Over the last few decades, the global tech industry is trying to inculcate responsible capitalism to drive social impact – a foundational shift critically enabled by venture capitalists (VCs), with support extending beyond financial assistance. Their mission to bolster fledgling enterprises in every aspect, from ideation to scaling, uniquely enables VCs to facilitate this enmeshing of technology and social impact.
It doesn’t come as a surprise that conscientious VCs are no longer looking to solely fund profitable startups. They are, in fact, interested in enabling impact businesses focused on resolving social, environmental, and ethical challenges while being self-sustainable – a unique merger of profit AND purpose. The rise of today’s tech giants – Google, Meta (erstwhile Facebook), Amazon, and the likes – is a testament to their choice.
Google, Meta and Amazon raised VC funds to the tune of $25 million, $12.7 million and $8 million in the early days of their journey. The money was critical in transforming the companies into global tech leaders, which in turn enabled them to be trailblazers in social impact.
Google’s Tech for Social Good has done groundbreaking work in sustainability, economic opportunity and cyber security. Amazon, on the other hand, has contributed to climate change, education, jobs and community welfare; while Facebook has worked extensively in crisis response and women empowerment.
Recent years have also seen these companies invest in similar impact-focused VC funds to amplify their reach. Notable is the Amazon Smbhav Venture Fund – a $250 million, India-dedicated venture for early stage startups and high-quality founders building to digitise MSMEs, enable universal and quality healthcare access, improve farmer productivity, etc.
In fact, official data suggests India is now home to over 400 impact startups, many of them with a particular focus on technology-driven change; and records a rapid annual growth of 20% in the space. With innovation, originality and social responsibility as their compass, these entities aim to solve critical grassroots issues like healthcare, water and power supply for domestic and agrarian needs, etc through tech interventions. These initiatives are being streamlined with meaningful assistance from impact-first VCs who are prioritising purpose alongside profit.
Integrating Technology and Social Impact
The role of VCs has evolved from being mere fund-providers to being catalysts of social change. Now, they not only facilitate impact while prioritising economic growth, but also establish necessary measures for risk-taking that challenge the status quo of profit maximisation at all costs.
This has resulted in an impactful amalgamation of humanitarianism and technology to create social impact, especially in healthcare, agriculture, climate change, and education, resulting in an improved quality of life for millions.
The healthcare sector has, in fact, made significant advancements with VC-backed biotechnology and medical startups around the world introducing groundbreaking treatments and devices to address affordability and accessibility in the space. The world witnessed their capabilities during the pandemic when many of them sprung into action to help local communities and healthcare workers amid global supply chain disruptions and medicine shortages. And in the post-Covid world, many of us continue to be regular patrons of medicine delivery services or prefer teleconsultations with physicians.
VCs have also played a critical role in democratising education, by choosing to support new ventures that harness technology to facilitate learning. Global edtech frontrunners like Udemy and Coursera have received VC funds to the tune of over $250 million and nearly $450 million, respectively, which has helped them reach out to millions and reach their current positions. Covid prompted the rise of virtual classrooms everywhere, but learners, especially in India’s smaller cities and rural areas, continue to benefit from platforms like Physicswallah, Byjus’ and Unacademy till date.
Sustainable energy, climate technology and other similar domains that proactively address environmental challenges, have also received critical support from VCs committed to creating a cleaner planet and greener society. Tesla, for example, raised considerable VC funds in its early days, with a whopping $6.5 million from Elon Musk himself. Today, the company is one of the world’s largest EV manufacturers and sustainable energy solutions provider.
Identifying Opportunities
With the scope of work at the intersection of technology and social impact increasing every day, VCs are proactively looking to identify scalable ventures with or without ideas, but with aspirations to drive change. Over the years, entities’ mission, vision, theory of change, business viability, core team and potential for growth have emerged as some of the key criteria that determine the extent of support.
While many VCs prefer a thematic or sector-specific approach, impact-focused ones choose a broader perspective. They use impact measurement tools to assess a startup, and key metrics like its founding team, their capabilities and scope of growth, when they choose to support one.
Future Outlook
The emergence of new age technology integrated to drive social impact has caused significant disruption in global markets; increased the chances of social and environmental change; and broadened the horizon for impact startups. Financial viability is no longer the only metric of success, leading entrepreneurs to work on ideas that solve humanity’s most pressing challenges.
This paradigm shift has prompted VCs to spearhead a comprehensive, meaningful transformation in how businesses are conceived, created and conducted. They have moved from a tunnelled vision of profit-making, to seeing the big picture. Responsible capitalism that impacts society is the new benchmark, in stark contrast to the age-old approach of funding the next big business and raking in the moolah.
For example, startups are increasingly integrating AI in addressing social and environmental issues like education accessibility, sustainable energy, healthcare and others. VCs are spearheading this shift through a united front, supplementing innovation and originality with their holistic support. Their proactive role is also incentivising the impact startup ecosystem, encouraging additional focus on integrating technology to ensure social impact. As a result, the impact metrics are shifting from conventional means, with a visible increase in institutional collaborations that are facilitating the integration of inclusive technologies and reshaping the future.
Research:
Google.org Impact Challenge: Tech for Social Good
Social impact startups are on the rise in India – IndBiz | Economic Diplomacy Division
The Role of Venture Capital in Driving Social Change – FasterCapital
