How going beyond conventional funding routes can lead purpose-led startups to commercial success

Kevin Wright is Chief Brand Officer and business strategist at Showerkap, a tech company on a mission to change how people use water and energy. Its platform combines engineering and behavioural science in a first-of-its-kind smart technology, enabling users to reduce water waste, carbon emissions and costs.

Traditional startups have long been focused on maximising profits and shareholder returns. However, in a society where urgent economic, social, and environmental issues need to be tackled, a new breed of purpose-led businesses is challenging this model by prioritising positive impact alongside commercial success.

For these businesses, the mission is paramount. It explains why they exist and the positive change they aim to create in the world. For truly purpose-led businesses, the movement for change is far more than just a marketing slogan or PR tactic designed to drive sales. It is the driving force behind every decision they make.

A ‘why’ business, not a ‘what’ business

Whereas more conventional startups will usually start with a concrete product or service, purpose-led businesses will likely not have a clear business offering at the start of their journey.

Take Elon Musk's SpaceX as an example. The company’s mission is to get to Mars, but the specifics of how this will be achieved are uncertain. Musk's approach of defining the outcome and then working backwards to achieve it is a blueprint that many mission-led businesses follow.

However, this can present a challenge when seeking to raise funds – especially for startups that don’t have the luxury of having one of the world’s richest men at their helm. Traditional funding routes, such as banks and institutional investors, typically require that founders go through time-intensive development stages to prove their concepts, but for many purpose-driven entrepreneurs, going down this route would quickly lead to funds drying up.

These startups need to look to less conventional and more agile funding options. Non-traditional investors – such as fellow entrepreneurs, angel investors or family offices – can offer a compelling investment alternative for startups to secure funding and strategic support. These forward-thinking investors stand out for their unconventional investment strategies and their openness to exploring different industries and business models. By collaborating with these individuals and groups, startups can gain access to extensive industry experience and strategic guidance that traditional investors may not offer.

Using the mission to win over investors

Many businesses are already using their purpose to deepen connections with customers or to attract and retain talent, but it should also play a central role when it comes to talking to and winning over investors. By developing a strong narrative that highlights the problem they are solving and their business ambitions, purpose-led startups can attract investors who commit to the business, not only for financial gain, but also to elicit a clear societal or environmental outcome.

By using their mission as a key selling point and securing non-traditional support, startups can gain access to faster cash injections and strategic support, even before they have hit the development stage. Crucially, this can help them to get their business off the ground faster and take them one step closer to fulfilling their mission.

Ensuring a sustainable business model

It's a common misconception that purpose-driven startups should not prioritise profitability. However, the reality is that fulfilling a purpose is directly linked to building a successful, sustainable business model. Purpose without profit is simply a good intention.

A purpose-driven startup must design a business model that creates and captures value in an economically viable way, but without compromising its mission. A sustainable business model helps the startup to create a compelling proposition for investors, deliver attractive returns to stakeholders, and generate ongoing funds to reinvest back into the business. By doing so, the startup can ensure its long-term success and impact.

Partnering for purpose

Once the business has taken steps to progress their offering, strategic partnerships can be a powerful growth strategy. By working with more established businesses to run pilot programmes, startups can validate their offering and gain valuable insights into market fit and customer demand.

Strategic partnerships can facilitate a real-world testing ground, helping startups to validate and refine their offering, and providing a compelling proof of concept for future investors and strategic partners.

Done right, these partners can also become powerful advocates for the startup, helping to further amplify the mission.

Driving scalable impact

Purpose-led startups are well-positioned to bring about breakthrough solutions to some of the world's biggest problems. Led by creative thinkers and unencumbered by bureaucracy and legacy constraints, these startups can bring about real-world change.

To achieve this, these disruptors must prioritise alliances with non-traditional investors and partners who share their world view. By tapping into these alternative funding channels, startups can access a more agile approach to investment, helping them to foster even greater innovation and create lasting, scalable impact.