Two years ago, we raised our first impact fund, closing just under $7M in the fall of 2017. Since then, we have made over 73 investments and our fund is nearly fully invested.
In addition to investments made through our Techstars Impact Accelerator (Austin, TX), Techstars Sustainability Accelerator in partnership with The Nature Conservancy (Denver, CO) and Cox Enterprises Social Impact Accelerator powered by Techstars (Atlanta, GA), this fund participates in Seed and Series A deals of impact companies across our global ecosystem as well.
Today, our impact portfolio spans multiple industries: from healthcare to financial services and insurance, to housing and supply chains and logistics. Our portfolio has global reach, representing companies operating around the world from Singapore, to Nigeria, to right here in the United States.
For example, Aunt Bertha (Austin, TX), a search and referral platform connecting individuals to health and human services, has raised over $22M to date. DroneSeed (Seattle, WA) uses FAA approved drone-swarms for agricultural payloads to take reforestation to scale, and has raised over $7.5M. And Connxus (Cincinnati, OH), a supplier management platform that enables procurement professionals to manage supplier risk, supplier diversity and sustainable sourcing, has raised nearly $17M to date.While our Impact Portfolio is still young, our 73 investments have given us a unique vantage point into emerging trends in the impact startup ecosystem.
Here’s What We’re Learning:
Impact Companies are Pacing on Performance — the impact advantage?
In 2016 we evaluated the historical performance of impact companies, and in a comparison of the collection of companies meeting our impact criteria compared with our general portfolio, our impact companies outperformed. Of these companies, Zipline, which builds drones to deliver life-saving medical supplies and went through our 2011 Techstars Seattle program, was recently valued at $1.2B.
Earlier this year, we repeated this analysis for all companies that went through a Techstars accelerator between 2012 and 2018, to compare the financial performance of our investments: all impact companies versus all Techstars companies, using gross multiples from our investments as the measure. Again, for every year between 2012 and 2018, our impact companies outperformed our overall portfolio: the range of outperformance varied between 6% and 26% in various years during this time period.
Over the last 18 months our investment activity across stages mirrors this trend with impact companies as a percentage of total investments made at Techstars (impact and general) increasing by stage:
Investment Activity by Stage (2018 – Q1 2019 investments)
Total Investments – Impact Fund
Total Investments – Techstars*
% of Total Investments Made*
Series A Deals
*Over the same time period across each category
Source: Techstars Impact Report
The Pipeline is Growing
Ahead of launching our first impact fund, we analyzed our historical portfolio and found that between 2013 – 2016 the number of impact companies accepted into our accelerator programs was growing by over 50% year-over-year and represented just under 10% of our portfolio. We’ve since watched this trend continue. Between 2016 – 2018, companies with ties to the UN Sustainable Development Goals that participated in our accelerator programs have gone on to make up nearly 29% of our global portfolio.
Impact Companies Are Emerging Around Four Key Trends
As a venture investor in impact, the mission of our approach to aligning financial returns with impact outcomes is to focus on areas where an impact opportunity directly aligns with a large market opportunity. Over the last decade, four key trends have enabled this:
- Technology creating first-time access to previously inaccessible markets;
- A fall in the cost of technology enabling the delivery of impact products down-market;
- A rise in consumer demand for ethical, sustainable products and business practices;
- The rise of global impact threats that, if uncorrected, represent existential business risks to top global corporations and our global economy
Market-Driven Technology Solutions Can Drive Real Impact at Scale
In May of this year we published our first Impact Report and across 44 companies. This report focused on our impact portfolio, which has delivered the following results:
- 3.7M people impacted
- 768,000 pounds of food diverted from landfills
- 14,221 tons of CO2 emissions avoided
- $6.2B in second tier diversity spend enabled
- 500+ jobs supported
Join Us on October 3rd to Hear How Our Most Recent Investments Are Impacting the World
On October 3rd, our ten newest investments out of our impact fund will take the stage in Austin, TX to showcase how they are leveraging innovative technologies to drive social and environmental impact around the world – from Ghana, to Nigeria, to Mexico, to right here in the United States.
While their business models range from delivering animal vaccines to African farmers at the last mile to a new form of background check for the 1-in-3 American consumers living with a criminal record — their mission is similar: scaling market-driven technology solutions to our generation’s most pressing challenges.
If you would like to attend Techstars Impact Demo Day on October 3rd, please RSVP here.
