How can tech startups have a positive community impact?

Fearless, a Baltimore-based digital services firm, had a project to streamline the process for entrepreneurs to incorporate their businesses online with a state government.

Boosting entrepreneurship captured the imagination of some. For others on the team, it could have been just another administrative process to improve with a few widgets and a bit of code.

Something changed, though, when the state government’s project lead shared that the project was personally important. The government team was striving to increase the number of Black residents who started companies. A mission that aligned with both the client and web development team turned humdrum digital services into a major passion project.

“Getting at that ‘why’” unlocked the impact of that project, said John Foster, a longtime veteran of the 250-employee tech firm that is among Maryland’s most prominent for its purple branding and flashy web content. That’s one reason Fearless doesn’t look like many other government contractors. Another reason is that last month Foster was named the company’s first chief impact officer, a title more associated with nonprofits.

I turned to Foster to help me answer a question: How can for-profit tech companies actually do good?

To some on either political extreme, this may seem a laughable question — perhaps you believe any capitalistic enterprise is incompatible with broad-based human values or maybe you believe any profit-making firm is by definition creating value and doing good. For those of us somewhere in the middle, this is one of the great questions of our time.

The rise and fall (and rise) of ‘for profit, for good’

Amid the Great Recession and 10% unemployment in January 2010, established corporate America took a reputational hit, especially within the financial services industry. If Occupy Wall Street wasn’t for you, then emerging tech companies and disruptive startups felt like the next best thing for changing a system that felt so broken. As we wrote in our recent report on inclusive entrepreneurship, an annual survey tracking the most admired employers was dominated by finance and management consulting firms in 2008, and the same list was filled a decade later with young, flashy tech platforms, like Google, Tesla, Netflix and Spotify.

This trickled down to smaller and younger companies around the United States. Across the country, economic development strategies incorporated entrepreneurship. High-flying tech firms with their gadgets and apps were going to solve all our problems. We could teach coal miners to code software. Social entrepreneurs championed the “for profit for good” slogan in cities from Philadelphia to Baltimore to Milwaukee and well beyond.

Enthusiasm withered during the pandemic as a battle of the American culture war centered on San Francisco, the cultural home of American disruptive tech. Tech developed an association with income inequality — making a few fabulously wealthy while leaving others behind.

Pandemic lockdowns and the murder of George Floyd parked the largest wave of racial justice protests and social upheaval in generations. Fifty years previously, economist Milton Friedman wrote his famous defense of shareholder capitalism, arguing that profit maximizing is the most efficient organizing principle for business leaders. This fell flat to many in the face of racial disparities and income inequality. Rich startup founders and coddled software developers were hardly sympathetic characters. As Technical.ly published in June 2021, tetch CEOs have nowhere to hide anymore.

Tensions have since cooled some. Entrepreneurship is booming and remains popular among Americans — nearly every demographic group starts businesses in the United States. Research has shown tech jobs contribute to greater earnings for others, and a mix of business types benefits everyone. Experts predict the boom will linger.

But after a 20-year rollercoaster, it’s important to check: How can startups and tech businesses have a positive impact on their communities?

Three steps for positive impact

Foster advises to start by considering the “why” of your company, which varies widely. Your surging startup might intend to disrupt an industry or leverage an emerging technology like artificial intelligence. Rather than just follow others, take seriously the impact your disruption will have. Likewise if you operate an established and profitable tech business, who exactly benefits from your success, and how consistent is that with why you say you got into the business?

Second, too many founders and business executives think far too narrowly, Foster argues. Though Fearless retains employees who live across the country, they primarily hire people who can easily commute to their offices in Baltimore. They view their success as linked to the success of Maryland and the greater DC-Baltimore region, Foster said. That’s a “growth mindset,” Foster said, that makes engagement in a local tech ecosystem and other civic issues not distractions but aligned with their business goals.

“I think when you think in that growth mindset kind of construct,” Foster said, “it’ll open the doors for those businesses to continue to grow just not necessarily being beholden to that bottom line.”

Lastly, try to align “value” and “impact” whenever possible. Each business creates enough value to stay in operation — or so one hopes. If that value creation outcompetes whatever positive impact a business leader hopes to have, it’s all fruitless. Social enterprise advocates have long advocated that you can’t profit on oil extraction by day and consider a few small environmental donations a fair balance.

Most importantly, though, Foster notes that company leadership has to give a damn. Opportunistic and inauthentic acts of small-scale corporate philanthropy will be seen as that. Selfish and one-sided pursuits of profit will feel hollow. Impact, then.

“It’s got to be at the center of what they do in order for them to succeed,” Foster said. “It is a difficult thing, and it is very much like a tactile activity on the daily.”