# Four ways impact acts as a source of value for startups and investors
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2021-08-31
Category: BUSINESS
Category URL: https://financedigest.com/category/business
Meta Title: How Impact Drives Value in Startups: 4 Key Factors
Meta Description: Learn from Nicholas Andreou of Big Society Capital the importance of incorporating impact into business models for long-term success, attracting customers and
URL: https://financedigest.com/four-ways-impact-acts-as-a-source-of-value-for-startups-and-investorshtml

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_By **Nicholas Andreou,** Investment Manager,_ [_Big Society Capital_](https://bigsocietycapital.com/)

As part of [Big Society Capital’s](https://bigsocietycapital.com/) (the leading social impact-led investor) work in impact venture, we invest across a spectrum of venture fund managers and are exposed to a broad range of startups and business models trying to achieve impact. For a significant proportion of these startups, we believe it is possible to generate meaningful impact and strong financial returns together.

This assumption is driven by the belief that impact can be a source of value. Broadly defined, when we say impact, we mean a positive change in outcomes for people and/or planet. In this blog, we unpack why we think incorporating impact drives value.

**Here are four [ways impact](https://www.financedigest.com/3-impactful-ways-that-leaders-can-contribute-to-the-independent-development-of-their-employees.html "3 Impactful Ways that Leaders Can Contribute to the Independent Development of Their Employees") acts as a source of value:**

1. **Accessing and** [retaining customers](https://www.financedigest.com/retaining-insurance-customers-in-a-post-pandemic-environment.html "Retaining insurance customers in a post-pandemic environment")

[Customers increasingly care about impact](https://www.financedigest.com/the-fca-is-taking-immediate-action-on-customer-vulnerability-but-how-does-this-impact-advisers.html "The FCA is taking immediate action on customer vulnerability; but how does this impact advisers?"). Data suggests that nearly two-thirds of consumers will [buy or boycott a brand](https://www.financedigest.com/loreal-buys-luxury-brand-aesop-with-eye-on-china.html "L’Oreal buys luxury brand Aesop with eye on China") because of its position on a social or political issue. There is also evidence that consumers are willing to [pay a premium](https://www.financedigest.com/finnish-businessman-zilliacus-ready-to-pay-premium-for-manchester-united.html "Finnish businessman Zilliacus ready to pay premium for Manchester United") for more sustainable brands. Therefore, aligning [corporate activities with a broader purpose is likely to drive](https://www.financedigest.com/green-bonds-are-set-to-drive-corporate-esg-debt-out-of-slump-in-2023-barclays.html "Green bonds are set to drive corporate ESG debt out of slump in 2023 -Barclays") value in the long run.

For [companies whose core products and services are about providing impact](https://www.financedigest.com/the-severe-impact-of-downtime-on-companies-bottom-lines.html "The severe impact of downtime on companies’ bottom lines"), these dynamics become even more interesting. In an upcoming blog, we’ll look at how the advent of micro-finance in [emerging markets](https://www.financedigest.com/medical-nonwoven-disposables-market-scope-emerging-trends-analysis-and-forecast-2028.html "Medical Nonwoven Disposables Market Scope Emerging Trends, Analysis and Forecast 2028") added hundreds of millions of customers to the pie. Innovations, inspired by a desire to make finance accessible to the bottom of the pyramid, [reduced the cost to acquire and serve customers while enhancing](https://www.financedigest.com/cobots-in-the-financial-workplace-reducing-costs-attracting-talent-and-enhancing-sustainability.html "Cobots in the financial workplace: Reducing costs, attracting talent and enhancing sustainability") customer lifetime value. This then made the segment profitable to serve, increasing the [total number of potential customers](https://www.financedigest.com/the-cervical-total-disc-replacement-market-to-grow-based-on-customized-digitization.html "The Cervical Total Disc Replacement Market to grow based on customized digitization"). For those who first moved into the space, they had the added benefit of being able to defend this segment of the pie due to the innovations that they had pioneered and implemented first.

2. **Attracting, retaining, and inspiring the best talent**

Any [successful founding team will know that talent is key to building successful startups](https://www.financedigest.com/tips-on-how-startups-can-turn-their-business-into-a-success.html "Tips on how startups can turn their business into a success"). Therefore, being able to win, retain and inspire the best talent to perform, becomes critical. While there are many dynamics at play here, a [key one is the extent to which a job taps into a potential hire’s](https://www.financedigest.com/hiring-smart-is-the-key-to-success-for-entrepreneurs-heres-how-you-do-it.html "“Hiring Smart” is the key to success for entrepreneurs. Here’s how you do it.") deeper values.

