How Startups Can Solve the 21st Century’s Grand Challenges [Part 1]

Executive Summary

How can the ecosystem of tech startups—utilizing direct access to significant capital and the world’s most cutting-edge technology—make more than just massive profits, but also make a difference to humanity by helping to solve the 21st Century’s Grand Challenges? 

—Jan Beranek, David Siska, and Vit Horky, September, 2020

We have been pondering this question for six months, combining our experiences in the startup world to try to come up with a solution that would help founders set up and grow their new ventures driven by both profit and positive impact. But we realized that obstacles remain for the founders, investors and other key stakeholders who are passionate about contributing to solutions for the massive challenges humanity faces in 2020 and beyond.

These are the key takeaways from our research:

• The UN’s Sustainable Development Goals cleared the path for thinking about the most significant challenges facing the human race, and others have followed. Today we know there is not enough funding and time to meet these goals and greater focus is necessary. Based on this prior work, we have categorized the important challenges that new, ambitious founders must solve. We call these the 21st Century’s Grand Challenges (21CGCs)
• The 21CGCs are those that threaten humanity’s existence, shorten the human lifespan, considerably decrease the quality of human lives, or limit the realization of human potential, human rights or freedom while impacting more than 100 million people
• Scalable technology startups can deliver solutions for the 21CGCs in a fast and scalable manner, if they receive enough investment and support 
• “Social impact” has no single, universally agreed upon meaning and using the phrase blurs our understanding of what is important. So we avoid this phrase and instead focus on Profit and Purpose-Driven (PPD) startups
• The measurement of general impact is convoluted and largely academic. Instead, we recommend building business models around the principle that generating a unit of profit generates a unit of impact; if you take one out, the other cannot exist
• There is an excess of capital in impact funds, but a lack of success stories and early-stage PPD founders tackling the 21CGCs. The purpose of these articles is to increase the number of PPD Startup founders and to highlight where more support is needed by providing the results of our six-month study
• For PPD Startups to thrive, investors must adjust their expectations: risks are higher and timelines are longer, but rewards are large and come with tremendous positive impact for the world

Introduction: How and Why Three Tech Entrepreneurs Want to Contribute to Solving the 21st Century’s Grand Challenges 

“Companies can do more than just make money, they can serve others. The business of business is improving the state of the world."— Marc Benioff, CEO of Salesforce

The three co-authors of this publication are experienced Czech entrepreneurs who have been reasonably successful, but are still restlessly curious.

We are startup founders with a collective experience of over 40 years spent building more than 70 commercial innovations, raising capital from various VCs and exiting companies to publicly listed corporations. Nonetheless, we have been feeling somewhat frustrated that our positive impact on society and the environment has been negligible thus far, despite the tens of thousands of hours we’ve put into building our companies, and the successes we have all enjoyed. 

Over more than a decade, we have employed hundreds of employees and have developed technology that has improved the quality of arguably millions of lives (mostly of customers in well-developed countries and in highly competitive industries). That feels great, but we can’t shake the feeling that if our companies ceased to exist tomorrow, other companies would immediately take our place and the world would adjust almost instantly. In the grand scheme of things, our impact has been very limited. At the same time, none of us would say that the world around us is working the way we want it to. This restlessness got us thinking.

What we thought

The three of us care profoundly about the challenges we see in the world, and we are also concerned about utilizing human potential to its fullest. Some challenges are systemic, like the problem of access to quality healthcare. Some challenges are hard to predict and suddenly appear from “nowhere” and scale exponentially like the recent COVID-19 outbreak. On the other hand, some challenges are new, unexplored, and widely disregarded, such as misinformation, fake news, and the unethical development of artificial intelligence. 

Last but not least, some challenges are constantly present, not exactly visible but profoundly impacting our lives—like climate change. As entrepreneurs, we believe that we can and must work more quickly on solutions to these challenges. 

We are the first generation to fully understand the ramifications of climate change, and arguably one of the last generations that will be able to solve it. 

That got us thinking about how we could help. 

What we did

Our intention was not to undertake profound research on every challenge facing humanity, but rather to map the landscape of available information, to determine what stakeholders exist, and to find out if there was any puzzle piece missing that we could fill in, or whether we could support any existing one to create a bigger impact. And since our research was coming from three founders, we wanted it to be useful to other founders, so they can make faster progress as they navigate through the topic.

The primary purpose of this document is to help clear a path for founders like us to start new PPD Startups and work on solving the 21CGCs.

We started our journey by identifying the challenges that could destroy humanity, those major issues that will decrease the longevity of human lives or significantly decrease their quality and potential. We also decided from the very beginning to consider environmental impact as important as the impact on human lives. 

