The Current Business Ecosystem: Who Has a Stake in Solving the 21st Century’s Grand Challenges? [Part 2]

In our last post we clarified our definition of the 21st Century’s Grand Challenges, and we also discussed the meaning of social and environmental impact while looking at the type of companies that are most likely to make a real impact in the coming years. These are purpose and profit-driven startups, or PPD Startups, which focus on making a profit and a positive impact.

But the exact nature of this impact—how it can be measured and where it is taking effect—remains to be defined. This post will help us do that.

Key points explored in this post: 

There are major stakeholders grappling with the 21CGCs, including governments, the media, nonprofits, and for-profit institutions.

• Despite this momentum, VCs and investors remain hesitant to invest in startups focused on impact. This is mostly due to a lack of success stories, but also because of the higher risks and longer time to market.
• This hesitation might be shortsighted because in recent years PPD Startups have demonstrated real potential to make big profits and big impacts when successful.
• We need a paradigm shift in the way that investors think about the balance between profit and positive impact, and we need cooperation from governments to cope with the 21CGCs faster and more efficiently.

Since the real result of business efforts at “social impact” is not really defined, the landscape remains broad. So let’s begin by specifying some of the stakeholders involved in possibly solving these challenges. 

Stakeholders in Solving the 21CGCs:

• Projects and Startups
• The Media
• Governments and the European Union
• Nonprofit Institutions
• Donor-advised Funds
• Marketplaces and Platforms
• Accelerators and VCs
• Venture Capital

The following paragraphs will just scratch the surface while pinpointing the most relevant stakeholders on the market. You will find plenty of links in the resources below. We certainly appreciate your feedback and tips for important stakeholders missing here! There are hundreds of various players on national levels. We chose players with overlaps and with international mindset. Let’s start small, with projects and startups. 

Projects and Startups

PPD Startups and non-purpose-oriented startups face the same limitations, including the founders’ experience with building businesses, founder-market fit, passion for solving the problem, endurance, the ability to think strategically and to build a capable team, and the challenge of coming up with a thoughtful solution at the right time.

In our research, we were interested in founders who are willing to impact at least 100 million people within the next decade. If they did not have such large ambitions, we were not interested. This disqualified most of the social impact startups we found within the Ashoka and Impact HUB networks, for example, which didn’t have such ambitions or track records. Nonetheless, we appreciate the work of these networks and local initiatives which support new generations of founders in the PPD space.  

The source of investment is crucial for impact startups. 

We have seen many founders in the impact space getting money from grants which distort their way of thinking and building their business. These founders often get to the “profitability gap” which makes it more difficult to find a product-market fit. Nobody pushed them to find the product-market fit soon enough, or taught them about raising money from investors or becoming profitable. 

For impact startups with smaller ambitions going through social-impact accelerators, the issue of raising money from investors is also major, since they will not generate enough profits and the value of the business will never be large enough. 

Yes, it is easier for startups with big ambitions to find investors, but these companies face their own issues.

For one thing, many investors want to see previous successful exits in spaces where they don’t yet exist. A lack of success stories makes pattern recognition more difficult for investors, so they often overlook startups that are actually quite promising. Or the startup is often a moonshot idea with high risk, costly development, and thus a longer return. Ultimately, there is a limited number of investors who are willing to invest in something like synthetic biology and hardware startups with moonshot ideas. 

One example we found of how it might work is SOSV, a VC fund with its own accelerators focused on these topics, offering labs and expert advisors. More than 8,000 startups apply yearly, with an acceptance rate of 2% (due to their limited capacity). 

But the issue of why certain fields and topics appear more attractive to investors is also a question of their presentation in the media. 

The Media: Making Threats & Success Visible

Some topics receive more attention in the media than others. Climate change and its accompanying phenomena are a focus of major outlets like the BBC, which has launched BBC Future Planet, The Guardian, with its Environment section, and Bloomberg, which has Bloomberg Green. 

These important projects inform the public daily about the level of CO2, temperature rises, and new milestones in the fight against climate change. The Financial Times recently called for a reset of capitalism, to be focused not only on making a profit but also on having a positive impact. To help spread this message, they launched their section The New Agenda in September 2019.

This increasing mainstream and business-media coverage makes the threat of climate change visible, creating urgency for finding solutions and providing a hopeful outlook for our chances at positive progress. This stands in stark contrast to the negative news we see so often in the mainstream media, which is one source of the widespread anxiety among younger people. 

Of course, topics that receive more media attention will be on the mind of more investors, and those topics that receive funding from governments also get a big boost. Stories of successful exits, IPOs and instances of raising following rounds in the PPD space will attract new founders and investors.

