⦿ INSIGHTS

COVID-19 accelerated responsibility among investors & had an impact on mission-driven founders

Denmark is in a unique position to become one of the largest impact startup hubs in Europe. The responsibility of investors, beyond financial returns, is being taken more seriously following the corona crisis and criteria like ESG will soon become mandatory. Paired with a new generation of mission-driven founders, who are becoming more selective about what investors they will allow onto their cap table, we see the responsibility movement positively accelerating.
COVID-19 accelerated responsibility among investors & had an impact on mission-driven founders
WRITTEN BY
Sara Rywe
Investor
WRITTEN BY

Infamously condemned as the year of the pandemic, 2020 will more positively be remembered as the year investors finally started to take responsibility beyond just financial returns. Responsible founders, those who actively consider the environmental and social impact of their business decisions, are being favored by investors, and thus sustainable investments have accelerated, nearly doubling between Q3 and Q4 of last year. If specifically looking at venture capital and the Nordic region, investments into impact startups skyrocketed to €1.5B and €1.6B respectively in 2019 and 2020, relative to €498m in 2018.

The recent exponential increase in sustainable investments is not a coincidence. In times of uncertainty, investors are naturally drawn to more resilient investments, and multiple studies suggest that responsible companies with a strong ESG presence deliver better returns in the long-run, and during uncertain times. 

The COVID-19 crisis also acted as a chilling, albeit important, reminder to many investors that one unpredictable event can have an extreme impact - whether positive or negative - on a company. The pandemic managed to destroy some industries, like aerospace and retail, overnight, while other sectors, like digital health and online communication, thrived. The eye-opening situation of the pandemic made us seriously evaluate other potential catastrophes that will hit us in the future - both social and environmental - unless we take precautionary actions. 

Yet, the pandemic isn’t the only reason investors have started to take on more responsibility. We have an underlying driver by the new generation of millennials and Generation Z, demanding accountability. As customers, but also as founders, managers, and employees. 

It’s not a new phenomenon, but one that COVID-19 heightened. People stayed home and reassessed their needs, choices, priorities, and, yes, their responsibilities. For example, the online grocery market skyrocketed in 2020, but it also needed to answer to the increased pressure of providing sustainable packaging, organic ingredients, and locally produced products. I guess it took a critical health event to make us reflect on how fragile we, our neighbors, and the world, really are.

Thankfully, it’s this generation that is knocking on our door: starting companies with responsibility at its core and looking for investment to fund it. To them, success is defined as making a positive impact on people and the world while simultaneously building a highly-valued business and, as an investor, I believe we have a moral obligation to support them.

In Denmark, we’re in a unique position to become one of the largest impact startup hubs in Europe, with companies like Vestas and Novo Nordisk already solving some of the world's most pressing challenges, and a thriving ecosystem of impact accelerators, impact-aware investors, and purpose-driven founders, following suit.

On top of that, we’re starting to see Nordic impact startups reaching unicorn status (valued at over $1b), like Kry/Livi and Northvolt, and many up and coming ones emerging from Denmark, like for example Corti who’s saving lives through the use of AI.

I want to invest in early-stage technology companies that are truly transforming industries: those that are coming up with solutions to some of the largest global issues we’re facing today, like the aging population and the climate crisis, but also less talked about issues such as online bullying and unfair real-estate markets. And even though the product may not solve a societal challenge, the way founders run their businesses may actually do so, for example, continuously working on building a positive company culture: where diversity & inclusion are not buzzwords and governance policies aren’t simply a checkmark. 

It’s this combination of a mission-driven young generation and the world-shaking events of 2020 that acted as a catalyst for the responsibility movement among investors. Following more than 20 years of data pointing us in the right direction, many investors, unfortunately, needed a pandemic to take it seriously and start acting.

I expect that investment evaluation criteria such as ESG will soon be mandatory for all funds and the majority of newly established funds will be dedicated impact funds.

Moreover, the majority of all startups built in the Nordics in the coming years will be very thoughtful about their impact on society and will be selective about what investors they will allow onto their cap table. Founders today have a great amount of power and I want to encourage you, as a founder, to put pressure on your investors and ensure that you properly evaluate if their values are aligned with yours before entering into a partnership. 

As for the investors, I want us, in the next meeting with a fund or a company you’re contemplating investing in, to ask: “how does your focus on positive impact support your financial success?” rather than “what’s the trade-off between positive impact and financial success?”.

Who knows, you might get an unexpected answer and win a deal you otherwise would have lost. 

More about the author(s)
Sara Rywe
Investor

Sara oversees our investments in Scandinavia - focusing primarily on Sweden, Norway, and Denmark - and has a particular interest in the future of work, FinTech, and the future of food. Her strong interest in social impact (and diversity!) is something that she continues to focus on here at byFounders and she is the mastermind behind our ‘impact-aware’ strategy.

More about the author(s)
No items found.
External
November 8, 2021

Steal, provoke & flatter: How to get media coverage through thought-leadership

Unless you have a celebrity founder, or a flair for spectacular press stunts, getting press coverage for your startup is notoriously hard. Very few have a revolutionary product to carry them through, and the reality is that 99% of startups aren’t inherently newsworthy.
External
July 28, 2021

COVID-19 accelerated responsibility among investors & had an impact on mission-driven founders

Denmark is in a unique position to become one of the largest impact startup hubs in Europe. The responsibility of investors, beyond financial returns, is being taken more seriously following the corona crisis and criteria like ESG will soon become mandatory. Paired with a new generation of mission-driven founders, who are becoming more selective about what investors they will allow onto their cap table, we see the responsibility movement positively accelerating.
External
June 1, 2021

The Do's & Don'ts of Running a Remote-first Startup

The pandemic has showed everyone one thing: remote work is here to stay. In this article, Tony Beltramelli, CEO & co-founder of Uizard.io, shares what he's learned from running a remote-first company for the past three years.
External
March 23, 2021

Introducing an 8th T to Our Updated Investment Framework

Since day one, we have made efforts to take responsibility beyond what’s expected of a VC. We are now making these efforts more explicit by gearing up to launch a holistically impact-aware strategy. Here's how we are taking the next step to building the VC fund of Tomorrow.
External
March 4, 2021

Why Hotels Should Ditch Their ‘Bourgeois’ Non-Digital Solutions

The future of hospitality is convenience driven and touch-free. In response, the hotel industry needs to speed up its digital transformation, says Nikolai Kronborg, chief commercial officer of mobile hospitality app, AeroGuest.
External
September 16, 2019

There's a Cap Table Problem in the Nordics

Johan Brand notices a concerning trend: many early-stage founders give up too much ownership of their business too early. How to think about your cap table?
External
February 19, 2019

Thinking Strategically About Startup Marketing

Robin Daniels (Matterport, Salesforce, Box, LinkedIn, WeWork) shares some key marketing lessons you should keep in mind as you grow your own company.

Delete me when done