Historically, public markets have signalled economic contractions and expansions, which in turn dictates the capital available to startups.
This brings to mind the recent turmoil with China’s Shanghai Composite Index and the resulting Black Monday… followed by Black Tuesday… you get the idea. Not to mention the underlying fears of another bubble regarding VC money that sits not so quietly in the back of many an entrepreneur’s mind.
The global markets increased uncertainty caused many global tech companies to falter, among them Apple, Google, Amazon, and Twitter. For many, this is a peek into the fallout that may occur should this precede the supposed “VC Bubble” pop.
But enough with the doom and gloom. Here’s how you can mitigate the damage and do some good while you’re at it.
Plan B, Which Should Really Be Plan A
At Spring, we focus on the intersection of purpose, profit and technology. To lean in and provide an impact lens into what has said about a VC bubble in particular, the decrease proportion that VC-specific money represents as part of the entire funding pie is a clear indication of increasing diversity among funders and sources of funds. There’s the growing popularity of crowdfunding, and the emergence of niche sources of capital, such as impact investing and vertical-specific angel syndicates. It’s no longer just patent pending true “high tech” startups and the latest dating app (no offence, Tinder), that are the VC starlets.
The reality is, impact entrepreneurs have several new channels to explore. There’s been an influx in individual angels, impact-centric angel groups (such as Toniic Network), impact focused funds (Renewal Funds and Better Ventures), mutual funds, and even crowdfunding platforms (Fundrazr and Classy) that all value and seek to support social ventures who are changing the world for the better. Savvy investors are not only chasing high returns and growth, but the mission behind the business. This makes their investments more carefully vetted, with a longer view and better values alignment.
Because of this wide array of options, the threat of a “VC bubble” poses less of a risk for impact entrepreneurs than in previous cycles. They have the means to diversify their sources of capital; no longer are they limited to placing all their eggs in one basket, as the saying goes. Bubble? What bubble?
That said, it is still the best entrepreneurs who take the time to focus on the right sources and the right investors who beat the odds. A sound capital raising strategy ensures that values align and that your round will be supported by investors who can add value throughout the company lifecycle, not just cash. The benefit for impact entrepreneurs is that it is often easier to find value alignment upfront, thus, having a greater chance of achieving a great pool of vision aligned investors with strategic value at the close of their round.
All of these factors take into account more than growth and interest rates, although that is certainly a major factor. The dual focus on impact and profit mitigate some of the threat of bubbles from both fronts, VC and international, making even more of a case for all companies to think about how they can profit while doing good.
But, don’t trust us, meet the investors for yourselves, This year at IMPACT, Vancouver’s premier conference dedicated to the intersection of tech and impact, Toniic Network, Better Ventures, Renewal Funds, and many others are bringing their best. Let them tell you all about impact investing, the trends they’re seeing, and where you might fit in.