Governments and the European Union: Funding Science and Innovation

Governments are crucial for the funding of science and research facilities; for subsidizing new technologies that wouldn’t be profitable otherwise; for scaling expensive technologies such as nuclear plants; and for setting up policies to limit or support certain industries, like CO2 limits for automakers.  

• The US and China account for approximately 50% of the $2.2 trillion spent on scientific R&D worldwide 
• The US recently raised funding by $100 billion over the next five years and is focusing research on technological development rather than primary science

Governmental policy can play a crucial role in tackling global challenges like climate change. Besides the important Paris Agreement, there is strong support for decreasing emissions in countries throughout the European Union, which is the second biggest economic block in the world. This sets a good example and supports the creation of new technologies that are applicable globally. 

The EU limits car manufacturers, airlines, and other producers of CO2 through the EU Emissions Trading System, which was created in 2005 to subsidize renewable energy and has helped decrease the costs of this technology in recent years. 

We believe these systemic changes, regulations, and subsidies are important for the acceleration of CO2-neutral or negative technologies coming to the market.

Every company needs its technology to be profitable, and someone has to put a price tag on negative externalities such as CO2 and methane. Even though this means that its companies will be less competitive on the global market in the short-term, the EU has huge potential to develop new technologies within the green economy. 

For anyone interested in doing more research about climate change, we highly recommend the NASA website’s climate section, which monitors the latest developments on the topic and includes evidence, causes, effects, and solutions.

Nonprofit Institutions: Doing Important Global Work

Fortunately, there are many nonprofit institutions doing important work around the world to tackle humanity’s greatest challenges. In this section, we will detail some of those we think are most significant.  

The United Nations 

As mentioned in our previous post, the 2030 Agenda for Sustainable Development undertook the ambitious project of developing 17 Sustainable Development Goals (SDGs) in 2015, including 174 targets to reach by 2030. The goals were adopted by all member states and should provide a shared blueprint for peace and prosperity for people and the planet, now and in the future. Meanwhile, the UN announced in September 2019 that it faces an annual $2.5 trillion funding gap. 2020 brought the Coronavirus, forcing governments to borrow money to subsidize their economies, possibly further widening the gap that must be surmounted before achieving the UN’s SDGs. 

It is important to mention that inter-governmental agencies such as the United Nations and its specialized agencies, including WHO and UNICEF, are crucial for solving some of the 21CGCs. The UN has allocated billions of dollars into development work and has achieved successes such as lowering child mortality. But what these agencies are missing is R&D for new technologies. The Bill & Melinda Gates Foundation is helping the UN lower child mortality even further. By focusing on the development of new technology, urban sanitation markets, policy and measurement, this foundation is helping much more efficiently than they would if they simply allocated money and built latrines. Investing into new technologies is therefore critical to more efficiently solving the 21CGCs. 

Trillions.global

This group completed a detailed analysis and suggests systemic changes to close the $50 trillion gap required to fulfill the SDGs by 2030.

80000hours.org

An independent nonprofit organization that researches how graduates can make the biggest difference possible with their careers, they’ve created a list of the world’s defining solvable problems. Drawing on research from groups such as the University of Oxford’s Future of Humanity Institute and the Copenhagen Consensus Center, 80,000 Hours created a framework for rating global issues. 

The organization based its scores on how solving the problem would reduce the risk of extinction, raise global economic output, increase income among the world’s poorest two billion people, and promote life expectancy. The organization also used factors like the amount of good done compared to the percent of the problem solved and the number of resources required.

Project Drawdown 

Founded in 2014, Project Drawdown has created a leading informational resource about climate solutions with costs and benefits by sector, as well as supporting research. They seek to help the world reach “Drawdown”—the future point in time when the level of greenhouse gases in the atmosphere stop climbing and start to steadily decline. To do so, they seek to uncover the most substantive ways to stop climate change and to communicate them to the world.

The Bill & Melinda Gates Foundation

There are many public and private foundations focused on the 21st Century’s Grand Challenges, but The Bill & Melinda Gates Foundation is the largest in the world with an endowment of nearly $47 billion, thanks to the support of Warren Buffet and his Giving Pledge. Their primary goals are, globally, to enhance healthcare and reduce extreme poverty, and to expand educational opportunities and access to information technology in the United States. 

Bill Gates also founded the private VC fund Breakthrough Energy, a global group of 28 high-net-worth investors from 10 countries who are committed to funding clean energy moonshot startups.

