A new wave of global entrepreneurs are setting up their businesses with the aim of making a positive impact on society, according to a new report from HSBC Private Banking. The Essence of Enterprise report found that the younger generation of entrepreneurs are leading this trend, with 24% of entrepreneurs aged under 35 motivated by social impact compared to 11% of those aged over 55. The report, now in its third year, is one of the largest, in-depth studies into the motivations and ambitions of entrepreneurs, researching the views of over 3,700 successful entrepreneurs in eleven countries. The report also found that this new generation of entrepreneurs is embracing angel investing, viewing it as a way to connect and collaborate with their peers.
A socially minded brand of entrepreneurship
One in five entrepreneurs considers social responsibility, being active in the community, or environmental responsibility as their top priority as a business owner, rather than prioritising areas such as maximising shareholder value or economic prosperity. Those who prioritise social impact have a greater propensity to engage in angel investing, (55% of impact-focused entrepreneurs versus 44% of entrepreneurs who prioritise commercial factors), and report a stronger willingness to rely on mentors for advice and support (75% of impact-focused entrepreneurs versus 66%).
The report also suggests a strong relationship between an emphasis on social impact and entrepreneurial ambition. 33% of the entrepreneurs projecting high growth ambitions state that they started their ventures with the intention of creating positive social impact, compared to 28% of those projecting the lowest growth. This suggests social impact should be seen as an integral part of the recipe of entrepreneurial success, and not separate from it.
A new investment style
Almost half of respondents (47%) have invested in other private, non-listed businesses, funnelling both capital and expertise back to the entrepreneurial community. However, the research reveals that a new younger generation of entrepreneurs is investing at a much higher rate than their older peers, with 57% of entrepreneurs under 35 undertaking angel investing compared to 29% of entrepreneurs aged over 55.
Differences also exist between the generations in how they perceive and approach angel investing. Over half of younger entrepreneurs (57%) view angel investing as a way to connect and collaborate with peers, staying up to date with industry progress and disrupters and to grow their knowledge and expertise. Entrepreneurs of an older generation view angel investing as a way to diversify and grow their investment portfolio, approaching angel investing in a more informal style, through their own network of personal contacts. 43% of those over 55 view friends as the best route to new business, while 44% of those under 35 turn instead to professional advisers to source new investment opportunities.
HSBC Private Banking Global Chief Investment Officer Stuart Parkinson said: ‘It’s clear younger entrepreneurs want to do good, and we would be wrong to dismiss this as youthful idealism that will act as a brake on financial success. They know that their business cannot have the impact they want without sustainable growth, and they are focussed on achieving both. They see a similar virtuous circle when it comes to angel investing; they are happy to invest in the wider business community, to contribute to each other’s successes and to learn from one another.”
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