Outside the Box: These companies are winning the war for talented workers, and investors should pay attention
Outside the Box
Top employees increasingly are drawn to businesses with a social mission
Impact investing is a hot topic in Silicon Valley and beyond. Now, with the rapid spread of the coronavirus, it’s never been as important that the private sector’s impact investments really do have an impact — and not just for the lucky few.
Broadening access to medication and health-related services has become the top priority, with COVID-19 spreading worldwide. It’s time to get behind technologies that can make a significant positive impact on meaningful numbers of people.
Much of my investing activity centers around digital health companies, a sector where analysts forecast phenomenal growth over the next few years, and which may see even bigger growth because of COVID-19. Because of the pandemic, a larger number of digital health companies now have the opportunity to make an impact.
My partner Heidi Patel and I, and our team more broadly, have fielded more than 2,500 pitches from entrepreneurs over the past several years. In digital health, we’ve developed a keen sense for what kind of companies will make a real impact, and we’ve been fortunate enough to finance and help such companies grow.
Here are a few of the metrics we use when evaluating a company’s potential social impact:
1. Pricing and affordability: Even the most innovative solutions to our world’s many healthcare problems won’t mean much if they’re financially out of reach for millions of people. If a company plans to sell straight to consumers, their product or service should be affordable. Alternatively, the product might be paid for by employers, health plans, or other entities (business-to-business) who benefit from the end user accessing the product or service.
2. Geography and accessibility: The best innovations — especially in healthcare — are those that make a valuable product or service widely available. Geography, just like price, is a factor that can limit accessibility. We look for startups that are using technology to shorten the distance between people, whether it’s a doctor and a patient who are in two different cities or participants in virtual clinical trials who might otherwise be left out of these opportunities. People don’t need to just afford a new technology, they need to be able to use it easily.
3. Diversity: Diverse management teams are arguably better at reaching and attracting diverse populations. Increased diversity is good for the world, and doing the right thing is often quite helpful to the bottom line.
Doing good is good business
As venture investors, we don’t fund companies just because they’re doing something great for humanity. We also have to make sure they will scale, prosper and offer a strong return on investment. In other words, we have to do well and do good. And we have to do both even in times of economic uncertainty like now.
Since deal flow might well be changing in the months and years ahead, it’s a good time for VCs in the digital health space to reassess their portfolios and their investing strategies.
The good news is that today we can often do well and do good without a difficult choice. Often, social impact businesses are simply better businesses.
For starters, businesses that aim to help a diverse set of communities have a far larger total addressable market than businesses that create technologies aimed only at those with money, education and abundant free time.
Millennial- and Gen Z workers want their work to mean something.
Not only do social impact businesses tend to have a larger potential customer base, they have grown in stature and value because of the quality of the talent that wants to work in impact companies. Millennial- and Gen Z workers want their work to mean something, and they want to pitch in on some of the world’s most daunting problems without having to wait until retirement to make a difference.
Take, for instance, drug costs, an issue that affects so many Americans. It’s a huge challenge, one that some in government have tried to tackle, but isn’t likely to have any impact on patients anytime soon, if ever. Adhering to medication regimens for chronic health conditions is especially important today, because of the danger of COVID-19 to people with underlying health issues.
For example, Sempre Health, which is led by vibrant, young female founder Anurati Mathur, provides drug-cost relief while improving medication adherence, ultimately making people healthier. This kind of deep impact company is what today’s top talent finds compelling. Young professionals are often much more willing to consider an earlier-stage company when that company’s financial mission is inherently aligned to a greater societal imperative.
The tech industry is waging a giant war for talent, and companies making a genuine social impact are winning that war. At the same time, innovations in software and other enterprise technologies have lowered the barrier when it comes to launching and scaling new businesses. There now are more opportunities than ever for investors to do well and do good. That’s important to keep in mind as we strive to meet the United Nations’ sustainable development goals aimed at reducing worldwide inequality, disease, and ecological destruction, and respond to a global health emergency that threatens millions of people.
Jenny Abramson is founder and managing partner at venture capital firm Rethink Impact.