3 signs that a startup’s ‘impact’ is just a marketing ploy for investors

Earlier this year, a report from the EU showed that 42% of companies exaggerate their level of sustainability. This “greenwashing” is now so prevalent that one organization has launched a platform to calculate businesses’ true environmental impact and avoid misleading marketing.

Today’s global impact investment market is valued at $715 billion and growing. But as VCs, angels and celebrities rush to put their dollars in businesses that do good, they’re not doing sufficient due diligence.

For some founders, tying themselves to impact is a way to play into trends and get noticed by investors. It’s why some people identify themselves as an “impactpreneur.”

There’s a fine line between impact and pushing a narrative for marketing purposes, and misjudging a startup’s genuineness can cost investors money as well as their reputation. During my time working with thousands of startups, I’ve picked up on these three signs that a startup is using impact to gain traction on the public stage — not make real change.

They aren’t recording and tracking impact metrics

If a company isn’t measuring the impact they claim to focus on, that’s a red flag. Startups that are really striving for impact will have a clear definition of what their goals are, how they’re getting there and what metrics are monitored along the way.

At Founder Institute, we have defined several “impact KPIs” that help startups track their incremental impact steps.

For example, a women-led accelerator program that hopes to increase the number of successful female founders could have metrics around the number of female attendees per month and year, the number of attendees that launch a business and how much funding those businesses received. No impact is created overnight, but by breaking the journey into granular chunks, businesses demonstrate that they’re committed to building and refining their path to impact.

Tracking metrics also forces companies to be fully accountable for the impact they advertise. The companies that publish their metrics even when they aren’t positive tend to conduct deep dives into what went wrong and put in place plans to remedy the situation.

A great example is Duke Energy, which shared a report acknowledging that it fell short on team diversity goals last year. To improve the metrics, the company hired a new chief diversity and inclusion officer and committed $4 million to advocate for equality in the communities it serves.

We investors also have to ensure that metrics are present throughout a company — that startups practice what they preach. If a business has stated that it wants to improve access to education for more people, the founder should be able to provide metrics around in-house training programs, course offerings, development plans and promotions.

If they don’t have this information, that could be a sign that the company’s impact only targets lateral goals and isn’t built into internal operations.

The CMO is responsible for the impact strategy

Impact should ultimately fall on the shoulders of the CEO. It may sound obvious, but if the chief marketing officer is the go-to person for conversations and reporting about impact, that’s a problem.

When impact exists solely in the marketing realm, it can be easy for people to have accidental or convenient impact — where they retrospectively look at data and celebrate successes that weren’t the direct result of an impact strategy. For example: A startup claims that it reduced its carbon footprint by 10% in 2020, when really the drop was due to operations being shut down during the pandemic.

Likewise, if a startup’s impact objectives seem too good to be true, they usually are. Marketing departments go big when they want to make a splash (see: Theranos), but with impact, companies need to be acting at the ground level before they shoot for the moon.

Take ExxonMobil, which advertised its experimental algae biofuels as a means to reduce transport emissions. Consumers were quick to point out that the company had made no pledge to net zero carbon emissions before shooting for “sexier” impact alternatives.

They’re about projections, not progress

It’s natural that when founders are fundraising, they emphasize their most disruptive edge. That they can end poverty, close inequality gaps or reduce the effects of climate change. These promises can raise investor eyebrows, but they have to be rooted in the how.

Every investor knows the feeling of glossing over the financial projections in a startup pitch deck. It’s not so much the figures that matter, but the process behind them. It’s exactly the same with impact.

If a startup’s whole identity is the future numbers of their impact goals, investors should be wary. The methodology is far more telling than the statistics.

For example, GSK has announced ambitious plans to be net zero carbon by 2030, but its breakdown of key activities like switching to renewable electricity, electric cars and green chemistry is what confirms that the company is actually moving toward that impact. If the company doesn’t reach total net zero status, the intent is still clearly there, and progress will be made — but perhaps at a slower pace.

If Theranos has taught us anything, it’s that companies are wise to the allure of impact when raising funds. For investors, being able to distinguish real impact from marketing ploys not only protects them, it helps their capital go to places that can really make a difference.

Zeit secures $2M in seed funding for its stroke-detecting wearable

Zeit Medical, which makes an early warning system for strokes during sleep, has raised $2 million in a seed round just after leaving Y Combinator’s Summer 2021 cohort. The company’s work suggests the brain-monitoring headband could save lives by alerting people to possible strokes hours before they might otherwise be noticed, and the new funding will help propel them toward commercial availability.

The company’s device is a soft headband with a lightweight electroencephalogram (EEG) in it. It works with a smartphone app to analyze brain activity and, using a machine learning model trained by human experts, watch for signs of an impending stroke.

I wrote up Zeit’s system in detail in August, and little has changed since then, though co-founder and CEO (and now Ferolyn fellow) Orestis Vardoulis noted that a usage study found that people wore the headband on 90% of nights, including people using CPAP machines, and there were few complaints about fit or comfort. Consistent usage is important if the goal of mitigating the effect of strokes is to be achieved, and an uncomfortable or bulky headband would certainly affect that negatively.

