Apple buys UK fintech start-up Credit Kudos
7 March 22
7 March 22
When thinking about ESG, it’s common to think of large institutions with teams of people applying ESG filters to investments. It’s not common to associate ESG with young, often small, startups that are focused on trying to get their first sales through the door and ensure they have enough cash to keep the lights on. Like Maslow’s Hierarchy of Needs, young companies have their own hierarchy of needs, and one might think that ESG matters are pretty low down this hierarchy.
Triple Point Ventures recently surveyed its portfolio companies and a number of other startups, and took the opportunity to ask founders about the importance of ESG matters to their companies. We did so not only because we were interested to know the answer, but also because, as a signatory to the UN PRI, we are committed to ESG integration throughout our business and our investments. We were pleasantly surprised by the results.
A whopping 67% of early stage companies answered that ESG matters were either ‘important’ or ‘very important’ to them. A further 25% responded that ESG matters were ‘somewhat important’. That’s 92.5% of the companies surveyed that, in one way or the other, understand that this subject warrants their attention, despite their size.
Why do early stage companies feel this way? There are several reasons, but three stand out: first, many are trying to sell their products and services into larger businesses, which are now applying ESG filters to all their suppliers, regardless of size. These enterprise companies prefer suppliers that are taking measures to reduce their carbon footprint and increase diversity, for example, over companies that are not. Early stage companies that are taking ESG seriously are therefore automatically getting a head start when pitching against competitors. Second, it’s easier to put the relevant measures in place when the company is small rather than retrofitting these when the company has grown. And third, in the intensely competitive market for talent, companies are listening to the priorities of their employees who are increasingly conscious about the impact their business has on society around it.
What’s the conclusion? If you are a startup focused on fast growth and talent retention, including ESG considerations in your planning at an early stage puts you in good stead for both sales and hiring. In due course, it could also make it easier to raise money from investors while gaining a head start over your competitors; a good outcome all round
Triple Point is a signatory to the UN PRI and takes ESG considerations into account in all its investment strategies.