Impact investing started in venture capital investing, and the trend is now influencing the entire industry, as a focus on impact becomes global best-practice. Giant Leap have released their inaugural Impact Startups Benchmark Report, taking insights from their first 4 years in operations as well as some 3,400 pitches they’ve reviewed. It’s a unique snapshot of the state of the sector.
It explains that over the last 5 years the percentage of impact startups, as compared to the broader space, has grown from 15 per cent to 23 per cent, and it’s not slowing down. The Thomson Reuters foundation ranked Australia as the second-best country in the world in which to be a social entrepreneur. And there are more organisations than ever offering capacity support, funding and mentorship to social-entrepeneurs.
“This report sets a benchmark for the impact startup ecosystem that we can use to track growth over time. It builds on emerging data from around the world that there is a huge financial opportunity for impact investors in this space. It’s the first of its kind and is an important step in seeing impact investing recognised in Australia as the new norm.” says Rachel Yang, Giant Leap Partner.
Despite progress, there’s still plenty more room for growth. Impact capital is concentrated in the US and Europe, and the report shows that only 8% of impact venture capital comes from the Asia-Pacific region, and that’s with a 29% share of the broader VC market. This is a big opportunity.
And the action is heating up with US$400 million having already been raised in 2021 by established impact VCs, and a US$162 million climate-focussed fund delivered by US-based Union Square Ventures.
If the impact thesis wasn’t strong enough, the financial returns have become compelling, and Giant Leap suggests institutional investors are starting to pay attention.
From examination of the broader industry, the report then focuses on the startups themselves. It shows that the foundational concepts of ‘impact’ are appearing, like green shoots, among a whole range of organisations. Who Gives a Crap donates 50% of profits to water and hygiene projects in developing countries, Square Peg Ventures pursues mission-led founders, Airtree promotes becoming B-Corp certified and Culture Amp has become Australia’s first B-Corp to reach unicorn status.
“Crucially, the report also serves as a resource for current or budding impact founders looking to understand the ecosystem and the breadth of dedicated support available to them. There’s never been a better time to build an impact startup.” Yang says.
It calculates that out of all the startups that got funded in Australia, 20% would have satisfied the Giant Leap impact framework. The potential flow-on effects are profound with 75 per cent of Australian founders thinking about measuring the impact of their operations.
This is the pivot that starts the flood, and it aligns with Giant Leap’s longer term aim of seeing the term ‘impact’ dissolve from their title, to a time when all businesses measure their impact.