The World's Top Disruptor Startups That Are Making an Impact
Over one third of the world’s most disruptive startups could potentially be impact tech companies. Crazy, isn’t it?
Well, not really.
The 8th annual Disruptor 50 list selects companies whose “tech platforms have the power to dominate”, and who are “influencing business and market competition at an accelerated pace.” Impact companies are succeeding at meeting the new demands of customers, attracting and retaining the best talent, raising cheaper capital and leveraging new strategies for faster and more sustainable growth. It is no surprise, therefore, that 17 tech companies that are impacting people and the planet made the list — they are ahead of the curve in adapting to a new world order.
Impact Tech
Impact tech is defined as the intentional use of science and technology to benefit people and the planet. When applied to the VC world, impact tech seeks both competitive financial and social/environmental returns. 17 of the 50 CNBC disruptor companies have built a product or service that specifically creates direct, positive impact through technology.
As an impact tech investor, I always look for ventures who have the intention to make an impact while maximizing both shareholder and stakeholder value. In the VC industry, we seldom discuss this new investing frontier. The old guard still questions the possibility of achieving high impact and high returns. Similarly, traditional entrepreneurs are afraid of ‘impact’ labels that could affect their prestige or limit big capital fundraising.
The reality is very different: the 17 Disruptor 50 startups who claim to be making an impact, from bettering health outcomes to expanding financial access, have an aggregate value of +$35B. And they are not alone: over $2B was invested in impact tech companies globally in 2019 alone.
[The 17 companies are: Indigo Agriculture, Coursera, Tempus, Zipline, Neteera, Lemonade, Healthy.io, GoodRx, Just, Tala, Butterfly Network, Apeel Sciences, K Health, Lanzatech, Guild Education, Convoy, Impossible Foods]
The Check Mark Process
The million-dollar question is: how do we know which companies are impact tech to begin with?
As an investor, there are three core characteristics I look for when evaluating startups: intentionally, technology and impact/business blend.
On the intentionality side, investors want to understand the motivations, drives and dreams of the founder(s). A simple check is to read the mission statement — the DNA of the company. Indigo Agriculture, for example, “improves grower profitability, environmental sustainability, and consumer health through the use of natural microbiology and digital technologies.”
Technology (or science) has to be core to the product or service the company is offering. Not all startups are tech startups. Some consumer-oriented ventures are focused on offering new flavors or colors. Others are creating food franchises with innovative business models. Even if they deploy technology to acquire customers or market their product, these would not fit the definition of impact tech. However, if a company is leveraging science to create sustainable food alternatives at scale (Impossible Foods), then it would be categorized as an impact tech company.
The third condition lies on the blended impact and business model. An impact VC investor wants to avoid trade-offs between impact and profits. To make sure that’s the case, impact has to be integrated into the product or service. For example, Lemonade aims to “transform insurance from a necessary evil into a social good.” By allocating a fixed amount of insurance premia into causes that clients care about, Lemonade is ensuring that as the company grows (that is, as it sells more insurance products) it is creating impact in lockstep.
Impact Natives vs. Impact Migrants
Among the CNBC 50 Disruptor companies, seven are impact tech natives and ten are potential impact tech migrants.
Impact natives are companies that are born out of the desire to change the world for the better through business. They are usually first-movers in their industry, are proud about their mission and work, and are actively measuring their impact. For example, GoodRx is in the business of helping families and individuals reduce the increasing burden of drug spending in the U.S.
Impact migrants are those companies that, although might not have been created under an impact narrative, have the potential and desire to embrace and track their impact. In this category, we find companies like Tempus and Neteera. Their products are likely creating positive impact, the former by excelling at precision medicine and the latter by actively monitoring vital signs. They are likely lowering healthcare costs for the average patient and delivering better outcomes. But their mission statement and strategy don’t yet speak about impact — they might be leaving money on the table by not aligning their product with the outcomes the various stakeholders want to achieve.
What about the other 33 companies? Just because they are not impact tech (natives or potential migrants) doesn’t mean they don’t deliver positive and/or negative outcomes. Many have Corporate Social Responsibility (CSR) programs or track ESG (Environmental, Social, Governance) factors. They might care about their footprint, but they haven't integrated an impact strategy into their business model and product/service (or they are simply not tech companies!).
Impact Measurement
The gold standard for impact investors is to find companies that, along with the three criteria above, are committed to understanding and measuring their impact.
Only seven (the impact natives) are actively measuring (or rather, reporting) their impact [check them here: Coursera, Lemonade, GoodRx, Just, Tala, Apeel Sciences, and Impossible Foods].
Why is impact measurement important? The field of impact investing is undergoing intense growth. This growth comes along with the very real risk of impact washing. Just like an investor would look at a company’s operating model to validate financial claims, we should do the same with impact. As a VC investor, I care both about revenue as well as profitability. Similarly, as an impact investor, I care about the mission as well as the underlying outcomes that prove the desired impact.
Israel — The Impact Tech Nation
Four out of the five Israeli startups that made the 50 Disruptor list are potential impact tech companies (Lemonade, Neteera, Healthy.io and K Health).
As a small startup nation, Israel is the number one innovator in the world (behind Silicon Valley). From cybersecurity to health technology or fintech, Israel is contributing in unimaginable ways to the global entrepreneurial ecosystem.
Similarly, Israelis are known for their community-oriented mindset. The combination of top-notch entrepreneurship, a culture that embraces risk and reward, and the ingrained public service mentality make up the perfect recipe for incubating impact tech companies. And this is already happening: Pitango Venture Capital, the largest VC in Israel (+$2.5B), recently announced their new investment strategy: a thoughtful and integrated impact lens that can deliver both profit and purpose.
Conclusion
Impact tech startups are innovative, disruptive, tech-powered enterprises who have chosen to integrate impact in order to create a more sustainable, inclusive, and innovative world. And they are becoming the unicorns of the world!
********
About the Author: Melina Sánchez Montañés is an entrepreneur in the public, non-profit, and financial sectors. She is the former Director of the Tuck Social Venture Fund and an investor at Impact First Investments.
