The priorities of early-stage founders are shifting, transitioning from driving ad clicks to purpose-driven innovation.
Increasing interest in Venture Capital from asset allocators highlights the growing significance of innovation in everyone’s portfolios. However, everything hinges on two central questions: will the math of venture work out? And will there be enough brilliant founders to invest in? We think so, based on three observable trends:
Unprecedented availability of talent globally
We are witnessing a rising supply of global talent amidst layoffs and employee dissatisfaction. In parallel, employees are also leading an exodus with many in the active stage of considering quitting their jobs, especially remote workers.
This is the prelude to an era of unparalleled global availability of talent, with many turning to entrepreneurship to take control in an uncertain time. What causes this dissatisfaction? Where will workers migrate? Will this availability of talent spur new companies being founded, like Facebook, Uber, and Airbnb, born out of dissatisfaction with the norm, driven by a vision for a new world?
Early-stage deals are the litmus test for a migration to purpose
We believe in migration to purpose — I see it at my company, where we are investing at ‘day zero’, the earliest stage possible, and early-stage deals are confirming this trend. Backing over 1,000 startups across six continents, we are seeing founders seek purpose to distance themselves from the misalignment they faced with a previous job, such as motivating customers to click on more ads.
For example, a portfolio company Syrenna came to fruition when a lawyer, a consultant, and a university researcher all connected on motivations outside of their previous careers. For co-founder and COO Becky Wightman, the personal impact felt limited at her large law firm. When she and Ester Strommen connected with Alex Alcocer, they realised the commercial potential in an underwater intelligence technology he had been working on and the three founded the company–a water drone measuring ocean temperature in real-time. They voted for purpose within innovation and their careers.
Through our access to the earliest stages of innovation, we have also found over 50% of our pre-seed stage portfolio companies have already considered environmental implications across their product life cycles. Outlier founders will increasingly be the ones who incorporate ESG and impact from the earliest stages, as early as day zero.
Early-stage deals affirm this migration to purpose. Half of our impact companies are climate companies, and 75% of these climate-related tech companies have gone on to raise external capital.
Founders prioritise ESG integration
Founders are taking ESG integration very seriously and it is a strong motivator for them to start companies: The World Economic Forum published research indicating that 68% of startups were already integrating ESG strategy from day one as core to their scalable competitive edge, outperforming later stages of growth.
Founders are effectively voting through starting companies, a strategy entrepreneurs have historically used to promote innovation, by proactively changing industry norms. Entrepreneurs have influenced some of the most known environmental policies today, such as the United States Leadership in Energy and Environmental Design (LEED) building certification.
As tech founders increasingly prioritise purpose and ESG integration, we can expect to see a surge of innovative companies generating profits but also making a positive impact on the world. This trend is already underway, with climate tech investments defying the market slump and a growing number of founders considering environmental implications from the earliest stages of their companies. By voting with their ventures, tech founders are leading the way toward a more sustainable and equitable future.
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- Source: https://www.eu-startups.com/2024/06/tech-founders-leading-with-purpose-the-rise-of-esg-integration/
