Measuring impact is almost synonymous with showing positive change over time and doing so with objective data, but it can be difficult to know how to track progress and how far to go, especially when a business is in its early stages.
In this article, I will provide a stage-based guide to help you measure the impact of your startup and suggest tips and tools for each stage.
1. Why shouldn't you start by looking at measurement standards?
To address the growing need for measurement and comparability, many measurement standards have emerged: IRIS, and others like System B. They are quite useful as a framework, but in my years of experience, I have never seen a startup satisfied with measuring these standards. The reason is that, in my opinion, they only try to solve the problem for one side of the coin: investment, but they leave unresolved the challenge that it implies for companies: the limitation of available data and their current stage of growth.
Pretending to use the same standard for a start-up company and a growing company is like wanting to use the same scale to measure the weight of a newborn baby and a 40-year-old adult.
What to do?
Analyze what you want to achieve with the measurement (Do you want to raise capital, reputation, communication, or meet a requirement of a stakeholder?)
Reflect on the return you hope to obtain and how many resources you are willing to invest.
Identify what stage of growth you are in and apply strategies according to it.
2. What is my role in measuring as an impact entrepreneur?
I always tell entrepreneurs that, in my opinion, the role of an entrepreneur is not to rigorously and scientifically demonstrate the effects of the intervention or product on people or the environment. That is what scientists or those who make public policies are for, who are dedicated to measuring and understanding the quantitative effect of each intervention, making random controls trials, and everything that the scientific method requires.
But in the case of interventions where we can assume with some confidence that the product or service is something we want to promote, for example, education, mental health, or recycling, (or we have previous studies), our role as entrepreneurs is to demonstrate that with our business model, we have solved a barrier that means that this obvious and good solution does not reach everyone: accessibility problem, information asymmetries, scalability, or compliance with rights. We can also argue that we do it more efficiently through technology or our business model, which would otherwise be very difficult to achieve (or very expensive).
What to do in each case:
Case 1: it is well understood that your company's product or service is good for the world (health, education, recycling) and Case 2: it is not well understood, but there are previous studies that rigorously demonstrate the positive benefit
Look for evidence from the studies and quote them in your presentations
Argue how you are solving an accessibility barrier (what is the alternative for your beneficiaries if you did not exist)
Try to estimate how much it would cost a state to provide the same service for the same number of people or the same speed
Case 3: The benefit is not well understood and rigorous studies are not easy to find
Make alliances with universities or multilateral organizations to carry out these studies. Offer your company as a vehicle for experimentation
Use the data of that study as your first impact report
3. How to measure according to my startup stage?
The seed stage is the initial period in which a startup begins to take its first steps. At this stage, everything is focused on the validation of the idea. The idea of a startup at this stage has not yet been tested in the market, so it does not make much sense to overwhelm yourself with indicators, standards, or impact processes, because your first mission is to survive.
What to do at this stage: Understand the problem well and understand how the solution solves it theoretically
🛠️Tools for this stage: Theory of Change, Problem Discovery Interviews
The early stage is when a startup begins to get its first funding and build a strong team. At this stage, the team's focus is on validating the business model and confirming the marketing channels. Here you are still surviving (believe me), and the effort to increase sales or attract capital is so high, that anything that distracts the founding team from doing that will be the last priority.
What is important at this stage: understand the potential for impact and why, devise the different ways in which it could be measured, and communicate the intention of impact to the different partners and allies.
🛠️Tools: Theory of Change, Qualitative analysis (user testimonials), SDGs
The growth stage is when a startup begins to scale and expand. If you are at this stage, you probably already have a lot of data from your business.
What to do at this stage: argue with business data how you are generating an impact. Think that if you are at this level, you already measure many things! You just have to order them in a way that you can understand if the theory of change you established is being fulfilled and build better insights into the impact you are creating.
🛠️Tools for this stage: Theory of Change, Scoreboard, KPIs Data Model, Third-Party data on the benefit of solutions like yours
The expansion stage is when a startup grows into new markets and/or initiates a capital raising greater than series A. Normally, venture capitalists in this stage require more evidence of the impact and the company can access capital with better conditions than the market. to multiply that impact on a larger scale
What to do at this stage: show how the variables of interest or people's lives change over time, before and after your solution. For this, you must collect data from the source where the impact is generated: users, customers, the environment, or the entire society.
🛠️Tools for this stage: user surveys, data integration with client software, measurement with IoT equipment, satellite data integration (for the environmental case)
4. How do I know I am doing the Theory of Change right?
You won´t 😅. At least not until you measure with data. But that's okay, that's why it's called the “theory of change” and not the “truth of change”. The important thing here is that you argue for why and how you are solving the problem, but the fact that it may be wrong does not mean that the job is badly done. What is important is that: It is logical, has a sense of purpose, is supported by evidence and there are not too big leaps in causal logic. That is why it is always recommended to review it with some frequency, as well as review and adjust strategic planning.
5. Where do I look for help?
If you still can't get started with this guide, I offer you two types of help:
This article is a simplification of a complex process of measuring impact in startups. It is not intended to be a recipe to follow, but a guide to orient you if this is your first time dealing with these issues.
It is possible that your measurement need does not fit perfectly with this scheme, so consider whether it makes sense and apply the recommendations with your best judgment. Perhaps it is a combination of the suggestions raised.
Like everything in a startup, measurement takes time and effort. Appointing a person to lead the process helps a lot to make it happen.
Impact measurement is a medium and long-term effort (you have to wait to see the results), but we have to start today to see the results in the future. So beyond having the perfect strategy, the most important thing is to start today! Cheer up!