We mapped the most significant challenges, both current and potential, focusing specifically on the EU and the US—largely because these are the markets we operate in and understand best. We brainstormed possible solutions and shared these with close friends to get some critical feedback. Then we did two things. 

First, we researched existing stakeholders and got a feel for the current discourse on these issues by talking to friends and colleagues in Europe and the US. Second, we laid out some hypotheses about the existence of purpose-driven tech startups that are willing to work on these challenges but lack funding and purpose-driven angel investors and, later, VCs, family offices and others who are willing to support them but are lacking deal flow. We also thought about corporations that are willing to help to solve these issues and able to scale solutions but lack the ability to innovate and therefore need startups for support.

We talked with more than 120 people from startups, angels, VCs, CVCs, impact accelerators and social impact networks in the US and the EU. Hundreds of hours analyzing our findings have led to one conclusion: founders must play their role in solving the world’s grandest challenges. 

This publication is an attempt to summarize all this information, and to share it with others before we continue our journey. We have researched organizations that provide insight into global structural problems. We have reviewed the UN’s Social Development Goals, which thus far provides the most comprehensive picture of the world's grand challenges and goals set to overcome them. And we have spoken to impact experts with decades of experience from organizations such as Ashoka, Amnesty International, Aspen, Katapult World, and others. 

This document is the result of our research and interviews. We consider it a fair—although necessarily incomplete and in some ways simplistic—overview of the grand challenges that affect at least a hundred million people on this planet right now, or are very likely to impact a large portion of the world’s population during the 21st century. 

As we continued to explore more than 20 distinctive categories of challenges, such as Better Access to Quality Healthcare; Improved Access to Primary Education and Lifelong Adult Education; Minimizing Social Inequality; and Decreasing the Chances of Another Pandemic like the recent outbreak of COVID-19, we realized that some challenges are too far from our general area of expertise and understanding. At the same time, the development of crises and responses like the Black Lives Matter movement while we were doing our research shows just how much the world needs solutions. 

Therefore, in order to set a manageable framework for our research, we focused solely on a subset of the world's grand challenges that mainly affect the Western Hemisphere. Although we consider this a vastly limiting factor and we would like to expand our scope in the future, our focus here is limited to the advanced economies of Europe and the Americas. Along the way, we realized that we have to narrow down the complexity even further to keep this project manageable.

What we learned

The first thing we learned is that these issues are in many cases limited by what we might call a failure of imagination. 

If we’re going to solve this century’s grand challenges, we need to think outside the box, and we need to be guided by optimism as well as logic.

Although we are concerned by some of the threats of scalable technologies not used according to their original design, we consider scalable technological innovation as one of the most viable methods of solving the 21st Century’s Grand Challenges on time.

Scalable technologies must work alongside cultural, political and scientific advancements in order to solve global problems. Applying technology while disregarding other factors will be less effective—and can actually be harmful. We have focused on how humans can use technology as a driver for positive change because technology is the sector where we have the most experience.

At this point, we must admit this document doesn’t claim to be the definitive statement on the challenges facing humans and the environment. We don’t claim to know it all, and we don’t claim to be inventing these solutions as we go. Throughout the following chapters, you’ll find plenty of links to the sources we have used. We present all of this information in a spirit of humility and with a desire to change things for the better. 

The goal of our research is to simplify this complex topic for founders, to direct them to relevant sources and support networks, and to pinpoint what we think is needed to create more of them and to support them in enacting systemic change.

Although we still haven’t found the single best route for us as tech startup founders to take, we have decided to share our learnings with anyone who might be interested.

Our research remains incomplete and may not even be 100% accurate! We certainly appreciate any and all feedback that will help us improve our thinking about these issues and in turn help improve lives.

PART I: What Are the 21st Century’s Grand Challenges, and How Can We Solve Them?

You can’t win a race if you don’t know where the finish line is. And we have little hope of solving the grand challenges facing the world if we don’t know exactly what they are. So, the purpose of this post is to define the 21st Century’s Grand Challenges (21CGCs) and to suggest what type of entrepreneurs and companies can have a real impact and make progress solving these challenges, while also making a profit.  

Key points explored in this post: 

• Humanity faces major challenges in the 21st century, including climate change, wealth inequality, social inequality, technological development, and much more.
• Many of the world’s most powerful institutions are thinking hard about how to help.
• Purpose and Profit-driven Startups, or PPD Startups, are uniquely positioned to take on these humanitarian challenges, which we call the 21CGCs.
• The term “social impact” must be more clearly defined.
• Some entrepreneurs and investors are starting to focus on how their businesses affect society.

