Funding, Growth, and Purpose: The Choices Entrepreneurs Must Make

In 2021, while living in Rwanda, I (Laura) transitioned from the non-profit and NGO sector to exploring the for-profit world. One of the first questions I asked myself was, “What trade-offs do purpose-driven businesses really face when prioritizing purpose over profit?”

I was determined to create a business that made a positive impact—or at the very least, caused no harm. I had a wealth of experience in designing strategies and building impactful programs that improve lives, but I wasn’t yet sure how to translate those skills into this new sector. Or if the sector even cared.

Even in uncommercialized Rwanda, I could see the global growing buzz around terms like purpose-driven, impact-oriented, and socially minded. Studies show consumers increasingly care about the values and ethics of the businesses they support. Yet, as will likely surprise no one, this rising awareness also fueled greenwashing and purpose-washing by companies eager to appease consumers without genuine action.

With all this in mind, I put on my familiar, public-health-trained Researcher hat and set out to answer this question. For a year, I interviewed anyone willing to share their insights, mentored and advised over 20 pan-African social entrepreneurs, attended social impact conferences, and pored over research to better understand these trade-offs. 

Little did I know that this journey would not only deepen my perspective but also bring me to Sarah. Despite coming from different backgrounds, Sarah and I share a vision for helping others navigate their own paths toward building purpose-driven businesses. Together, we’ve combined our learnings to help empower others to define their version of success and purpose.

Here are the Top Three learnings about Purpose-driven businesses I’ve gained along the way.

Purpose is the “why” your business exists.

At its core, Purpose is the reason your business exists. It’s the constant foundation that remains steady, even as your business evolves and pivots. For many entrepreneurs, a business’s Purpose is an extension of their personal Purpose—how they contribute to something bigger than themselves.

Let’s use Patagonia as an example. Their Purpose is clear and bold: “Patagonia is in business to save our home planet.” This mission forms the foundation of everything they do. While there are countless ways a company could contribute to saving the planet, Patagonia aligns its strategy with its purpose through its business structure, initiatives, and sustainability practices.

At its core, Purpose is the reason your business exists. It’s the constant foundation that remains steady, even as your business evolves and pivots.

Patagonia demonstrates its commitment in tangible ways:

• They adhere to strict environmental standards with multiple third-party certifications.
• They’re a founding member of the Sustainable Apparel Coalition. 
• They provide unparalleled transparency into their supply chains.
• They’re a certified B Corp, embedding purpose into their business model.

Could Patagonia generate more revenue if they scaled back on these efforts? Possibly. Competitors like North Face and Columbia brought in around $3.5 billion each in 2022, compared to Patagonia’s $1.5 billion. However, prioritizing profit over purpose would go against their foundational “why,” and it’s likely that they’re more than content with their more purpose-aligned revenue model.

Intrinsic Motivation Will Only Take You So Far

Many of the entrepreneurs and small businesses I have worked with in East Africa start their ventures driven by a deep desire to make a meaningful difference. They envision creating much-needed jobs and offering products that directly improve the lives of those in their communities.

However, Purpose must be more than a lofty ideal—it must be embedded as a core business strategy and a guiding principle for operations. Without this intentionality, purpose risks becoming little more than a marketing slogan.

Many businesses assume—or hope—that their products alone will fulfill their Purpose and create an impact. For instance, selling solar panels, reducing food waste, or improving farm production are powerful contributions. However, without embedding purpose into every aspect of the business, these efforts risk falling short. Over time, the lack of intentional alignment can lead to decisions that undermine the very ideals the business was founded on. For example, not considering how the solar panels are manufactured, underpaying staff, or misaligned partnerships.