Founders Pledge

Founders Pledge began in 2015 as an initiative enabling startup founders to pledge to do good before they exit their startup and become wealthy. FP’s mission is to make it easier for entrepreneurs to do immense good. 

They collect pledges from startup founders around the world to support nonprofits, and they also do comprehensive research on nonprofits to evaluate how efficient they are per dollar donated. In addition, Founders Pledge runs Donor Advised Funds in the US, the UK, and Germany to receive an immediate tax deduction and organize physical events. It’s all fee-free and 100% impact-focused, and at present 1,360 members have pledged €2 billion.

Founders Pledge has launched a new initiative, Climate Cohort, to mobilize and empower startup founders, investors and leaders to take action on climate change. They have also put together a comprehensive report about impact investing.

Wbcsd.org

This is a global, CEO-led organization of over 200 top businesses working together to accelerate our transition to a sustainable world. Their member companies come from all business sectors and all major economies, representing a combined revenue of more than $8.5 trillion, along with 19 million employees.

CopenhagenConsensus.com

This is an interesting think tank that researches and publishes the smartest, most cost-effective solutions to the world's biggest problems. Their studies are conducted by more than 300 economists from internationally renowned institutions, including seven Nobel Laureates, seeking to advise policymakers and philanthropists on how to achieve the best results with their limited resources.

Copenhagen Consensus creates a framework to prioritize solutions, with the goal of achieving the most good for people and the planet. Their analyses consider health, social, and environmental benefits as well as the economy.

Donor-Advised Funds

Donor-Advised Funds are charitable giving vehicles created for high-net-worth individuals to make philanthropy easier. Donors make an irrevocable contribution of personal assets, including cash, stock, real estate, and more, and immediately get the maximum possible tax deduction allowed by the IRS. Donors can then support charities, or let other people—family members and employees—spend the money or invest it tax-free. 

DAFs are growing very quickly thanks to their flexibility. Currently, in the US alone, there is more than $110 billion waiting to be invested or donated. DAFs have their critics, but still offer big opportunities for impact investment. 

Family Offices

According to Campden Research data from 2018, in that year there were 7,300 family offices worldwide with $5.9 trillion in assets under management. According to research from UBS and Campden Research from 2020, family offices plan to double their investments in sustainability and impact within five years. Plus, almost two thirds (62%) of families regard sustainable investment as important for their legacies.

Marketplaces and Platforms

Impactfinance.network

Here you’ll find very useful research and a list of 150+ impact platforms and marketplaces worldwide connecting startups with investors, mentors, and more. 

General Crowdfunding Platforms

Crowdfunding platforms such as Seedrs, Crowdcube and Republic are not as PPD-focused as the platforms mentioned above, but they could be a great source of initial capital for PPD Startups.

Solve.mit.edu

This initiative of the Massachusetts Institute of Technology (MIT) has the mission to solve global challenges. Solve is a marketplace for social impact innovation. Through open innovation challenges, Solve finds tech-based social entrepreneurs around the world. The program then brings together MIT’s innovation ecosystem and a community of members to fund and support these entrepreneurs to drive long-term, transformational impact.

Plusimpact.io + Thehub.io

+impact is based on a strategic partnership between Danske Bank and the innovation agency Rainmaking. The platform is fostered by Danske Bank’s desire to support impact startups and make it easier for entrepreneurs to create positive change in the world.

The Hub is a cost-free community platform tailored to the needs of growth startups. They provide visibility to startups in Denmark, Sweden, Finland, Norway, and Northern Ireland. Via the platform, startups can get assistance with talent recruitment, connect with investors, and access best-practice tools like employment contracts and pitch decks.

PropelX.com

An investment marketplace that gives investors the power to discover and fund visionary science and technology startups. 

Accelerators and VCs

SOSV

This successful VC is a global early-stage deep tech fund that has invested into more than 800 startups and has $650 AUM. SOSV runs its own network of six accelerators with labs and experts around the world. They invest in about 150 startups each year and focus primarily on prototype-stage deep tech startups in life sciences, hardware and robotics, food innovation, mobile apps, decentralization, blockchain, and acceleration in China. 

X.company (formerly Google X)

This semi-secret research and development facility was founded by Google in 2010. They’re currently being presented as the moonshot factory from the Alphabet family, tackling the world's biggest problems with technology. X's mission is to invent and launch technologies that aim to make the world a radically better place.

X has projects in the areas of food supply, clean energy, mobility, logistics, health, and connectivity, with creations such as Waymo, Wing, Malta, and Glass, among others.

Engine.xyz

Launched by MIT, Engine bridges the gap between discovery and commercialization by empowering disruptive technologies with the long-term capital, knowledge, network connections, and the specialized equipment and labs they need.