We are excited to announce the ten companies joining the Techstars Impact 2019 class!
We kick off today in Austin, TX with teams joining us from around the world with operations spanning the United States, Canada, Mexico, Brazil, Ghana, and Nigeria.
Over the next three months, these teams will work intensively with a deep bench of Techstars mentors to pressure-test their business models, while designing for market-driven impact at scale.
At Techstars Impact we have a core belief that our deepest problem sets represent our greatest opportunities, and over the years we’ve watched this story play out in our portfolio. In an analysis of our wider portfolio looking at the multiple on invested capital for our historical investments in impact companies compared with our general portfolio, we found that impact is outperforming.
Today, these teams join the 44 companies in our Techstars Impact portfolio, which have collectively impacted 3.7M people around the globe, reduced over 14,000 tons of CO2 emissions, and enabled over $6.2B in second-tier diversity spend.
Please meet the newest members of Techstars Impact, our 2019 summer class:
In 2006, Techstars launched with the simple belief that entrepreneurs build a better future. Twelve years and over 1700 portfolio companies later, we’ve watched this belief be confirmed year after year in all corners of the world.
Still, 2018 represented a notable milestone for Techstars, we launched Techstars Impact, our first impact fund, exclusively dedicated to backing entrepreneurs tackling our most pressing global challenges.
With Techstars Impact, we believe that our deepest problem sets represent our greatest opportunities. We put founders at the center of our strategy to build a better future, and believe that entrepreneurs have the potential to deliver scalable solutions to some of our generation’s most pressing problems. As a venture investor in impact, the core of our approach aligning financial returns with impact outcomes is to focus on areas where an opportunity directly aligns with a large market opportunity. While leveraging our insights from over a decade of investing in seed stage companies around the world, we built an impact investment strategy that also naturally aligns with the U.N. Sustainable Development Goals.
Since 2018 the Techstars Impact funds have made 44 investments with a footprint across six continents. Collectively, these companies have created over 500 jobs and directly impacted 3.7 million people around the globe.
This Impact Report highlights our approach and investment activity since January 2018, as well as some of the direct and systemic impact delivered by Techstars portfolio companies receiving investment from our Techstars Impact 2018 SPV and Techstars Impact 2018 Accelerator funds.
Read the full Techstars Impact Report here.
We are thrilled to announce the nine companies that will be joining Techstars for our 2018 Impact program in Austin, TX.
Nine months ago we set out to find nine world-class teams who like us, believe that our deepest problem sets represent our biggest opportunities, and that entrepreneurs should sit at the center of our strategy to build a better future.
On June 4th, 2018, nine teams arrived in Austin from around the world as part of our inaugural class, and we are looking forward to three months digging deep with these teams to bring business and impact into lock step, capped off by Demo Day on Aug. 23rd, 2018.
These nine teams represent a diverse mix of founders and industries, with operations across the United States, as well as Mexico, Nigeria and South Asia. Techstars is the Worldwide Network that helps entrepreneurs succeed, and strong partners and mentors help make this happen.
Without further ado, here are the Impact 2018 companies:
Join Zoe Schlag, Managing Director of Techstars Impact, for one-on-one office hours to learn more about Techstars.
Please join local and visiting Techstars Managing Directors from Techstars LA, Techstars Retail, Techstars Impact, Comcast NBCUniversal LIFT Labs Accelerator, Powered by Techstars, and founders on February 20th for an evening of networking and more. We’re inviting a group of successful Techstars alumni companies to share their stories and advice with fellow entrepreneurs and anyone considering an accelerator program. Drinks and light bites will be provided. NOTE: This event is likely to sell out. Please RSVP to reserve your spot.
Techstars Programs Participating:
Comcast NBCUniversal LIFT Labs Accelerator, Powered by Techstars
Meet Techstars Alums from companies including:
Christine Carrillo, Joany
Sky Kelley, Avisare
Dan Altman, Naritiv
Rahul Sidhu, Spidrtech
What you can expect:
6:30 – Doors Open
6:45 – Founder Panel
7:15 – Hear from Techstars Managing Directors
7:20 – Networking, Drinks and Appetizers
More info on Techstars:
Are you ready to accelerate your company? We currently have applications open for Techstars Mentorship-Driven Accelerator programs around the world. At Techstars, we are on a mission to help entrepreneurs succeed. Over the past 10 years we have helped over 1,200 companies grow and raise over $4 billion in funding, with a market cap of $10 billion. Now we’re on a search for the next wave of companies to join our worldwide network!
