I wrote this a while ago but never posted it for some reason. Aza Raskin’s tweet and the shortÂ discussion it created got me thinking. I’ve always had a hunch that startups are a very efficient way of achieving change but I realise that I probably don’t have the evidence to prove it yet.
There are a few different ways to think about capital efficiency. The first is to ask if you have a certain amount of capital (say Â£1 million) what’s the best way of deploying it? You could measure that based on direct return on investment but there are also lots of ways of measuring that, especially when you’re talking about changing the world. There’s a mini industry of organisations with their own ways of measuring SROI (Social Return on Investment). Even Bono has got in on the act saying that ‘change the world’ efforts should be driven by data.
There’s a wider question though, beyond any individual founder, investor or startup. Does money going into a startup ecosystem (say Â£1 billion) give a return? This would be a question of combining all the investment that goes into the different stages of startups (including the money lost on startups that fold) as well as looking at the money made or lost for the Government through taxes or tax breaks. Then you’d have to look at what problems had been solved as a result.
There are no simple answers but it’s worth us setting up some experiments to test the impact of different approaches.
- The purpose of a startup is not “success” (chrisyeh.blogspot.com)
- The switch from doing jobs to starting startups: will we even notice? (iijiij.com)