How much could you help the world by founding a new profitable business? Well, it depends on several factors, but there are at least two ways for-profit entrepreneurship could lead to large-scale impact. First, you could provide products and services that directly improve the world. Second, you could generate a lot of money to donate toward effective causes and pressing problems.
Our sense is that this could be a very promising route for some people, but certainly not for everyone. Because of the many demands of this path, personal fit may be an even more important factor here than it is for other careers. For-profit entrepreneurship also carries a high chance of failure, so having some comfort with risk is essential.
It addresses some of the most important considerations about this career, though we might not have looked into all of its relevant aspects, and we likely have some key uncertainties. It’s the result of our internal research.
What do we mean by for-profit entrepreneurship?
In this profile, we’re concerned with creating businesses that can generate large amounts of positive impact. Because of this, the for-profit ventures we primarily have in mind are those that can scale up to directly benefit large numbers of people, or that can generate large amounts of profit (or facilitate a lucrative “exit”). Typically – though not always – these will be high-growth startups, often with a strong focus on technology, as such companies tend to be particularly able to to scale up for global success compared to other kinds of for-profit enterprises.
As such, the advice in this profile might be less relevant for people who want to found other kinds of for-profit businesses, like small, family-run affairs, or independent brick-and-mortar stores. Though such enterprises are valuable, they probably won’t provide the platform needed to make this an impactful career path competitive with other promising career paths.
How promising is for-profit entrepreneurship?
Create a business that directly improves the world
By providing jobs, helping customers, and stimulating economic growth, many businesses have a positive impact on the world just by being successful. However, we think businesses can do a lot more than this. Through developing products and services deliberately optimized to improve the world and help their customers, some businesses can have an enormous direct impact on top of the generic impact successful for-profits can have. Getting the right product into the marketplace could produce the kind of impact many might not expect from companies, like saving lives, improving people’s health and quality of life, providing and improving education, and helping people to escape poverty.
This makes choosing the right product or service a really important decision if you pursue this path – in fact, it’s likely to be one of the largest determinants of your counterfactual impact. It might help to use a simple model when thinking about this: broadly speaking, the impact of a product is the average benefit each sale provides multiplied by the total number of sales. Using this model can help us to think about potential tradeoffs between how much a product or service helps people who use it, and how many people it might be able to reach. For example, developing a technology that significantly improves a few thousand peoples’ lives might offer a comparable impact to a product that reaches tens of millions of people but only makes them slightly better off.
Putting this calculation into practice is of course quite complicated – we don’t know exactly how much a product will help, and it’s even harder to know how many people your product will reach. This means it’s worth thinking about carefully and strategically before committing to a business idea. To get you started, here are a few product types that could be particularly promising. We don’t necessarily recommend these specific focus areas for your startup, but they’re examples of what can be achieved with an impactful for-profit venture.
- Beneficial software. There are lots of examples of helpful software out there. However, some software helps people vastly more than others by focusing on particularly important problems. A great example is Wave, a company that helps people in Africa without banks to send and receive money for minimal fees relative to rival service providers, saving customers about 70% in transaction costs relative to leading rivals. With over 6 million active users, Wave has likely saved millions of dollars for residents of one of the world’s poorest countries. Another example is MindEase, an app that helps to reduce anxiety and depression through evidence-based methods. The MindEase team plans to use profits from the app to distribute it freely to people in low-income countries.
- Medical technology. Advances in medical and biological technology could have a huge impact. For example, the vast majority of the most widely-used vaccines used in the Covid-19 pandemic were produced by private pharmaceutical companies as profitable ventures. Cumulatively, these vaccines have saved tens of millions of lives globally. New medical technologies might also be able to achieve huge amounts of impact, for example through applying AI to aid in diagnosis or in discovering new pharmaceuticals. Examples of promising medical technology startups include Alvea, a biotechnology company that develops flexible vaccine platforms to help combat future pandemics, as well as Sherlock Biosciences and Telis Bio.
- Alternative food products. Animal-derived food products like meat and dairy are often both carbon-heavy and suffering-intensive. Developing plant-based or cultivated alternatives could help reduce demand for these products. Consider Beyond Meat and Impossible Foods, two alternative protein companies whose products are now sold globally. Beyond has already sold tens of millions of plant-based burgers. Though many of these will likely have been sold to people who would have bought some other plant-based product instead, there’s some evidence alternative proteins do effectively detract from the sales of regular meat products, reducing potentially significant amounts of greenhouse gas emissions as well as animal suffering.
