Why purpose isn’t the preserve of Corporate Multi-nationals
Justin Michaels, Director of ustwo Adventure
Hardly a week goes by without a major corporation launching a new strategy or positioning based upon “purpose” and delivering social good. Recent examples include BP – “keep the world advancing” – and HSBC, with “together we thrive”. This is no surprise given the research that shows customers buy into companies and brands with purpose. For instance, 66 per cent of global consumers are willing to pay more for sustainable goods.
These are major companies with millions to spend. Yet over at ustwo Adventure, the start up and investment arm of independent digital studio ustwo, we’ve seen from our own investments and those of others that this trend isn’t just for the multinationals but also for small investors looking to back entrepreneurs with shared values.
That’s because the next generation of founders is increasingly focused on generating profit with purpose. In the US, we are seeing new investment terms evolve – often borrowing from the impact investment space – to incentivise sustainable profitability. It’s become clear that social purpose is not confined to companies with lavish boardrooms and budgets to match, and here are five clear actions to build that purpose into your business.
Be yourself and believe in your sense of purpose
The majority of successful start-ups are borne out of their founders living the pain points and finding solutions to these. A lack of authenticity is where the problems start with purpose because you need to bring experience to the table. For instance, ustwo Adventure invested in uptree, which provides access to large companies for young people from underprivileged backgrounds. Uptree was founded by two people (Tamsin Dewhurst and Lucy Cranwell-Ward) with a clear sense of the issue at stake – the need to provide work experience to young people without the necessary networks. Tamsin had previously worked in education and Lucy in recruitment, and they made uptree a profitable business within a year. IBM, Google and Vodafone are among those offering experience and mentorship to young people through uptree.
Find your angle on purpose and implement a clear framework
You don’t have to fly headlong into this as a mission-based business looking to solve a problem as large as global warming. Just remember that beyond the obvious - investors, customers and employees - are community and environmental stakeholders. Identify those that are important to you and then adopt a clear framework for embracing them. For instance, at ustwo, we’re currently going through the process of applying for B Corp Certification, which recognises businesses that balance purpose with profit, and measures your company’s impact on community, environment, workers, and customers.
Find investors who see your values as virtues
You’re looking to find the right investors for your needs, and those that have confidence in your mission and vision. Purpose-led businesses aren’t for everyone, but this can be helpfully polarising. Before we invested in Seed & Spark, a crowdfunding platform for diverse filmmakers, CEO Emily Best pitched to over 40 VCs off and on for two years. She ultimately decided that a cap table of believers was more valuable than a handful of deep-pocketed VCs. It may be unconventional - and it may take longer - but the right investors will let you believe in your purpose and back you over and over.
Launch a charitable foundation
Structures such as CIC (Community Interest Company) can prove to be restrictive for entrepreneurs looking to run a for-profit company. However, there are more flexible ways to embrace purpose through your company model. One potential route to success is to operate your start-up as a traditional for-profit business and then launch, or partner with, a charitable foundation alongside. For instance, ustwo Adventure has invested in TRIBE, which makes a range of nutrition products. TRIBE is a for-profit business but donates an amount from each product sold to its charity, which fights human trafficking (a cause close to the hearts of the founders). Not only does TRIBE run a successful business but also creates a virtuous circle of donating regularly to a cause and building a closer connection to its customers as a result.
Get your people onboard
People place a value on working at places with clear values and a sense of community and, as a result, staff retention and performance levels increase. So, involve your team from day one in any purpose-based initiatives, because they’re likely to see a value in this that attracts them to remaining with the business. You may want to go even further, by considering partner or ‘steward’-based ownership structures to retain and motivate talent. This approach was instrumental in creating successful UK companies such as John Lewis, and we’re seeing it spring up as an investment model. For instance, Germany-based Purpose Ventures solely focuses on investments in steward-owned companies, believing “that autonomous, fully responsible entrepreneurs take the best decisions for their company.” That might be too extreme an approach for many entrepreneurs but it’s further evidence that a sense of purpose is valued by the investment community.