5 Reasons Purpose-Driven Startups Will Shine in 2020

Some big corporations have grown a conscience. At least, that’s the message from the Business Roundtable, which a few months ago announced that from now on, its members will focus not solely on lining their shareholders’ pockets. They have also said that they will work on investing in employees, dealing fairly with suppliers, and working to protect the environment.

Entrepreneurs are bringing in purpose-driven leadership.

Those are laudable goals — but the goals are also the ones many smaller companies and startups are already striving toward with remarkable success. As the new fiscal year gets underway, it’s worth taking a moment to think about some of the ways in which entrepreneurs are bringing purpose-driven leadership into the mainstream.

Here are five key trends that will drive American startups forward — and make our world a better place — over the next 12 months:

1. The (continuing) rise of the Millennials.

More than a quarter of Millennials are already in management roles, and two-thirds aim to be in positions of leadership a decade from now. That trend will be even more striking in startups: Millennials might not be starting businesses quite as often as their parents, but they’re grabbing key positions in new businesses, ensuring they’re positioned to reshape our business culture for years to come. From Komal Ahmad, whose company’s goal is to end hunger, to Luke Droulez, an early hire who turned Parachute Home into an eight-figure success story, young people are emerging as powerful leaders and strategic thinkers in their own right.

Why does this matter? Well, we all know that young workers bring different perspectives, and that’s doubly true of young bosses. Millennials are more socially conscious, increasingly skeptical of old ways of doing business, and strongly purpose-driven when compared to past generations. Research suggests they’re hanging on to those guiding principles as they grow into leadership roles.

2. Cashing in on diversity.

America is the world’s top country for female entrepreneurship, but women, POC, and other minority entrepreneurs still aren’t getting the support or attention they need from investors. As things stand, female-owned startups receive just 2% of all investor capital — even though women-founded companies generate twice the revenue per dollar of investment as companies founded by men.

There’s a growing realization that by glossing over the opportunities brought forth by women and minorities, investors are leaving money on the table. That will take time to correct, but there are some promising signs of change. The number of black female founders has doubled since 2016, for instance, and female-founded unicorns are now growing faster than ever before.

There’s plenty of evidence that diverse life experiences help leaders unlock new ways of doing business, and find more creative solutions to the problems they face. It’s almost inevitable that the boom in women- and POC-run companies will change the business community, and society as a whole, for the better.

3. A better approach to AI.

AI and automation are finally starting to move into the business mainstream. A recent Deloitte survey found that 68% of companies are already automating tasks once done by humans, reaping enormous efficiency gains but also risking their relationships with both employees and customers. Everyone likes affordable, smart, always-on services, but they quickly change their tune when efficiency evolves into losing their jobs to a machine.

That tension creates opportunities for new businesses, which are well-placed to embrace machine learning and automation without alienating an existing customer base. The best startups will find ways to deploy AI in the service of a bigger vision, unlocking new strategic gains while injecting real soul and purpose — and a sense of humanity and meaning —  into their brands and business models.

4. Learning from the gig economy.

The gig economy was supposed to turn us all into entrepreneurs — but in fact, it has left many of us overworked and stressed out as we bounce from one stopgap to another. Hardly surprising, then, that the tightening labor market has left many freelancers clamoring for better working conditions and looking for better side-hustles. This creates an opening for startups capable of finding a middle ground: giving employees the flexibility and independence they crave but also treating them like human beings.

Over the next year, we’ll see more startups thinking creatively about how to staff up in ways that align with their broader purpose and keep their employees happy along the way. There’s a middle ground between the gig economy and “hustle culture,” but getting there will require more than just foosball tables and bring-your-dog-to-work days – it will demand a genuine rethinking of the meaning of workplace satisfaction in order to create purpose-oriented businesses that employees are proud to be a part of.

5. Location, location, location? Not any more.

Small businesses used to live or die depending on the locations they staked out and the foot-traffic they could count on, but these days many startups chiefly exist online, and it doesn’t really matter where they’re headquartered or even where their leaders and employees are based. That brings both opportunities and challenges, and, once again, it’s a trend from which purpose-driven businesses are poised to benefit.

After all, as companies come to be less defined by place and by face-to-face interactions, they’ll have to rely on less tangible factors like identity, personality, and brand to make an impression and build customer loyalty.

Entrepreneurs are well-placed to create the flexible, always-on companies that consumers demand — and founders who put purpose first will find it easier to build memorable brands that their customers are drawn back to and proud to associate themselves with.

Putting purpose first in 2020.

As the Business Roundtable’s statement shows, we live in turbulent times in which even the biggest companies are seeking ways to bake purpose into their brands. There’s plenty to be gained along the way: purpose-driven companies are outperforming the financial markets by 42%, and that trend won’t change in 2020.

But we also live in a world in which consumers are sharper than ever, and increasingly wary of insincere “purpose washing” by major corporations, so clumsy attempts to burnish a company’s brand can easily backfire.

The good news is that while changing an established company’s corporate culture is difficult, startups are far nimbler, and it’s possible to inject real vision into their DNA from the get-go. That will give small businesses and startups a critical advantage over the next 12 months.

As long as a company and the entrepreneurs and founders are brave and creative enough to aim high, their startups will develop a real and meaningful vision, and put purpose at the center of their strategy for growth.

The post 5 Reasons Purpose-Driven Startups Will Shine in 2020 appeared first on ReadWrite.

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Greg Shepard

Greg Shepard is a serial angel investor and startup growth consultant who has spearheaded 12-15 company exits throughout his career. His former company, AffiliateTraction, was acquired by eBay Enterprise Marketing Solutions in January 2016 as a part of a cross-brand deal totaling $985M.

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