Join Zoe Schlag, Managing Director of Techstars Impact, for one-on-one office hours to learn more about Techstars.
At Techstars Impact, we’re in the business of solving problems that matter, and we have a deeply held belief that some of our deepest problem sets also represent some of our biggest opportunities. However, people ask us all the time what we’re actually looking for when we say “impact”.
The short answer is that we back mission-driven founders building technologies to solve pressing social and environmental problems. If you’re wondering what gets us most excited though, below are the key areas where I am most looking to invest.
As a founder, we know that time is one of your most precious assets, so our aim is to be as transparent and direct as possible about what we’re looking for*. In an effort to do that, I’ve built this list (which we’ll add to regularly) of the types of impact startups we’re particularly interested in. If this is you, let’s talk**.
*Two caveats: Firstly, we have and always will back incredible founding teams over ideas. Ultimately, you matter much more than the business model you are applying with. Secondly, consider this list directional, not prescriptive. We fully expect you to have identified opportunities that sit outside of this list, so applying with a startup that fits into this list does not guarantee that you will be accepted into the program.
**Already know you’re a good fit for Techstars Impact? Applications close on Feb. 25th, 2018. Apply today.
PROBLEMS WHERE WE SEE AN OPPORTUNITY
We see a gap in financial products that are both designed for the underbanked and are non-predatory (i.e. payday loans). We’re looking for financial products for the underbanked that help build healthy financial futures.
Across the United States, there doesn’t exist a single county with adequate affordable housing for its residents, and our ability to meet that need is trending in the wrong direction. We’re looking for technologies that enable housing solutions for the lower-quartile of communities in developed countries or universally in emerging markets.
Migration is one of the single best tools in our toolbelt to tackle global poverty. We’re looking for technologies that support or enable global migration and whose end-benefits positively reach underserved communities. For example, in 2014 migrants sent $436B in remittances, nearly three times the total amount of official development aid given by the world’s wealthiest nations. There’s a lot already in this space, so we’re looking for alternatives that can build a competitive advantage by providing a better, more affordable product for people on the move.
Workforce & Future of Work
Automation and other technological innovations are fundamentally changing the shape and makeup of the labor economy. As these shifts set in, we’re looking for solutions that will help navigate that transition, including upskilling and reskilling platforms that anticipate the evolving skills needs of the new economy, as well as solutions and technologies that inclusively enable a transition toward non-labor income streams, such as nanopayments and the token economy.
Our education system is badly broken, and is not built for today’s learner nor tomorrow’s economy. We’re looking for alternative, accessible and affordable education models aimed at outcomes like reducing dropout rates and improving persistence rates, as well as preparing students to be competitive in tomorrow’s economy: it is becoming increasingly apparent that nonhuman competition will require that we adequately train tomorrow’s workforce with skills and abilities that will be harder to automate.
Diversity & Inclusion
The data keeps rolling in, and it is increasingly clear: diversity drives better business outcomes. We’re looking for solutions that increase diversity across the spectrum, ranging from building and connecting talent pipelines to enabling hiring, fair wages and promotion practices to products and services that incentivize diversity in governance structures
Technology is uniquely positioned to empower the masses to build better-functioning democracies around the world. We’re looking for startups that either a) strengthen existing democracies or b) provide democracy-strengthening opportunities for people living in closed societies, ranging from open media and election technologies to anti-corruption fintech and encrypted communications.
With the $30T transfer of wealth between the baby boomer and millennial generation underway, we’re seeing a surge of capital moving into the impact space. We’re looking for impact savings and investment products that bring impact investment to the masses, ranging from solutions that increase financing into underserved communities to ones that will help fuel the emergence of the global impact investing economy in innovative and more accessible ways.
