Designing an Impact Start-Up

Most people want to do meaningful work and often contribute positively by working in a non-profit organization, lobbying organization, trade group, or government agency. For the most part, working for such organizations, you can make a difference in the world.

However, to make a difference in any of these roles starts with understanding what fuels the meaningful change you seek. For example, climate change brought on by fossil fuel use, mining, and meat production, is driven primarily by us, as consumers, paying into the market to broaden, deepen and perpetuate the longevity of these entrenched industries.

While policymakers, advocates and activists play a vital role, they may have a limited impact on the one thing that can disrupt a foundational industry: moving money.

Until we can move money away from fossil fuels, mining, and meat production, climate change and other social harms will continue to bear down upon us. This is where impact-focused start-ups can play a significant role in directing our economy toward a more sustainable future.

In the last 50 years, start-up companies have made considerable progress toward disrupting energy production with solar, wind, and other alternative energy solutions. The combination of policy changes and the availability of alternative energy sources has made an impact, with roughly 20% of production now coming from renewable sources. Yet, global use of fossil fuels has climbed, largely due to increasing demand, and is expected to keep growing by over 5% per year through 2028. Likewise, meat production has steadily risen by at least 3% CAGR since 2018, and is expected to rise to 6% CAGR in some regions through 2028. Unlike alternative energy, meat alternatives clock in at just 0.02% of global meat production by volume, which doesn’t even compare with the roughly 20% of meat wasted by industry and consumers annually.

The reason for this industrial growth is obvious: people still pay for these goods and services and companies continue to make money. While lobbying for environmental laws, and activism can make a dent in the future of these industries, they don’t provide the fundamental goods or services to move money from that which is causing harm to people, animals and the planet to those goods or services which avoid, mitigate or correct such harms. And finally, the bigger the industry, such as energy and meat production, the harder it is to disrupt the status quo.

So how does an entrepreneur design and build a company that disrupts a major entrenched industry? While there will never be a single recipe, I offer a few pieces of wisdom that may be helpful:

1. Design for product-market-fit for the scale of the problem you are seeking to disrupt and then actually build your company for the scale of that problem. Entrepreneurs are advised to find product-market fit, which is a tall order under the best of circumstances. But product-market-fit for a small company disrupting, for example, a local natural foods channel is very different from product-market-fit for a product or service disrupting industrial-scale chicken production. When I started Seattle Food Tech (the corporate name of Rebellyous Foods), I knew I wanted to work in the industrial meat industry, not the alternative meat industry. While I admired the foundational work of long-standing brands like Kellogg and Tofurky to bring about good replacement products, they had nothing on the technological sophistication of the highly automated, efficient and massive animal meat industry. I decided to start Rebellyous Foods to design and deploy transitional food processing equipment to one day convert our existing meat processing facilities into plant-based meat production facilities. While other companies in our industry were using marketing to promote products and build a large following on social media, at Rebellyous we intentionally passed on extensive consumer marketing momentum to instead direct venture capital to develop technology that substantially lowers the cost of production and increases the quality-at-scale of plant-based meat. In this way, I designed the company to strike at the heart of the high-cost, low-availability problems of plant-based meat. In contrast, had we spent our VC dollars primarily on marketing, we’d have little impact on these problems holding back the alt-meat industry today.

2. Get a running start on the market even if success comes in small wins. Moving money away from an entrenched industry is first about market penetration and demonstration. At Y Combinator, the mantra to first get into the market is to do things that don’t scale just to get started. This is good advice, and should not be confused with building a company for scale vs. entering the market with actions that don’t scale. Once you’ve got traction in the market, you’ve also got credibility and you can switch to market growth strategies that do scale later. Another important reason to get into the market early is to benefit from learning by doing and iterating around a solution that does scale. The Silicon Valley mantra of move fast and break things is an attempt to teach entrepreneurs this lesson. In the food industry, and any other industry where people’s and animals’ lives are on the line, I prefer the saying move fast and learn things or move at the speed of a start-up. But the most important reason to get a running start in the market is that it opens doors to work with those already in the industry. Traction leads to partnerships and partnerships lead to progress, at least some of the time.

3. When challenging the status quo, design for profitability, not perpetual investment. For decades the model for venture capital-funded companies was to grow fast at all costs and take a loss well into your second decade as long as revenues keep rising. Investors get returns when company stock changes hands. This model may have panned out in the world of software companies where products exist in the digital world, but tangible goods companies challenging the dominance of meat production, extractive fishing, destructive mining, and fossil fuel production know that allies come and go very quickly. Obviously, when investor activity slows, the risk of a company losing literally everything in a matter of months to weeks is often the outcome unless the company is profitable. Most importantly, if the path to profitability is based on scale and growth alone, a company producing tangible goods may possibly get to scale in a small market, but this strategy is much less likely to provide the longevity to allow a company to get to scale in markets on the order of meat production or energy generation. Also, designing for profitability and longevity to challenge the status quo is an upfront choice, not an outcome. These shouldn’t be confused; otherwise, it might be too late in the company’s life to choose profitability and longevity.

4. Design technology that addresses weaknesses in the prevailing industry. Big, entrenched, large, foundational industries come with big problems, which are not usually the problems that are seen as social harms. For example, fossil fuel production is a vulnerable industry because there is a limited supply (see peak oil) and production gets more expensive as more resources are exhausted. Renewable sources of energy should be fundamentally more attractive to investors than better extraction technology if you can apply the lessons mentioned above. Likewise, industrial chicken production has been hit hard by highly pathogenic bird flu with over 82M birds in the US alone sickened leading to the killing of flocks of a quarter million birds or more at a time. And, in 2018 chicken production was determined to have the highest rate of worker injuries among US-based jobs costing millions in workers comp. Impact start-ups that are designed to directly address these serious problems, instead of just mitigate them, are likely to compete more realistically in the future economy and bypass losses from such industry weakness. For example, solutions such as raising free-range chickens do little to prevent bird flu and the dangerous conditions for human workers in slaughterhouses and processing facilities are unchanged. While some incremental solutions can be impactful, entrepreneurs and investors get more bang for their buck tackling the big problems head on instead of dancing around the periphery of the impact solution company design space.

5. For underrepresented founders/operators, always ask for a seat at the table. Being a female founder or founder from an underrepresented group often means you aren’t seen as the go-to solution provider for your industry. Regardless of whether this happens due to intentional lack of inclusion, active discrimination, or just unconscious bias, the remedy for such exclusion is the same. You must always ask for a seat at the table. Apply for grants, pitch events, and conference speaking engagements. Invest in public relations, weigh in on topics in roundtables, and share your insights/solutions on industry platforms. Most importantly, ask for the opportunity to negotiate on contracts. We’ve all experienced seeing the same founders or executives at our industry speaking engagements, often over and over again. It can feel frustrating to know you have as good or better solutions than another company, but don’t get the chance to share. But decisions are made by those who show up. So find a way to show up and be an agile ‘political animal’ to get a seat at the table and be a player in the game.

There is very little that can be done to make an impact start-up easy, except maybe to skip the “impact” part. But for those of us who want to participate in, and do the hard work necessary to make a change in entrenched industries, designing the company and making each of the consequential decisions we are faced with specifically and intentionally could be the difference between risking investor funds and entrepreneurs’ lives for lasting change versus a flash in a the pan that is quickly lost to the history books.

Christie Lagally is the founder and CEO of Rebellyous Foods, a plant-based meat manufacturing and production technology company based in Seattle, Wash.