What Are the 21st Century’s Grand Challenges?

It doesn’t take much imagination to picture the major challenges currently facing humanity. After all, anyone who pays attention to the news can tell that none of us live in an ideal world. But many of the world’s most prominent thinkers and organizations have worked hard over the years to define the largest challenges facing mankind and to map a way forward.

DEFINITION: The 21st Century’s Grand Challenges are issues that affect or may affect at least 100 million people, and:

1. Threaten humanity’s existence, or
2. Shorten the human lifespan, considerably decrease the quality of human lives, or
3. Limit the realization of human potential, human rights or freedom

We have chosen to describe the 21CGCs in general terms rather than precisely defining each problem because existing frameworks from the UN, the WEF and Singularity University (to name a few) do this quite well. So we’ll introduce each of these frameworks.

The United Nations Sustainable Development Goals

The Sustainable Development Goals (SDGs) were born at the United Nations Conference on Sustainable Development in Rio de Janeiro in 2012 (and were revised in 2015). The objective was to produce a set of universal goals that meet the urgent environmental, political, and economic challenges facing our world, including poverty, inequality, climate change, environmental degradation, peace, and justice.

There are 17 SDGs in total, and the aim is to achieve them by 2030.

Image: UN Development Program, www.undp.org 

According to the UN SDG website:

“The Sustainable Development Goals are the blueprint to achieve a better and more sustainable future for all.”

The careful, clear thinking and organization we see in the UN’s Sustainable Development Goals is crucial for tackling the 21CGCs. 

Other Important Lists of Global Challenges

The UN isn’t the only organization on the case. The World Economic Forum singled out 10 key global challenges in an insightful 2016 article. There is some overlap between the two lists, but the WEF focuses more on business and the economy. 

Meanwhile, Singularity University has put together a growing body of research that is mapping out humanity’s shared future with powerful technology and artificial intelligence. Their Global Impact Challenges (GICs) are incentive competitions organized by partners in countries around the world to identify innovative startups using exponential technology to solve the world’s pressing challenges.

Singularity University is committed to finding solutions to the 21CGCs while inspiring leaders to leverage Exponential Technologies to positively impact billions of people. But rather than naming and defining the challenges, like the UN and the WEF, Singularity University is creating an open forum to encourage upcoming thought and business leaders to contribute their ideas and put them into practice toward solving the 21CGCs. Their online resource library contains webinars, blogs, ebooks, and more. 

It should be abundantly clear that technology will play a central role in solving the 21CGCs. After all, advanced technology is already impacting all aspects of life and society, from mental health to employment. 

The influence of AI and other powerful technology in solving the 21st Century’s Grand Challenges is going to increase exponentially. 

Why Comparing Global Challenges Is Useful

Hopefully, we haven’t overwhelmed you with information. The point is not to discourage our readers because of the huge number of challenges that different organizations have highlighted. We get excited looking at these lists of challenges, especially because we see so much overlap among them. And we see room for improvement.

The UN’s SDGs are systems issues that require a systems approach. Simply introducing small-scale solutions and praying they will somehow scale is not going to be successful. We believe that impact investors should be a powerful voice urging governments to internalize externalities and, by doing so, turn all investment into impact investment.

This is why we have created the 21st Century’s Grand Challenges. Our list is more flexible and applicable because it can work with any of the frameworks examined above. Our goal was to create a more practical list that founders can utilize as they create startups that will tackle these problems while making a profit. 

Our list of the 21CGCs can help purpose-driven startup founders to focus their efforts.

At the same time, we want to stand on the shoulders of giants, and that’s why we’re quoting directly from the important work of the most impactful and innovative thinkers in the field. We encourage all of our readers to seek out the original sources for this information and we hope we inspire you to dig deeper in your own research as we all choose to work on the right challenges. 

It’s also important to think about the types of companies that will have the biggest impact when it comes to tackling these challenges. 

When Startup Meets Purpose and Profit

When we started our research, we weren’t really sure that the business leaders we talked to would share our optimism about humanity’s potential to tackle the great challenges it faces. But we quickly learned that our instincts weren’t totally off-base. 