Clean Energy & Climate Change Solutions
Climate change is one of the most urgent threats facing humanity. We believe that business and technology is uniquely positioned to drive the adoption of climate-improving practices at scale to bend the emissions curve by 2020. We’re looking for startups building:
- Technologies that enable the transition to solar and other forms of clean energy as quickly as possible, whether that be a financing or an accessibility play or otherwise
- Climate-smart solid waste management, including waste-to-liquid fuel, waste-to-energy and circular economy marketplaces
- Methods of capturing, storing and utilizing CO2
- Technologies to enable our transition toward electric vehicles
- Smart cold chain storage and transportation plays
- Platforms that enable cities, which produce 75% of global greenhouse emissions, to cost-effectively reach goals set out by the Fossil-Fuel-Free Streets Declaration led by the C40 Climate Cities Leadership Group
Food Supply & Security
As the global population continues to grow, we need to develop climate-smart ways of to feed the world with healthy, affordable food and without also driving up greenhouse emissions. We’re looking for technologies targeted at:
- Food recapture and recovery
- Shelf-life extension
- Accessible, affordable healthy food options for underserved communities
- Scalable strategies to finance the half-billion smallholder farmers around the world
Oceans, Water & Sanitation
Whether viewed from the lens of climate change, meeting the growing global water demand, or mitigating the repercussions that will be faced by the millions worldwide who depend on coastal resources, water is inextricably linked to building a better planet. We’re looking for water innovators who are tackling issues like:
- Drones/blockchain solutions for real-time ocean monitoring
- Supply chain innovations for fisheries
- Water recycling and reuse
- Water-smart technologies
The Team Behind the Mission
As we mentioned, this is a non-exhaustive list, and we’ll be adding to it on a regular basis. And while these are some of the issues we’re looking for founders to tackle with innovative technologies, regardless of the issue, what’s most important to us is the team behind the mission.
Here’s what we’re looking for in you:
- You’re in it for the mission, and know you’ll get there by building a big business. You’ve tightened your aperture around a pressing global problem that also represents a massive market opportunity, and have developed an innovative technology or business model to link those two together.
- You operate with unshakeable intellectual honesty and an insatiable curiosity to learn and improve.
- You demonstrate strong founder/problem fit, meaning your background, skills and experience give you an unfair advantage to tackle this problem. You understand the industry that you are operating in, which gives you unique insights about where there are open opportunities, and have a real passion for the space.
Applications close on Feb. 25th, 2018. Apply today.
If you’d like to join Techstars Impact as a founder, let’s talk. You can reach me directly at email@example.com.
We’ll also be on the road in January and February, meeting with founders from LA, San Francisco and Vancouver to Boston, Chicago and NY, and more. Keep an eye out for dates.
This was originally published on Medium.
Recently, a friend and founder of a social venture that increases access to basic services for underserved communities in the US, started gearing up for his Series A fundraising. As a mission-driven company, when he went out to raise capital, the advice he got about where to look was split down the middle. Due to his company’s social mission, some investors told him to focus exclusively on raising from impact investment funds.
On the other hand, other investors who’d spent time understanding his business model encouraged him to raise venture capital for the strategic advantages it would unlock, including industry expertise, connections, and commercial credibility.
If you are a founder building a company whose core mission is to solve a pressing social or environmental problem, you’ll likely find yourself in a similar position, asking yourself the same questions:
- should I raise funding from impact investors or venture capitalists?
- As we scale, to what extent will that external capital support or push back against our mission?
- How can I ensure that our investors and our company are fully aligned on impact for (inevitably) when the road gets rough?
These questions can all be boiled down to a single one:
Is venture capital right for social ventures?
There’s no black-and white answer to this question. However, under specific conditions, venture capital can be a good fit without putting your mission at risk. More importantly, over the long term social ventures may actually be a better investment, since they increasingly benefit from competitive advantages unique to social ventures.
The Sweet Spot: Intrinsic Alignment between the Business Model and Impact
If you run a social venture and are wondering whether venture capital is right for you, your starting point (for entrepreneurs and investors alike) should be to have a solid understanding of the level of impact risk that is embedded in your business model. Start by considering this question:
To what extent does your business model sit in lock step with your impact model as you scale?
All social business models lie along a spectrum here, ranging from impact can seamlessly be divorced from the business model to increasing margins has the inherent effect of increasing impact. The former introduces a high-risk variable as to whether external capital will be helpful or harmful to the mission, while the latter limits it.
For example, Stasis Labs is a cloud-connected vitals monitoring device aimed at decreasing mortality rates among the 11 million under-monitored patients around the world. Because impact is intrinsically linked to Stasis Labs’ core product and business model, and impact will scale in lock step with the business, they’ll sit farther to the right on the spectrum. In this case, limiting impact risk makes them an ideal fit for venture capital.