Young professionals are increasingly looking to [work in roles and organisations which create an impact](https://www.financedigest.com/how-has-hybrid-working-impacted-the-gender-gap.html "How has hybrid working impacted the gender gap?"). According to LinkedIn, 74% of members place a high value on work that delivers a sense of purpose. However, most do not feel that they are able to engage with this aspiration. For example, according to Deloitte, 53% of millennials feel some form of accountability for social equality, but fewer than 33% feel that they can exert a ‘significant’ amount of influence on the issue. Offering talent a role that can tap into the need to create impact is likely to [lead to a greater](https://www.financedigest.com/move-over-pcl-greater-londons-suburbs-take-the-lead-this-summer.html "Move over PCL, Greater London’s suburbs take the lead this summer") talent advantage over time. Employees who experience a sense of purpose at work are more likely to be engaged at work which [studies show results in 22% higher](https://www.financedigest.com/investors-seek-higher-returns-as-catastrophe-bond-issuance-slows-during-q2-according-to-aon-study.html "INVESTORS SEEK HIGHER RETURNS AS CATASTROPHE BOND ISSUANCE SLOWS DURING Q2, ACCORDING TO AON STUDY") productivity.

3. **Reducing risk**

[Startup investing](https://www.financedigest.com/analysis-rocket-startups-face-adapt-or-die-moment-amid-investment-drought.html "Analysis-Rocket startups face adapt-or-die moment amid investment drought") is laden with risk, as evidenced by the remarkably low success rates in this space. We believe that taking an [impact lens in building a company can reduce that risk](https://www.financedigest.com/russia-could-hike-rates-in-2023-if-inflation-risks-have-big-impact-cenbank.html "Russia could hike rates in 2023 if inflation risks have big impact -cenbank"). One obvious [way is in reducing the people](https://www.financedigest.com/5-common-ways-people-end-up-in-debt-without-realising.html "5 Common Ways People End Up In Debt Without Realising") risk associated with your best talent leaving (if we believe the above that impact is a competitive advantage in winning the best talent).

Another consideration is [regulatory risk](https://www.financedigest.com/is-regtechs-rise-one-way-tackle-the-international-regulatory-game-of-risk.html "Is Regtech’s rise one way tackle the international regulatory game of Risk?"). Companies that are ahead of regulatory action are more likely to do well in the long run. Deliveroo’s recent disappointing IPO was also in part down to impact concerns and regulatory risk. M&G, who chose not to engage with the IPO, stated “This is largely driven by the company’s reliance on gig-economy workers in the UK as informal [employment contracts potentially fall](https://www.financedigest.com/uk-employers-see-slight-fall-in-pay-awards-over-2023-xperthr.html "UK employers see slight fall in pay awards over 2023 – XpertHR") short in offering the value, job security and benefits of full employment. Uber is a very topical example of greater legal rights being enforced by the Supreme Court to riders previously categorised as self-employed.”

4. **Improving access to capital**

If the above is true, then investors will increasingly be looking for an impact [focus to generate edge](https://www.financedigest.com/oil-prices-edge-down-recession-fears-back-in-focus.html "Oil prices edge down, recession fears back in focus"). Outside of this performance angle, there is an increasing desire from asset owners for their assets to be [invested in a way](https://www.financedigest.com/10-ways-to-put-together-a-killer-investment-pitch.html "10 WAYS TO PUT TOGETHER A KILLER INVESTMENT PITCH") that creates impact. We believe that these mechanisms combined will ultimately translate into an increased ability for impact driven managers and startups to [raise investment](https://www.financedigest.com/5-tips-for-raising-investment-as-a-start-up.html "5 tips for raising investment as a start-up").

We already [see early signs](https://www.financedigest.com/adecco-sees-signs-of-a-hiring-slowdown-at-start-of-2023.html "Adecco sees signs of a hiring slowdown at start of 2023") of this hypothesis playing out with the growth of the ethical investing market. According to the annual GIIN investor survey, impact [investing has been growing by 17% Compound Annual Growth](https://www.financedigest.com/how-a-british-tech-brand-can-maintain-category-leading-position-and-continued-growth-by-investing-in-the-uk-people-and-infrastructure.html "How a British tech brand can maintain category leading position and continued growth by investing in the UK people and infrastructure") Rate (CAGR) since 2016. Similarly, broader Environmental Social and Governance (ESG) investing is [growing at a 16% CAGR](https://www.financedigest.com/epharmacy-market-size-to-reach-us-158-02-billion-and-growing-at-12-3-cagr-by-2027.html "ePharmacy Market Size to Reach US$ 158.02 Billion and Growing at 12.3% CAGR By 2027"). This compares favourably to other areas of the investment landscape, [private equity](https://www.financedigest.com/4-trends-that-will-have-a-major-impact-on-private-equity-in-2021.html "4 Trends that will have a major impact on private equity in 2021") for example, is growing at a projected 11% CAGR.

We hope that this sparks some interesting conversation, challenges us to deepen our thinking and ultimately, inspires others to consider an impact lens in their investment decision making, both for start-up entrepreneurs and [venture capital](https://www.financedigest.com/breaking-down-venture-capitals-gender-and-diversity-barriers.html "Breaking down Venture Capital’s gender and diversity barriers") backers.


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