The dangerous disregard driving the ‘hypergrowth’ ideal

On the doorstep of a new decade, humanity is simultaneously in the midst of history’s greatest technological transformation and in the throes of some of the gravest social and ecological crises ever.

As cities flood, economies crash, populations riot, and inequality rises, it has also never been more clear just how much the world’s wellbeing will depend upon the decisions of tomorrow’s tech entrepreneurs. Will we harness tech for benevolent ends, prioritizing investment in sustainability and social good? Or will we chase the quickest buck, opting for the pursuit of breakneck growth over righting the ship?

If tech is to help fix the world, it must first fix a worrying trend that’s left the globe’s innovation ecosystem severely out of alignment. The ailment to which I’m referring is embodied by the largest venture capital fund in history, SoftBank’s $100 billion Vision Fund.

The vision fund – marveled at by markets, emulated by fellow firms, and coveted by countless cash-strapped startups – has a pretty simple strategy: Pour enormous sums of capital into a small number of startups with the precondition that they spend brazenly to achieve the fastest growth of any company in their industry.

The aim of this strategy, unsurprisingly, is not to drive innovation or develop impactful new technologies but to sell the next round of investors on an impressive growth rate, thereby increasing the company valuation and making the existing investors richer. Lather, rinse, repeat.

Of course, Softbank’s Masayoshi Son didn’t invent this investment strategy – it’s been a tried-and-true VC tactic for years. He did, however, carry it to the extreme, with a disregard for the consequences. Investments in Uber and WeWork have recently provided stark examples of the strategy’s potential to generate social problems and even threaten global markets through its excess. Amid the hype of hypergrowth, it seems, humanity and sustainability have become an afterthought.

Despite the increasingly evident dangers of this “hypergrowth equals valuation markup” philosophy, the global startup innovation ecosystem has had no choice but to embrace it. And upstart entrepreneurs desperate for capital have no option but to hop on the bandwagon, impactful innovation and profits be damned.

The real travesty of the trend is that it’s taking hold against a backdrop of huge social problems and environmental calamities – crises for which socially responsible innovation might well offer remedies.

There has never been a better time for tech entrepreneurs to make a huge impact, and startup investors, institutions, accelerators, advisors, policy makers, and the like all have a moral imperative to empower businesses that can have a positive impact on humanity. We must start funding and supporting more entrepreneurs building solutions to BIG problems like poverty, affordable healthcare, sustainable energy, inequality, climate change, and other U.N. Sustainable Development Goals.

In the end, assuming this responsibility isn’t just the ethical thing to do, it’s also good business. While many investors are still sneering at the “impact startups” prioritizing social responsibility, today’s workforce genuinely wants to work on things that matter, to join companies with a benevolent mission. Today’s consumer wants to read about companies doing good in the world, purchase products from companies that care, and spread the word about companies that align with their values. This is especially true of millennials, now the largest adult population in the United States.

Provided access to capital and the right expertise, “impact startups” can, and should, generate unprecedented economic opportunity. If we can realign the innovation ecosystem around building companies with a positive impact, then we can realistically hit all of the U.N. Sustainable Development Goals by 2030.

We are all to some extent culpable for the current misalignment of the innovation ecosystem. We have all been complicit in building and reinforcing the current structure. I know my own organization can do more to inspire and empower entrepreneurs building impactful businesses, and we will.

I hope others will choose to do the same.

Adeo Ressi is CEO and co-founder of The Founder Institute.

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