Purpose needs to be deeply integrated into the fabric of the company. Take, for example, the U.S.-based small business Prosperity Candle, whose Purpose is ‘to create positive social impact through enterprise’. They employ female refugees in the U.S. to produce their candles and other products, providing them with stable jobs and living wages. Abroad, they train women in conflict-affected areas to make and sell candles, creating revenue streams in their home countries and beyond. Prosperity Candle operates with fair trade principles, ensures safe working conditions, and is a Certified B Corporation committed to its mission.

Over time, the lack of intentional alignment can lead to decisions that undermine the very ideals the business was founded on.

Like many businesses, Prosperity Candle faced the typical challenges entrepreneurs encounter—economic pressures, supply chain issues, and the need to remain competitive. If their Purpose wasn’t fully embedded in their ways of working, they could have made decisions to lower prices or cut costs in ways that compromised their values. Instead, they stayed true to their Purpose, allowing it to guide their decision-making and sustain their impact.

Pick your investors wisely. Better yet, get a loan or grant.  

If you’re a fund-backed business (e.g., Venture Capital), you might eventually face a difficult choice: prioritize survival or make decisions that misalign with your Purpose.

If you’re unfamiliar with the world of venture capital, here’s a primer: VC funds operate on a high-risk, high-reward model. They invest in businesses with significant potential to scale, often targeting industries or innovations that promise exponential growth. Think of companies like Facebook/Meta or Uber. Most VC firms focus on a specific niche, such as a particular industry or stage of business growth (early stage, pre-revenue, post-revenue).

To fund these investments, VC firms first have to raise capital from individuals or institutions, known as Limited Partners (LPs). These LPs expect substantial returns—typically at least 15 - 20% on their initial investment. In exchange for VC funding, businesses offer a percentage of ownership (equity), and when the equity stake is large enough, VCs often gain decision-making power, such as a board seat.

The fund’s success depends on its ability to generate these high returns. As a result, VCs are often focused on rapid growth and profitable exits, such as selling the company to a larger business or going public. They are incentivized to encourage businesses to “fail fast” if they don’t show strong potential, rather than spending additional time or resources on a slow-moving company. Revenue and growth for growth’s sake often become the primary objectives to meet these expectations.

Here’s where the conflict arises: VC incentives don’t always align with the slower, more deliberate pace of purpose-driven decision-making. Purpose-led initiatives often require time to build trust, create meaningful impact, and deliver long-term results. While these efforts pay off in brand loyalty, community trust, and sustained impact, they rarely deliver the immediate returns that VCs and their LPs demand.

Some alternatives, like loans, grants, or even crowd-funding, allow you to retain full control of your business and make decisions without external pressures.

I point this out because it’s crucial to understand the funding model you choose and the expectations it brings. Venture capital can be a powerful tool for scaling businesses, but it often comes with strings attached. If your mission and values are central to your business, take the time to evaluate whether VC funding is the right fit.

Some alternatives, like loans, grants, or even crowd-funding, allow you to retain full control of your business and make decisions without external pressures. These options might not provide the same immediate influx of capital, but they align more closely with the long-term vision required for Purpose-led businesses to thrive.

Ultimately, your funding choice should reflect your priorities as an entrepreneur. Staying true to your Purpose isn’t just about what you do—it’s also about how you grow, who you partner with, and the legacy you want to leave behind. As Jerry Colonna the ‘CEO Whisperer’ said, “Don't go after the most money; go after the right amount of money."

Has this gotten you thinking? Here are some next steps:

• Read Sarah's ideas for Purpose-led micro/local businesses that can help get some ideas going.
• Do Sessions 1 & 2 of our mini-course where you'll do your 10-year Ideal Scene and Purpose/Vision/Mission of a potential business.

If I had to summarize what this all means for me and Laura & Sarah, it’s this: Traditional capitalism often prioritizes short-term financial gains for shareholders, disregarding long-term societal and environmental well-being. We believe your business can be different. We want your business to not only generate revenue and be financially sustainable but also give you the life you want. At its core, we believe it’s possible to achieve this without sacrificing the health of our planet—or ourselves.

Let’s figure it out together.