The 50 Breakthroughs Report gives a rundown of 50 prospective technologies that would most help the world meet the UN’s Sustainable Development Goals — an ambitious set of targets for global development. This could be one useful place to look for potentially impactful for-profit ideas.
Create a profitable business to donate money
Another approach is to maximize the amount of money your company makes in order to donate it to impactful causes. The most successful for-profit companies generate a lot of money, and this money can be used to do a lot of good if spent in the right ways. And you’d be in good company – a number of the world’s wealthiest people have already decided to give substantial amounts of money to help have an impact.
For instance, Microsoft founder Bill Gates has pledged to give away the vast majority of his (approximately $113bn) wealth through the Gates Foundation, which funds interventions in global health and development. Successful trader Warren Buffet has also supported the Gates Foundation to the tune of over $40bn. These sums are larger than many countries’ total annual budgets.
But you don’t need to be as successful as Bill Gates or other multi-billionaires to have lots of impact in this path. They are outliers, and very few will be able to be as successful as them. But, fortunately, you don’t need to be as successful as them to amass enough wealth to bring about a lot of positive impact.
How much impact can for-profit founders achieve?
Let’s go through a very rough back-of-the-envelope calculation to work out how much good a successful founder might be able to do. We’ll use very rough estimates here – so take the numbers with a substantial pinch of salt.
First, consider that the average exit value for startups that are successfully acquired is somewhere over $240 million (at least according to one source). Assuming founders typically have a 10% stake in their company at the time of exit—again, an uncertain assumption—then they’ll walk away with a figure just shy of $25 million. Removing another 25% of this for tax, we’re left with a total of $18.75 million.
So, how much good could we achieve with $18.75 million? One way to get an estimate is to look at GiveWell, a rigorous charity impact evaluator who estimates their top recommended charities save a life for roughly $5,000 in donations. So, if $18.75 million was to these most effective charities, a crude calculation suggests this would save around 3,750 lives. This is pretty impressive and comparable to some high-impact examples of nonprofit entrepreneurship.
However, this number is probably misleadingly high. The $240 million average exit value figure is likely pulled upwards by a few extraordinarily successful companies. For example, of over 20,000 startups backed by YCombinator, just 10 of them are responsible for around 75% of their combined valuations. So, the median exit value is likely to be lower than $240 million (though we’re not sure exactly how much lower). Additionally, one source suggests only 1.5% of companies reach a successful exit of over $50 million – so the odds of huge success are not great.
The key takeaway here is that impact in this path is very heavy-tailed – in other words, the very most impactful people in this path have huge amounts of impact, but the typical person in this path will likely have much less (and perhaps very little) overall impact. Because of this, it’s likely that considerations of personal fit are more important in this path than they are in some other paths, and that most people probably shouldn’t choose this path over others unless they are exceptionally well-placed to do so. With that in mind, here are a few general advantages and disadvantages of this path:
- High expected value – Though most startups don’t become multi-billion dollar enterprises, the remote chance that yours might mean that the expected value (in short, the value of success multiplied by the probability of success) could nonetheless be very high if you’re not averse to risk.
- Flexible skills and career capital – Founding your own company strengthens a wide range of skills – people skills, organizational skills, finances, independence, and more. Even if you end up deciding that entrepreneurship is not for you – these skills are valued in many other organizations and companies.
- Range of cause areas – This is a very flexible career path regarding the sorts of causes you might choose to support, especially if you choose to maximize wealth to give the money away. You could choose effective organizations in areas like global health, animal welfare, preventing global catastrophic risks, and more.
- Low likelihood of success – Few businesses ultimately succeed. It’s often suggested that around 90% of startups fail within their first ten years of operation, and (as mentioned earlier) research by StartupGenome suggests that only 1.5% of startups result in exits of at least $50 million. So, the odds of producing vast amounts of money (or becoming a “unicorn” – startup speak for a business valued at over $1bn) are very small indeed.
