Funding the future: How mission-driven startups can achieve commercial success
For the new generation of purpose-led startups to deliver on their goals and effect real-world change, these innovators need to take a different approach to investment.
Our world is facing existential threats posed by the climate crisis and rampant social inequality. Led by innovative and highly-focused entrepreneurs, mission-focused startups have the potential to be a catalyst for positive change.
Unlike traditional startups that typically begin with a well-defined product or service, purpose-driven companies often start with a broader vision or desired outcome and then work backwards. Take SpaceX as an example: the company's mission is to colonise Mars, but the specifics of how this will be achieved are still evolving. This approach of defining the end goal – the mission – and then working backwards is a hallmark of a true mission-first business.
Look to unconventional funding routes
But while this mission-centric approach is a powerful motivator for founders, employees and customers alike, it can present challenges when it comes to securing funding. Long-standing funding sources, such as banks and institutional investors, are swayed by prototypes and concrete business plans, not missions. But for many purpose-driven entrepreneurs, getting to these more advanced stages takes time. Going down a conventional funding route can therefore quickly deplete funds and push a startup out of business before their vision has had a chance to take flight.
To overcome this hurdle, these agile, purpose-led startups must look beyond conventional funding options and explore more flexible alternatives. This is where non-traditional investors come in – angel investors, family offices, and even fellow entrepreneurs can offer a compelling investment alternative to more conventional sources. These investors tend to be more flexible, offer a different approach to investment and critically have a willingness to explore emerging industries and more diverse business models.
Powerful storytelling to win over hearts and minds
Having a clear mission is a powerful tool when engaging with these non-traditional investors. Mission-led startups should lean into their purpose and use this as a means to sell their business proposition to these potential funders.
Impactful storytelling should have authenticity at its core, and should directly address the ‘why’ of the business – namely, the problem that the startup is looking to solve. Placing the mission front-and-centre has the added benefit of increasing the chances of the startup securing capital from like-minded investors. These funding sources are more likely to be able to provide the required financial and strategic support needed, and without pressure for the business to achieve short-term gains that could compromise the mission. These alternative investment routes are an effective way to open up access to faster cash injections, even before the business has a clear-cut product or service, which can help these mission-centric startups get their businesses off the ground, fast.
Don’t forget about profit
To be in with a chance of meeting its mission, a startup needs to be profitable. Even the most idealistic investor will struggle to justify sticking with a loss-making enterprise.
A mission-led startup has to have a commercially viable business model that delivers attractive returns to stakeholders and generates ongoing funds that can be directly reinvested into the business. Profitability also helps the startup to attract new talent and enables ambitious employees to progress and grow as the business scales.
By balancing a focus on the bottom line while also being driven by their mission, startups can ensure sustainable success and amplify their impact.
Forge strategic partnerships
Strategic collaborations with larger businesses is another way for startups to achieve their goals. For example, working with a strategic partner to run a pilot programme can enable startups to validate their offering, gain access to invaluable knowledge transfer and gather customer feedback for continuous improvement. Partnerships of this nature enable the startup to identify and address challenges before full-scale implementation, reducing the risk of things going wrong in the future.
These joint ventures can also serve as a compelling proof of concept for future investors and partners. Moreover, when executed effectively, the strategic partners can become powerful advocates for the brand, helping to further amplify the startup's mission and accelerate the business.
Create lasting positive Impact
The new breed of startups is challenging the traditional profit-led model. But to deliver on their goals and effect real-world change, these innovators need to take a different approach to investment.
Looking beyond conventional investors and seeking out like-minded strategic partners can help these mission-driven companies achieve commercial success while achieving their mission.
Showerkap is a pioneering tech company on a mission to change how people use water and energy. Our platform combines engineering and behavioural science in a first-of-its-kind smart technology, enabling users to reduce water waste, carbon
emissions and costs.
To find out more, follow Showerkap or ➡️ reach out to Kevin Wright, Chief Brand Officer.
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