Toward the other side of the spectrum might sit many one-for-one models, in which a company typically donates one product for every one product sold. This business model is inherently risky for both investors and entrepreneurs alike, because impact can seamlessly be divorced from the business model.
For the investor in this scenario, increasing impact has the inherent effect of decreasing margins. For the entrepreneur, at the point at which they find themselves in a cash crunch down the road, they may have to scale back on impact — or eliminate it entirely — in order to optimize for survival.
Why Venture Capital is Starting to Invest in Impact
Historically, many VCs have been skeptical of social business models as good financial investments, which means that most social ventures will have an extra barrier to overcome when pitching VCs.
However, if you satisfy this key condition of intrinsic alignment, there are a handful of unique competitive advantages inherently tied to key drivers of success that you’ll be able to leverage. As you talk to VCs, you can point to these factors to walk your investors back from the ledge of viewing your mission as a risk, and rather as a competitive advantage:
The Market is on Your Side
Put simply, consumers want you to win, because you are solving a real pain of theirs and something that matters for the world. Additionally, 70 percent of consumers aged 18-34 say they are willing to pay more for a socially or environmentally responsible product (source).
Mission-driven companies have an easier time attracting top talent, from co-founders and team members, to mentors and advisors.
The Rise of Impact-focused Capital
From venture capital to hybrid impact investment firms to philanthropic foundations, capital is converging on impact: from 2015 – 2020, the impact investing market is predicted to grow from nearly $9B to $1T (source).
At their core, social ventures have a purpose that the public can get behind. In the short term, an impact story means you are much more likely to get positive press and PR.
Over the long term, this can return in spades to support the growth of your company through talent attraction and retention, strategic fundraising, increased opportunities for strategic partnerships, and more.
Stay tuned for application dates for the Techstars Impact Accelerator!
Techstars, the worldwide network that helps entrepreneurs succeed, is excited to announce the launch of the Techstars Impact Accelerator, its first program backing for-profit, mission-driven founders building technologies to solve our most pressing social and environmental problems.
Techstars Impact Accelerator will be based in Austin, TX, where Techstars has operated programs since 2013 and will continue to deepen its footprint. As the fastest-growing city in the US, Austin is an emerging leader bridging technology and social innovation and consistently attracts top tech talent from around the world.
Applications open in December 2017 and the program kicks off June 2018. The Techstars Impact Accelerator fund is backed by notable LPs including impact investment funds managed by Morgan Stanley Investment Management’s AIP Private Markets Team, Impact America Fund and Cotter Cunningham, CEO of RetailMeNot, Inc.
After four years serving as founder and CEO of UnLtd USA and previous experience working with impact startups across the US and emerging markets, I am joining as managing director of the program. UnLtd USA will join forces with Techstars to bring its global network in the impact space to the Techstars Impact Accelerator.
Meanwhile, since Techstars launched 10 years ago, we have had a deeply held belief that some of our biggest global challenges also represent some of our biggest opportunities, so investing in world-class, mission-driven founders is deeply embedded in our DNA.
Over the last several years, we have made several investments into impact companies, including category leaders such as Zipline, which builds drones to deliver crucial medical supplies in Africa;Aunt Bertha, the #1 ranked social service search and referrals platform;and Connxus, a supplier management solution that allows buyers to achieve their goals of responsible and sustainable sourcing.
In 2015, Techstars companies represented 5 percent of all Series A deals. Alongside this, we see an important trend in the landscape: since 2011, the number of impact companies accepted into our global accelerator programs has continued to increase, growing by an average of over 50 percent each year over the last three years. Now with dozens of impact companies in the Techstars Portfolio, we see a second exciting trend that validates our core belief: looking at the investment multiple of our impact companies compared against the general portfolio, our impact companies track with the general portfolio and in some cases are outperforming.
Today, we launch the Techstars Impact Accelerator to help world-class, mission-driven entrepreneurs who believe, like us, that solving some of our most pressing social and environmental problems can sit hand-in-hand with building a successful company.
Companies participating in the program will focus on developing transformative technologies and innovative business models to solve our most pressing challenges across financial services, education, agriculture, energy and more.
Go to our page to sign up for updates on the Techstars Impact with meetups, webinars and news on the application process, as well as to learn more about where you can meet me as I tour the world looking for the world’s leading mission-driven startups to join Techstars Impact.