Throughout our research, a few key facts kept hitting us after every call, every meeting, and every blog post or research paper we read on the topic. These are things that anyone who wants to help find a solution to the 21CGCs should be aware of:

• A growing number of impact startups, funded by impact funds, are ready to forsake high profits to deliver high impact
• Many nonprofits are tackling some of the 21st Century’s Grand Challenges by funding research, or increasing awareness and urgency in the media
• Corporations are increasingly investing their Corporate Social Responsibility budgets into initiatives supporting solutions for the 21st Century’s Grand Challenges
• Today’s university graduates are more motivated to work for companies that deliver a positive impact
• Many governments are striving to meet benchmarks set by the UN’s 2030 Social Development Goals, the Paris Agreement, and other international initiatives
• Many business angel investors would refocus their investments towards impact, but too few companies are focused on the 21CGCs, so there are too few success stories, making it more difficult to identify promising companies
• Family offices are shifting to impact investments

There is a growing trend of solution-oriented technology businesses tackling the 21st Century’s Grand Challenges. The Milton Friedman approach that the sole purpose of a company is profit is outdated and increasingly rejected by today’s businesses. This makes sense from a business point of view as well as a humanitarian one. Several die-hard VC-backed startup founders and traditional venture investors we talked to said that for-profit technology startups focusing on large problems that scalable technology can solve have the potential to deliver massive societal impact as well as a great return on investment. 

Purpose and profit-driven startups, or PPD Startups, are uniquely capable of solving the 21st Century’s Grand Challenges. 

Defining Purpose and Profit-driven Startups

PPD founders don’t simply want to build scalable startups that deliver profitable solutions in the long run. They’re also passionate about finding a real purpose for their business in terms of delivering a positive, meaningful impact. 

These startups are solving the 21CGCs and generating profit doing so. The key part for us was adding “profit-driven” to the equation and focusing on companies that consider generating positive impact and generating profit equally important for their long-term existence. This stopped endless discussions about impact tradeoffs and made one thing clear: impact companies must play ball in the current business ecosystem.

We will talk more about PPD Startups in the next chapters, but for now, let’s look more closely at the current startup atmosphere and the potential for upstart companies to enact positive change. 

Social Impact Doesn’t Mean Social Impact Anymore

The first thing to know about “social impact” is that the phrase is a cliché. 

Social impact has become a stand-in for whatever people think is good in the world besides money. 

Our anecdotal research told us that there are significant variations in the understanding of the concept of social impact between Europe and the US.

For example, in the European VC space, a Social Impact Investment Fund is generally understood as a fund that is trying to generate as much impact as possible without losing money. In the US, these funds are understood as something that should be tied to sustainability, job creation, or other worthy targets, while generating profit for investors or Limited Partners (LPs). 

That does not mean that all American impact funds are only profit-driven and that all European impact funds are only impact-driven—there certainly is a range. But we found this general division to hold pretty consistently. For example, we met a startup that was turned away by European impact investors because they were making too much money.

In our early discussions, we found ourselves using the phrase “social impact” to define an ephemeral something that is designed to save the world while lacking any substantive meaning in our understanding of what we were trying to solve. At one point pretty early on, we identified that issue and became quite disillusioned with the word “impact.” We tried to redefine this whole sector for ourselves, and we tried to find a more meaningful way of categorizing our efforts.

To be honest, saying “social and environmental impact” just made us feel better about what we were trying to do—create something meaningful enough to impact over 100 million people in the world and make their lives easier while helping the planet. 

But we were happy to learn so much about other entrepreneurs and businesspeople thinking along the same lines. A quick Google search turned up mountains of interesting information about the topic. It’s encouraging to see that a real shift is taking place, and to know that it’s not just our feeling!

If we are going to solve the 21CGCs, we need new ways of thinking about the mission of startups and we need to clarify precisely what we mean by “social impact.” Fortunately, we are already moving in that direction.

A Bright Future for Positive Innovators

No matter where your interest and expertise lies and no matter how we define the challenges facing us in the 21st century, it is abundantly clear that the world needs innovators and leaders to enact changes on a global scale that will have a measurable impact on the way that people live their lives. 

The good news? Change is coming.

There is a growing, palpable feeling among entrepreneurs and investors that simply making a profit isn’t enough anymore. 

And there’s a growing sentiment among the public that supporting companies that have some kind of humanitarian component is the right thing to do. 

We hope that our conception of PPD Startups will inspire those who might be sitting on the fence, balancing between profit and impact, and wondering exactly where they should invest their time and energy. Startups that focus more on impact will not only be helping humanity, they will also be on the forefront of a developing way of doing business, and this positioning could lead to major profits. 

But every investor—of time, money, or blood, sweat, and tears—needs to know exactly what they are getting themselves into before they commit. So, in our next post we’ll be taking a closer look at the current business ecosystem, examining the motivations and the drawbacks in store for anyone looking to make a positive impact through business.