Fundraising during a downturn: 3 hidden benefits for impact founders

2023 has been a bumpy ride for the global economy. Soaring inflation rates, geopolitical turbulence and cautious spending activity caused a downturn not seen for decades.

Unsurprisingly, these market conditions have had a direct influence on investor activity. Global capital intake for investors dropped by $200 billion between 2021 and 2022. But it seems that impact investment activity is proving to be more resilient.

Growing consumer demand for sustainable products and services coupled with the ability to drive system change through innovation means that impact startups and organizations have the chance to secure funding and support despite the economic downturn.

Here are three reasons why the current climate provides favorable conditions for founders of impact ventures.

Room for impact at all-time high

Regrettably, the current economic downturn is having a major impact on individuals and causing the gap between the haves and have-notes to widen further.

But this means that impact organizations using tech for good can deliver even more impact with their solutions. For example, Jack Griffin was in high school when he established the all-virtual nonprofit FoodFinder during a similar downturn in 2013. A decade later, his impact venture has become the largest data bank for food assistance and has connected 2.3 million US families in need to meals.

And the economic crisis has also left many governments and social support initiatives struggling to make ends meet. Impact ventures that have innovative solutions that support public services are therefore a highly attractive prospect. This could include AI-powered platforms that help people access medical care without having to visit a doctor or software that helps governments become more efficient and reduce overall running costs.

During times of need, solutions from impact ventures are likely to generate even more reach at a faster pace making them highly attractive prospects for impact investors.

More support for fundraising

Support for impact startups has been growing for years which has given rise to more accelerators and mentor support that specifically look to support the growth of worthy ideas. For example, Y Combinator has been including a few nonprofits in each startup batch since 2013.

Meanwhile San Francisco-based accelerator Fast Forward has scaled significantly in the last decade by focusing exclusively on tech nonprofits. The founding team sees this as a key way to guide the development of technology towards causes that work for the greater good.

Another example can be found with MassChallenge, an accelerator program supporting high-impact, high-potential startups since 2009. Today the incubator includes a mix of both nonprofits and for-profits, but the focus on delivering impact remains.

Crowdsourcing and donors

Finally, impact startups are likely to have an easier time tapping into crowdsourcing networks and donors. For one, there are a range of new solutions on the market that help founders raise funds within the community. This includes platforms like GoodBox, which recently raised £9 million to support the global for good sector by using technology to better connect donors with the causes they care about.

In addition, during a recession, many people are keen to support causes and do what they can to help. But it’s advisable to give donors flexible giving options that allow donors to adjust and revise the amount they donate using digital payment technology.

The need for impact startups in 2024

During a recession, impact startups play an even more important role. Their projects and solutions can help address key challenges and provide access to everything from healthcare to education at a time when public services are stretched.

For this reason, startups may be able to find favorable conditions with impact investors, accelerators and donors during the economic downturn.