August 14, 2021 3 minutes read
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Investor-seeking entrepreneurs think that generating huge profits is the best way of impressing investors. Entrepreneurs also believe that investors will sign checks if they have a unique idea that is different from the standard offering. Although all of this is true, it doesn't necessarily reflect the majority. I spend half of my time working with investors in startups of all types. I have seen many reasons why investors invest in startups. An important fact that entrepreneurs are not aware of is the increasing interest in impact-focused startups.
Many investors are interested in impact investing to maximize the value of their capital. Impact investments aim to have positive, sustainable and environmental impacts as well as returns. According to the 2020 Annual Investor Survey, GIIN estimated that impact investments total $715 billion.
Related: These 20 Startups are Impacting the Livelihood of Latin American Farmers and the Future of Food In Latin America
Are you an impact-preneur?
Impact-preneurs are entrepreneurs who have a passion for solving large-scale environmental or social problems. Impact-preneurs are entrepreneurs who create sustainable business models that both serve a social and environmental purpose while also being financially profitable. This is the key insight. Although the underprivileged may not seem to have much money, it can be a source of long-term opportunities.
Related: Three Reasons Businesses are on the Rise
Identifying an industry that will have an impact
It is easy to find an industry that has the potential to make a significant impact by looking at the 17 Sustainable Development Goals (UN) of the United Nations. Microfinance, education and healthcare are just a few of the sectors that have had a significant impact on the world. It would be wrong to attribute impact to a particular industry or sector. A startup that has an impact is one that solves a major social problem.
Scalability is a favorite term of investors. Scalability combined with a social cause is just the cherry on the cake. If you are not in an industry that has a significant social impact, consider repurposing your product to address a large-scale problem.
Related: 5 Ways to Incorporate Social Good into Your Business
After all, money is not something we can eat.
Many entrepreneurs have had to reevaluate their vision for their startup in these difficult times. It is not enough to get into a market that will pay for your product. You need to be relevant in the market even if money is irrelevant. Impact investing is defined by the performance measurement of impact-driven startups. The impact in the target area is measured against the profit. This is not surprising. This method of measuring opens up new opportunities for innovation and holistic solutions to social or environmental problems.
It's never been a better moment to explore the impact of startups businesses. Entrepreneurship is more important than ever. People who are passionate about a social cause will be the heroes of tomorrow. Social entrepreneurs are the foundations of emerging stability in the economies. Investors are placing their bets on that.
