Impact start-ups defying the ‘tech wreck’: Giant Leap

Women-led businesses and start-ups tackling climate change are outperforming their counterparts, according to new research.

Women-led businesses and start-ups tackling climate and sustainability issues are outperforming their counterparts and proving more resilient during the ongoing ‘tech wreck’, according to investment fund Giant Leap, which says nearly a quarter of all venture capital deals completed in Australia in 2022 funded impact companies.

Impact start-ups are defined by Giant Leap as a company that has a tangible environmental or societal benefit embedded in its business model, and the Impact Startups Benchmark Report, released on Wednesday, found that Australia is punching above its weight when it comes to funding impact start-ups.

Around 22 per cent of all venture deals completed in Australia in 2022 funded impact companies, compared to just 8 per cent in the US and 18 per cent in Europe, the report found.

“Impact start-ups have proven to be extremely resilient during downturns, despite operating in sectors that can be affected by economic fluctuations,” Giant Leap managing partner Will Richardson said in an interview.

“Their deep sense of purpose and focus on critical social and environmental issues give them a unique advantage in weathering economic storms.”

Impact companies often draw a higher caliber employee than their counterparts because they have a cause baked into their revenue model, he said, and typically win support from their customer base regardless of market conditions for the same reason.

Australia is ranked by Thomson Reuters Foundation as the second-best country in the world to be a social entrepreneur, behind Canada.

HEX CEO Jeanette Cheah. Picture: Supplied

Founded in 2016 by The Impact Investment Group, Giant Leap describes itself as the nation’s first venture capital fund that is 100 per cent dedicated to investing in impact start-ups, with portfolio companies including Hex, Seer Medical, Swoop Aero and Who Gives a Crap. The fund’s portfolio currently consists of 55 per cent women-led companies, with a target to reach 60 per cent representation with future deals.

It’s in the midst of closing its $50m second fund, Giant Leap II, which was first flagged by The Australian.

“As impact companies often operate in essential and growing sectors, there is ongoing demand for their products as they are typically delivering solutions which are both more effective and cheaper than the incumbents,” Mr Richardson said.

“Our portfolio companies showed resilience in the face of the Covid-19 pandemic off the back of these factors. While circumstances are different with the current economic stressors, we’re confident that the sector is well positioned to weather the challenges ahead and become stronger for it.”

More work needs to be done to encourage start-up founders from under-represented backgrounds, according to Mr Richardson.

“Given our current data, we believe that further work here will also lead to the creation of more impact start-ups,” he said.

“Also, despite the headwinds facing the start-up ecosystem this year, we’re confident that impact start-ups will not only continue to grow, but will emerge from this period stronger than ever before. Many are addressing fundamental issues in society and the environment that will exist well beyond this downturn.”