Bringing impact intent to venture investing

Purpose-led startups are tackling hard problems and improving lives. Wagestream is making payday lending redundant by enabling employees to get instant access to their earned wages. Open Bionics is on a mission to ‘turn disabilities into superpowers’, by building and developing the next generation of bionic limbs for limb-different children. Ieso Digital Health delivers online therapy for people with common mental health issues across the UK, at a time and place that suits them.


Written by

Douglas Sloan, Managing Director

These startups are part of a movement that is gathering momentum. One in five young founders say having a positive social impact is their primary motivation for starting a business. People care who they work for, and care who they buy from. There is increasing demand to help solve the many pressing issues facing society.

Encouragingly, this trend is supported by a growing appetite for impact investment opportunities from both retail and institutional investors. The rate of investment into startups tackling the UN Sustainable Development Goals doubled this year as a proportion of all venture investing in Europe.

At Big Society Capital, we’ve been making investments into venture funds for a few years now. Along the way, we’ve backed accelerators, angel groups, and funds at Seed, Series A, and Growth stage. Around 10% of our capital has flowed into venture and equity investments in different ways.

Bringing impact intent to venture investing is an area of increasing importance to us. We have a vision where every investment helps improve people’s lives, and purpose-led startups provide a unique opportunity to source innovative ideas and scale successful models that can make a difference.

But what do we mean by purpose-led startups, do they make strong financial returns, and how can we capitalise on this momentum to tackle social issues?

What are the characteristics of a purpose-led startups?

Purpose-led entrepreneurs have a certain drive that sets them apart from other entrepreneurs. The fundamentals of growing a business are much the same - innovation, a scalable market opportunity, a focus on user-centred design - but what’s unique is these are intrinsically linked to delivering positive social or environmental outcomes.

Technology has an important role to play in developing products and services that better meet the needs of individuals. Low marginal cost and capital-efficient business models allow tech startups to scale and reach many people swiftly. By drawing on fast feedback cycles and rich engagement data, startups can design and refine goods and services – in some cases crafting personalised offerings, developing predictive capabilities, or enabling preventative action.

We see a role for this type of approach in a range of areas including health, education, and financial inclusion. This way of delivering impact isn’t right for all problems or all people – but where it is right, where it can harness the benefits of the startup method and steer clear of the challenges associated with technology-based models and too-fast scaling pathways, it can be transformative.

Can purpose-led startups deliver strong financial returns?

Historically ‘impact’ or ‘purpose’ has been associated with lower returning or higher risk startups. However, it’s clear that there is a spectrum of returns – within which returns will differ depending on the nature of the business.

At Big Society Capital, we increasingly frame our approach to venture in relation to two points on that spectrum:


When venture investors talk about ‘unicorns’ they are referring to startups with a valuation of over $1bn. When we use the term here, we’re referring to startups seeking the kind of fast scaling pathway that might lead to unicorn status.

Startups seeking to make an impact and scale quickly can harness the benefits of purpose-led business models. These benefits are well documented, and include:

  • Stronger ability to attract and retain co-founders and employees
  • Stronger ability to attract and retain customers
  • Deeper understanding of their users through impact insights
  • Larger target markets through reinvesting margin in price as they scale

We believe purpose-led startups with these characteristics can deliver meaningful impact alongside scaling their businesses at the pace needed to drive financial returns at or above market rate for commercial venture investing.


As an alternative to the unicorn model, ‘zebras’ seek sustainable and profitable growth alongside emphasising commitment to community or a cause. When we use the term here, we’re referring to startups that are seeking growth through designing or delivering better solutions, but are not seeking to grow as large or as fast as ‘unicorns’.

For these purpose-led startups, aspects of their business model may mean they grow on shallower scaling pathways – either taking longer or scaling smaller. On the flip side, these same aspects may increase the quality of impact delivery. For example:

  • Targeting a specific user group may reduce the addressable market size, but may deliver stronger ‘per user’ outcomes through knowing that user base better – for example if serving people who experience a particular health condition
  • Seeking to scale into industries with complex revenue landscapes, such as parts of the public sector or organisations serving low income consumers, may reduce the speed of growth but may increase impact through reaching underserved or at-risk groups
  • Delivering services with a large face-to-face component or specialised requirements may increase the capital intensity required to reach scale, but may improve the quality of impact

We believe startups with these characteristics can deliver positive, if lower, returns to investors – alongside potentially deeper impact than other startups.

What role can venture capital investors have in purpose-led businesses?

At Big Society Capital, we see our role as supporting the development of a range of approaches, seeking to enable both groups of purpose-led startups described here to grow their businesses and their impact. Venture investors (VCs) have a vital role in the future of impact investing – in both of these areas.

For Unicorns: We know that the best VCs bring capital, strategic insight, and operational support to improve the growth and profitability of businesses they support. There is an opportunity for VCs to harness the growing momentum of purpose-led business to deliver strong returns and transformative impact.

We want to work with top class venture managers who bring a depth of scaling expertise, a strong track record, and an excellent reputation in the market to help unlock the potential of purpose-led ventures. These managers may not describe themselves as impact investors, but they may have made investments we would consider impactful.

Our aim is to support an engaged group of high-calibre managers, executing a diverse set of strategies by stage and focus, aligned with our values and thoughtful about impact. We want to change perceptions about impact in venture – by proving it is possible for a subset of purpose-led ventures to deliver strong financial returns and make a meaningful difference.

For Zebras: We think you need different models to effectively meet the needs of this group of high-impact, profitable ventures with positive returns but shallower scaling pathways than in conventional venture investing. We want to explore what might be possible in this area in the coming months.

If you are a manager or investor that shares our goals or would like to be part of the journey, please get in touch with Dougie and Katie.