Katapultworld.com

A group of companies investing in and scaling impact-focused tech startups. They have screened more than 10,000 startups from 100+ countries and have invested in more than 120 tech startups and five funds working to meet the UN Sustainable Development Goals. 

Unreasonablegroup.com

A global VC group with a private, global expert network operating immersive programs for growth-stage entrepreneurs that offer solutions to seemingly intractable challenges. With $4.7 billion in AUM, they have supported more than 200 startups from 180 countries. They maintain several partnerships, including public-private partnerships with the US State Department and the United Nations, to scale up growth-stage ventures dedicated to solving the 17 UN SDGs.

DBLPartners.com

They were formed with a “Double Bottom Line” investment strategy to invest in companies that can deliver top-tier venture capital returns, while working to enable social, environmental and economic improvement in the regions in which they operate. DBL invests in Cleantech, Information Technology, Sustainable Products and Services, and Healthcare.

They offer investment opportunities in early-stage impact-tech and deliver a three-month accelerator program to startups. They run Katapult Accelerator, Katapult Ocean Accelerator, and Katapult Food Accelerator, and they organize and fund the Katapult Fest in Oslo.

Venture Capital

Breakthrough Energy Ventures ($1 billion, Bill Gates)

Established in 2015 by Bill Gates and a coalition of private investors concerned about the impacts of climate change’s acceleration, Breakthrough Energy supports the innovations that will lead the world to net-zero emissions.

The Rise Fund

The Rise Fund invests in companies driving measurable social and environmental impact alongside business performance and strong returns. 

Fifty VC

Fifty VC backs companies that, if successful, will be both massively profitable and make a serious dent in achieving one of the UN’s Sustainable Development Goals.

Obvious VC

Obvious VC believes the largest companies of our time will utilize breakthrough technologies to solve systemic problems in a profitable and scalable way. They run their blog https://worldpositive.com/ with the most-positive term-sheet template.

Social Capital

Social Capital’s mission is to advance humanity by solving the world’s most difficult problems. They believe that empowering entrepreneurs who seek to improve the lives of the people around them is the best way to create more opportunities globally.

Bethnal Green Ventures

Europe’s leading early-stage tech for good VC. They back ambitious founders using technology to tackle big social and environmental problems that aim to radically improve millions of lives.

Urban Us

Urban Us funds startups that upgrade cities for climate change. Their startups are upgrading cities with optimized buildings, food resilience, climate insurance, fun electric vehicles, water-demand shaping, and more.

Ananda

One of the leading impact investors in Europe. Their investees address social challenges in vital areas such as education, health, consumption, and the aging population.

IX Investments

A permanently capitalized holding company—not a fund—that addresses areas of human need. Their shareholders, which includes 56 of the world’s leading families, come together to address critical global challenges. 

Collaborative Fund

A leading source of capital for entrepreneurs pushing the world forward.

Closed Loop Partners

An investment firm comprising venture capital, growth equity, private equity, and project finance as well as an innovation center focused on building the circular economy.

Norrsken

Investing in startups solving the world's biggest problems and having a clear impact across all UN SDGs, invest mostly within Scandinavia.

Plus Impact

A comprehensive list of more than 400 investors in the impact space, in Norway and around the world.

Lux Capital

They make long-term investments into scientists, technologists, and inventors who are challenging the status quo.

Govtech Fund

This fund invests in startups that modernize the operations of government.

Are These Stakeholders Enough? 

Although there is a growing number of for-profit and nonprofit investment funds, marketplaces and other entities to support the technological innovation needed to tackle the 21st Century’s Grand Challenges, it’s not quite enough for the scale of PPD Startups required to solve the major challenges facing humanity and the environment in a timely fashion. The world needs more courage and cooperation. Governments need to limit negative externalities and support new businesses by issuing new policies and at least triple the investment into R&D even though nobody can guarantee results. We need courageous founders to create new PPD success stories and become role models. And we need investors with courage to support groundbreaking innovations that might fail but can also become new PPD unicorns and solve the vital challenges.

Hopefully these pages have left you feeling optimistic because there are so many powerful and intelligent groups making huge efforts to have a positive impact in the world. But in our opinion, more must be done. Change cannot only come from the top down. Even smaller companies and individuals can and must enact positive change. 

The (business) world isn’t fully prepared to tackle the 21CGCs. 

Despite the best efforts of those outlined above, there are still significant hurdles and roadblocks in the way of entrepreneurs and startups looking to have a positive impact. Our next post will lay out the major challenges in the way of true impact and innovation and will also suggest a few ways forward.