ImpactAlpha, Sept. 18 – When Zoe Schlag made the original case to the startup network for an impact-focused fund and accelerator she produced data showing that impact-aligned startups at Techstars outperformed their ‘non-impact’ peers. That was enough for Techstars to raise a pilot impact fund and launch an impact-themed accelerator to prove out the thesis.
Three years and 73 investments on, a repeat of the analysis has found that each year between 2012 and 2018 “impact tech” startups have outperformed Techstars’ total portfolio, measured by multiple on invested capital (to be sure, nearly all of the value is yet unrealized).
“The analysis we did three years ago is holding up,” Schlag told ImpactAlpha. “This validates the alignment between investing and impact in our core business.”
- Impact investors. Schlag has invested nearly the full $7 million pilot fund, which counts among its limited partners Morgan Stanley’s Alternative Investment and other family offices.
- Impact portfolio. Nineteen investments have been made through the Austin-based Techstars Impact accelerator. Techstars made the other 54 investments across its other accelerator programs and in Seed and Series A investments in impact-aligned startups across its network. These include in Austin-based Aunt Bertha (raised more than $22 million), Cincinnati’s Connxus (raised $17 million) and Seattle’s DroneSeed (raised $7.5 million). In the last three years, nearly 30% of startups across Techstars programs have had ties to the UN Sustainable Development Goals.
- Opportunity set. “Impact tech” is a big market. Techstars identifies four reasons why: Technologies are creating first-time access to inaccessible markets. Falling costs of tech are enabling delivery of goods and services down-market. A growing number of consumers are demanding ethical and sustainable products. Corporations waking up to mounting social and environmental risks are turning to impact to mitigate them (see, “Techstars looks for startups to help mitigate mounting social and environmental risks”).