue of their values and stated goals. You’d be shocked how many superstar employees will turn down a bigger paycheck to go work on a mission they believe in. Millennial employees, in particular, want to work for companies that are purpose-driven. While making money is important, they also want to make a difference.
Now top-tier universities like Stanford are reimagining their degree programs to prepare students for missions, not majors. This means the pool of candidates for mission-driven startups will not only be larger but more talented.
2. Motivate employees
Not only do mission-driven startups have a leg up attracting top talent, but their employees are highly motivated and work hard. When employees are working towards a goal they truly believe in, they naturally bring their best. And when you have a whole workforce that’s energized by a company’s mission, the results can be off the charts.
This is not just a theory. Research by Bain and Company found that engaged employees are 125% more productive than those who are merely satisfied with their work, and 75% of engaged employees report working for a company with a strong sense of purpose. So, if you want to build a startup with a workforce that gives 110%, tying it to a noteworthy mission is a great way to motivate your team.
3. Attract long term investors
When raising capital, entrepreneurs have to convince wary investors that they’re a good financial bet. Their interest in your success is almost exclusively profit-driven. That means they likely won’t be supportive if you’re using resources in a way that doesn’t maximize the value of your business. If 10% of your profits are going to charity instead of being invested in growth, that might not resonate well with investors. Mission-driven startups, on the other hand, can attract true stakeholders that care about their societal goals, and not just dollar signs.
For example, consider the recently launched Meridian Network. Their mission is to create a financial ecosystem that’s decentralized, community-run, and built to benefit everyone involved. In their first few months after their launch, over 1,500 people have backed them valuing them at close to $2M. All of this comes from individuals who believe in what they’re doing and wish to have a voice in the future of the platform.
In the long-term, stakeholders who care about your mission will act in the best interests of the business, rather than in their own short-term, financial motives.
4. Enjoy a brand advantage
Consumers today want to transact with companies that align to their values. They want to put their money where their mouths are. Investment companies like BlackRock, for instance, are creating impact funds so you can invest in companies that align to causes you care about.
According to a major survey on the topic by Accenture, mission-driven businesses are beating the competition in every major U.S. market. Most importantly, the survey found that 52% of consumers are attracted to brands that stand for something bigger than their products and services, and an astounding 62% were drawn to authentic brands with ethical values.
This means that mission-driven startups can enter a market today with consumers ready to embrace them for what they stand for, rather than on how big their marketing budget is. It allows you to introduce a share worthy brand out of the gate, creating press opportunities and lowering your cost to acquire customers.
5. Make a positive impact
Creating a business that has a double bottom line, one that generates profit and has a positive impact on the world, can be incredibly rewarding. Yes, you’re making money, but you’re giving your employees purpose and you’re doing good.
Kristin Groos Richmond, the founder of Revolution foods is a great example. Her company is a B-Corporation, which means they’re legally committed to producing a public benefit for society.
In a lengthy interview she explains that she isn’t driven by making money, but instead by providing access to high-quality healthy meals that can improve the nutrition and health of Americans. When you’re making a difference, you naturally find ways to succeed.
Find your mission
Even if your business isn’t naturally mission-driven, it doesn’t mean you can’t be. Toms for instance pioneered a model where they would donate a pair of shoes for every one bought.
How can you tie your business to a related cause, where as you grow and succeed, you’re able to positively contribute to your community? Doing so can not only set you apart from the competition, but be personally rewarding.