Introducing Conscious Scaling
We are all acutely aware that the growth of the tech giants of the 21st century has had both significantly positive, and seriously negative, consequences for society. Tech remains the most trusted of any industry, yet tech companies face questions on everything from workers’ rights to enabling the manipulation of democracy. In the face of global backlash, tech is waking up to the fact that it must answer not only to shareholders, but to the public.
As venture capitalists, our business model depends on finding, investing in and accelerating the growth of early-stage companies that have the potential to become the next generation of enduring global champions. At scale, their products and services could have a similarly large impact on society, often in ways that were not foreseen during the formative early years.
Of course we can’t see the future, but we can and we should imagine what might happen. Just as both founders and investors challenge themselves to imagine what might happen on the upside if all the stars align, we must challenge ourselves to imagine how technology can negatively impact the welfare of all stakeholders – including employees, suppliers, customers, citizens, and the planet. It is in part because investors have not adequately considered groups other than shareholders that capitalism’s ability to increase the prosperity of all is being called into question. We must invest in companies that return profits but also create returns for society. If not, we’re setting capitalism up to fail.
The data doesn’t lie. Customers are demanding that companies think about social and environmental impacts – a third of global consumers are now buying from brands that are doing social or environmental good. 71% of European consumers consider living an ethical or sustainable lifestyle to be important in creating a feeling of wellbeing.
Talent – the most important ingredient of successful tech companies – is also asking companies to be more thoughtful. 28% of tech workers in the UK have seen decisions made about technology that they felt could have negative consequences for people or society. 18% left their jobs as a result.
Other studies and statistics show that consideration of social and environmental factors equal better performance. It’s clear that profit and purpose are not mutually exclusive, they’re mutually reinforcing.
That’s why Atomico has developed Conscious Scaling, a framework for dialogue between founders and investors/the board focused on identifying and mitigating long-term risks associated with a business model or technology’s impact on society, the environment, and all stakeholders. We believe that companies that fail to successfully mitigate these risks will not realise their full potential.
We have been running sessions with founders we have partnered with for the last nine months. The founders we’ve worked with want to learn from the negative consequences of the previous generation of tech leaders, and have embraced the opportunity to make time to be challenged on the potential risks of their future success. One said that doing this session sent “a very strong signal to the wider team that our lead investor is indeed supportive and behind our mission.”
We’ve discovered that many companies have concerns about risks in similar areas, such as the misuse of technology, data security, and how technology can potentially dehumanise employees or customers. The discussions have also led to decisions to adopt non-commercial KPIs, to track misuse of platforms, build policies for ethical pricing, and to consider whether or not they would work with customers such as big tobacco or the defense industry. Teams also have spoken about the importance of having a strong value set to underpin those decisions. We check in every six months and board members can hold founders accountable at board meetings.
Given our position of influence as board members, venture capitalists are well-placed to help companies consider those factors when they are small and in their formative years. Waiting until a company has 500 employees on 3 continents is too late – at that point culture and operating principles are set and much harder to unwind. We also have a responsibility as stewards of our investors’ capital, board members, and members of society to ensure we are doing everything we can to set these companies up for long-term success and avoid negative external consequences.
We believe we can help accelerate meaningful change and progress in our industry by making the tools that we use available to the entire community. We have open-sourced a Conscious Scaling framework here.
Please share your feedback with us. We know we do not have all the answers. We hope to inspire some new thinking and build advocacy among our investing peers to ask these hard questions.
We hope this is a step in the right direction to make future technology companies stronger and better for society; we believe that companies which are more mindful of long-term risks today will be more successful tomorrow.