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Startups - too damn small to matter or automatically amazing? Neither.

Slush and Upright teamed up to quantify the net impact of all startups coming to the North’s #1 startup event in this December. The results? It’s time to bust some myths.

“Startups are just hype, they don’t really impact the economy as they are so damn small.”

“Startups play a crucial role in solving some of the biggest problems of our time.”

“Startups waste too much time solving meaningless problems.”

Discussion about the impact of startups is often binary and based on anecdotes. How do startups really impact the world around them?

This year, Slush and The Upright Project teamed up to raise broader discussion about the impact of startups on our environment, health, knowledge creation and society at large. Concretely, we quantified the net impact of all startups coming to Slush 2018 using Upright’s quantification model and data provided by the startups themselves.

Based on the results, we ended up busting five myths on startups’ impact.

Myth #1: “Startups don’t really impact the economy as they are so damn small.”

Yes, by definition early stage tech companies still produce less revenue than large established companies. This can be seen when putting the size and impact of Slush-comers side-by-side with US Fortune 500 representing ⅔ of the US GDP, and Finland’s largest company Nokia.

However, the relative net impact score, defined as net impact divided by revenue, of the Slush 2018 startups is higher than that of the two comparison points. This “bang for the buck” score describes how efficiently a company uses its resources, and how much net impact it achieves relative to its size. No wonder investors are showing up at Helsinki-Vantaa airport in masses right about now.

Myth #2: “All startups are automatically net positive.”

Busted. Many are not, often due to already using scarce human resources but not yet delivering the positive outcomes via their product or service. Compared to the Fortune 500 and Nokia, the startups are especially knowledge-heavy - both on the negative as well as the positive side. They consume more highly skilled human resources compared to their size - but also create and distribute more new knowledge.

Myth #3: “Small and cute startups rule when it comes to impact.”

No. Companies with revenue currently under USD 1 million averaged to a clearly negative net impact, whereas larger growth companies make it to the net positive side. This is largely due to early-stage companies already consuming (especially human) resources, but not yet producing the desired positive outcomes via their products and services.

Small might be cute, but impact is made in companies that produce revenue.

Myth #4: “The young and idealistic will save the world.”

We also examined the startups' impact against the age of the founding team. Companies whose founding team had at least one person over the age of 30 had a more positive net impact than companies with a fully under-30 founding team. Breaking the illusion of the young and idealistic vs. old and cynical?

Myth #5: “Investors avoid 'impact-focused' startups as they don’t make money.”

A quite curious take-away from the data is that two groups stand out positively when looking at amount of funding: the ones who have received the least funding (less than 50k) and the most (more than 2M). Investors currently find the best - and some of the best run away from investors?

The investor scene doesn’t yet have any standardized ways of quantifying impact, but the data suggests that more and more investors are seeing the link between making money and impact.

What does all of this mean? What startups really spend their time on, i.e. what their product or service actually does, determines whether or not they use economic, planetary and human resources efficiently. Perhaps even more interesting is that an increasing amount of investors, employees and founders themselves are starting to see the link between traditional financial success and solving problems that matter.

Want to see the full results of the joint analysis by Slush and Upright? We will publish them together with Slush later this winter - stay tuned!

Annu.
Founder of the Upright Project
Engineer and action woman who thinks it's time we update our way of measuring value creation of companies.