“Besides pushing hard on getting the product finalized and ready to be tested in our upcoming studies, we have also been experimenting with different applications of our AI in the inpatient setting. Many intensive care unit patients require close ischemia monitoring,” Vardoulis said. Various conditions can potentially be warned of by the model Zeit has created that would otherwise need an expert or a dedicated system to diagnose. “We have approached several large national academic centers that monitor their subarachnoid hemorrhage patients with EEG to understand if this would be an acceptable application for our technology.”

Vardoulis said the stroke survivor community has been very interested in the device, and even on our coverage people in the comments noted how useful the device might be to them. For anyone wondering how they can get hold of a device, it may be a while — Zeit is charging toward FDA clearance and has received “Breakthrough designation,” a sort of fast track, but it may still be a year or two before it’s widely available.

That’s still a remarkably short lead time for a medical device, and investors clearly thought this was an opportunity for both impact and ROI.

The $2 million round was co-led by SeedtoB and Digilife, with participation from Y Combinator, Gaingels, Northsouth Ventures, Tamar Capital, Axial, Citta Capital, as well as angels Greg Badros, Theodore Rekatsinas and a few others in the medical world.

The money will be used, as you might expect, to continue and expand operations, building the team and funding the studies prerequisite to FDA consideration and approval. With luck, Zeit’s device could be standard issue as early as 2023 to anyone at risk of a stroke.

Google and Jio’s smartphone with custom Android OS for India launches November 4 for $87

Google and top Indian telecom network Jio Platforms said on Friday that their much-anticipated budget smartphone, JioPhone Next, will go on sale in the world’s second largest smartphone market on November 4 (coinciding with the big Indian festival of Diwali.) The firms said the JioPhone Next will cost 6,499 Indian rupees ($87), and can also be purchased in multiple instalments with an entry price as low as $27.

The smartphone runs Pragati OS, which is powered by an “extremely optimized” Android mobile operating system with a range of customized features such as Read Aloud and Translate Now that will work with any text on the phone screen, including web pages, apps, messages and even photos as well as support for 10 Indian languages.

“Among the many rich features of JioPhone Next, the one that has impressed me the most — and one that will empower common Indians the most and take their digital journeys to the next level — is its contribution to India’s linguistic integration. India’s unique strength is our linguistic diversity. Those Indians who might not be able to read content in English or in their language can get it translated, and even read out, in their own language on this smart device,” said Mukesh Ambani, Chairman and Managing Director of Reliance Industries, which operates Jio Platforms.

The two firms also revealed the specifications of the JioPhone Next. The smartphone features a 5.45-inch HD+ display with Corning Gorilla Glass 3 protection. It is powered by Qualcomm’s quad-core QM-215 chipset that clocks up to 1.3GHz, coupled with 2GB of RAM and 32GB internal storage, which is expandable. The dual-SIM capable JioPhone Next, which houses a 3,500 mAh battery, features a 13-megapixel rear camera with support for HDR and an 8-megapixel selfie sensor.

Google CEO Sundar Pichai interacts with students at IIT Kharagpur campus on January 5, 2017 in Kharagpur, India. His firm has grown extremely bullish in India in recent years. Last year, the company announced it will invest $10 billion in India over the course of next five to seven years. (Image credits: Getty Images)

The JioPhone Next is Google’s latest attempt at reaching the masses in developing markets. The Android-maker has launched several programs over the past decade including Android One to deliver budget smartphones with improved user experience. At an event in India in 2017, Google chief executive Sundar Pichai noted that many markets such as India need phones at a price point of $30 for mass adoption.

“The JioPhone Next is an affordable smartphone designed for India, inspired by the belief that everyone in India should benefit from the opportunities the internet creates. To build it, our teams had to work together to solve complex engineering and design challenges, and I’m excited to see how millions of people will use these devices to better their lives and communities,” he said in a statement Friday.

Analysts have said in recent months that the JioPhone Next could disrupt the Indian smartphone market — the world’s second largest — and help the telecom network, which has amassed over 400 million subscribers and last year raised over $20 billion from a range of marquee investors including Google and Facebook, further solidify its dominance in the country.

The JioPhone Next — which was originally scheduled to launch in the second week of September, but the two firms had to delay the sale citing global chip shortage — is aimed at helping roughly 300 million users in India who are still on a 2G network upgrade their gadget to access faster networks, Ambani said at an event earlier this year.

“I am delighted that Google and Jio teams have succeeded in bringing this breakthrough device to Indian consumers in time for the festival season, inspite of the current global supply chain challenges caused by the Covid pandemic. I have always been a firm believer in the power of the Digital Revolution to enrich, enable and empower the lives of 1.35 billion Indians. We have done it in the past with connectivity. Now we are enabling it again with a smartphone device,” he said in a statement Friday.