Purpose – why does it matter and what does it mean for startups?

Purpose is more than a large company buzzword. It will help you attract and engage customers, "smart money," employees and the communities you touch. Articulating the impact you want to have on the world will also guide many of the decisions you make as you start and grow your business

Purpose matters

“Business does not exist without society and the environment, likewise society and the environment are inextricably linked to business and its investors.”

The US Business Roundtable’s 2019 statement on purpose, committed to delivering value for customers, employees, suppliers, communities, and shareholders.[i] Essentially, profit is no longer the sole ambition for the 181 leading American companies that are part of this organization – making a positive impact more broadly is at the forefront. Other leading companies globally have embraced a triple bottom line, measuring their impact on people, planet and profit, with some adding a fourth metric of purpose and/or progress.

It’s about business being sustainable within the context of the environment, society and investment. Business does not exist without society and the environment, likewise society and the environment are inextricably linked to business and its investors.

[i] https://www.businessroundtable.org/business-roundtable-redefines-the-purpose-of-a-corporation-to-promote-an-economy-that-serves-all-americans

It can create a competitive edge for startups...

“Nice,” you may say. “The big companies have the resources and time to think about the bigger questions. Philosophy is cool, but not for us right now. We need to raise investment and make money to survive and grow as a scrappy startup. We’ll get around to this purpose thing later.”

Yes, you do need to raise money and you do need to make money. But purpose will help you, not hold you back. Attracting customers who will pay for your products and services is not just about their ability to pay, it is about their willingness to engage with you as a company. The impact you want to have on the world sends a message to customers – as well as employees, suppliers, communities you touch, and investors. You want all of them to buy into what you are doing and why it is positive for each of them. You want – and need – their support to succeed, particularly in a world facing the immense challenges we face today, from the pandemic to climate change.

Articulating your purpose, the impact you want to have on the world in the long-term, is not easy, but critical. It will guide many of the decisions you make as you start and grow your business, from who to hire, the “smart money” you want to attract, the channels/partners you choose for your products/services, the ways you choose to test your offerings and how you measure success. It can also give you a competitive edge.

...as many are already finding

“Some have traction, some have investor interest at an early stage. It’s not just because they are in “hot” sectors, it’s because they have purpose.”

Take finance as an example. The “profit first” focus of many large financial institutions in the past has accelerated the rise of fintechs and alternative banks. These new companies are not just focused on profit, but also on the value they deliver to customers and society more broadly. This mindset has successfully attracted customers and is gradually changing the financial system towards more equitable distribution of value created among stakeholders.

Cleantech, sustainable fashion, edtech, medtech – all of these are sectors represented by our foundation programme participants. Some have traction, some have investor interest at an early stage. It’s not just because they are in “hot” sectors, it’s because they have purpose. They know where and how they want to have impact and why this is important. They care about how they impact society and the environment – this makes it easier for both investors and customers to buy in, to attract partners and new hires that believe in what is possible.

Get Inspired

What’s your purpose? What impact do you want to make on the world?

Join the Activate Flexible Foundation Programme and explore these questions.