- Risk of Value Drift – It’s easy for founders to start with good intentions, but the competitive incentives of business can make it difficult to hold on to these altruistic motivations over the long run, leading founders and companies to prioritize profit and growth above social impact. If you pursue this path, it might therefore help to find ways to sustain your original values, like finding a community of like-minded individuals or other altruistic entrepreneurs to hold each other accountable. This will help ensure you stay focused on impact and don’t stray into potentially harmful profitable endeavors.
- Highly demanding – Though you’ll be in charge of your schedule, it’s generally acknowledged that founding a successful startup takes a large amount of time and energy, especially for the first few years. This means it might not be compatible with various other lifestyle considerations. In a survey of UK startup founders, 41% of respondents claimed to feel stressed “pretty much every day”, and nearly 80% said their business had negatively impacted at least one significant aspect of their life (for example, social life, relationships, and mental health). This likely isn’t a career path for someone who wants a typical 40-hour work week.
Is it a good fit for you?
Here are a few traits that might mean you could be a good fit for for-profit entrepreneurship:
- Exceptionally determined and driven – Founding a startup is notoriously difficult and you’ll be sure to face many hurdles along the way. Because of this, the ability to sustain high levels of motivation and discipline over difficult (and potentially long) periods is incredibly important.
- Jack of all trades – As a founder, you’ll need to be involved in all aspects of your business from the start, from building the product to hiring and dealing with legal work. Many of these tasks might lie outside your expertise and previous experience. Because of this, you’ll need to learn as you go, picking up new skills and learning new concepts as they’re needed. And as your company grows, the challenges you’ll encounter and skills you’ll need to run it will change significantly, meaning you’ll need to cover a huge number of bases throughout your business’s life. Managing a team of 3 people is very different to managing a team of 100!
- A unique advantage in a relevant area – Do you have a unique insight into a promising industry? Exceptional competence in a valuable skill or technology? Or perhaps a rare or unique combination of skills? These are examples of what startup advisor Alice Bentinck calls “edges” – possessing one of these edges could make it more likely you’ll succeed as a founder. An edge can help you to answer important questions like why hasn’t this been done before? as well as confer other advantages like a ready-made network of potential clients, collaborators, and hires.
Paul Graham (co-founder of prestigious startup incubator Y Combinator)’s article ‘What We Look For in Founders’ gives a helpful list of qualities that might make startup founders particularly likely to succeed.
Entering and excelling in the field
- Prioritize finding a great co-founder – Though solo founders can be successful, it’s generally considered best practice to found your startup with someone else who complements the skills and experience you bring to the table. If you do partner with a co-founder, it’s no exaggeration to say that this could be one of the most important relationships in your life – so make sure to invest time and energy into both finding the right person and successfully maintaining the relationship – and be willing to “break up” early on if it isn’t working!
- Incubators and accelerators – One sought-after way to make your startup successful is to go through a startup incubator or accelerator. These are organizations dedicated to guiding new companies to profitability. They will provide advice, office space, and access to funders, in return for equity in your startup. The most prestigious incubators have strong track records in identifying and developing hugely successful companies – see, for example, this list of the top ten accelerators ranked by their successful exits.
- Acquire venture capital – Startups typically acquire funding to scale up by pitching themselves to venture capital funds. There are a huge number of these, but some that explicitly focus on funding impact-oriented companies include Fifty Years and Deep Science Ventures – you can find a large list of other impact-focused VC funds here.
Finally, if you’re interested in for-profit entrepreneurship, you may also be interested in pursuing nonprofit entrepreneurship – that is, founding a nonprofit organization dedicated to solving important global problems. Many of the skills and requirements for success in for-profit entrepreneurship will also apply to nonprofit entrepreneurship, and we think it could be an incredibly promising path for those who are a good fit. In fact, you may not have to decide just yet – we think it often makes sense to think of the vision or service you want to provide, and then choose the business model based on the goal, rather than the other way around. Take a look at our nonprofit entrepreneurship career profile for more information.
- Sam Altman’s Startup Playbook is an approachable introduction to founding a startup.
- YCombinator’s online Startup School (or their Stanford course How To Start A Startup) is one of the best resources for new entrepreneurs.
- Entrepreneur First has a helpful guide on what they look for in promising founders.
- Founder’s Pledge helps successful founders donate their money in impactful ways.
- Paul Graham, founder of Y Combinator, has an influential blog containing lots of great advice on founding startups.
- Ben Kuhn, the founder of Wave, on why and how to start a for-profit company serving emerging markets
Books on startups