Lyel, where do you think we are right now with PPT How far have we come (particularly in the U.S.) and what is happening right now?
It is important to say, that first, we continue to suffer from a nomenclature problem; responsible tech, responsible innovation, tech for good, PPT and public interest technology and ethical tech are all used by people - and they all mean slightly different things and have their own inadequacies we need to think about the framing difficulties. I want to point particularly at ethical tech as a problematic framing: it makes you think about the wrong issues and immediately gets people defensive. Unfortunately, it has become a default umbrella. So for me, talking about public purpose technology seems like a better framing.
For most VCs, anytime they hear the word public in the description of an investment, they are just going to run away - but there is a broader argument here that will make many of them listen properly. You look at Andreesseen’s recent essay and he talks about the problem of not having focused on ‘building things’ that solve big problems. That is ultimately what PPT is about, right? You need to find commonality between different layers in the ecosystem and this is a good starting point. Similarly, climate is another good starting point right now - there is massive mobilization on the capital side for that, too.
However, we need to be careful with what we wish for - if we want VCs to fund more PPT, then they are going to do it in a certain way. Overwhelmingly, they will want to still think through ‘blitscalable unicorns’ and focus on returns in the mid-term.
That is where questions around stakeholder interests come in - I would be pushing for more stakeholder capitalism conversations. I don't think it is a silver bullet by any means but it is an important shift in the conversation, and happening in parallel to PPT.
Let me give you an example from my teaching. WIth my students, we start with looking at value creation - as a business, you are always creating a spread of value. There are different stakeholders you are creating value for and for some others you are destroying or extracting value - and that might be okay. It’s important to be clear-eyed and transparent about tradeoffs.So when you put all your hopes on VCs, they are focussed on creating value for their LPS, and so they push for companies that are hyper-focussed on this type of return. Often at the expense of other stakeholder groups or even long term value. their LPs. That is where society has to come in and push them in a certain way; we need to start thinking about what it means to create value in society and PPT is one strong way of helping with that.
Tanya, what is your impression - where are we with PPT? Who is pushing it, particularly in Europe?
My impression is that PPT, in its various forms from mobility infrastructure to telemedicine, is reaching a “tipping point”, attaining a level of social uptake and recognition from which a reversal is unlikely. There are a few reasons for this, including global megatrends like climate risk, population growth, pandemia and infodemia, and the shortcomings of global cooperation alone to address the needs that these megatrends create or anticipate. These patterns are emerging alongside technology founders’ increasing ambitions to address genuinely big public problems, and expectations of digital-first approaches to some of these issues by younger generations.
My sense is that there is also a broadening recognition that engaging digital and emerging technologies to address major public needs, from the local to the planetary scale, is both crucial, and may best be defined against one-dimensional solutionism – the idea that technology alone can “solve” major needs and problems. The recognition that technology is one important lever alongside (and in tandem with) public policy, organisation, business models, investment models, culture, is hugely encouraging. While I agree that the Andreesen essay on “building things” suggests a growing proximity to PPT, I think some of the most exciting PPT will be developed outside Silicon Valley precisely because the starting point in terms of belief about what technology alone can achieve is so different to the solutionism that has emerged from SV over the past few decades. “Build” appears no less than 40 times in Andreesen’s essay, but the kind of building that PPT needs cannot happen in isolation from policy development, organisational and cultural change, and in many cases new business and investment models. Just think about the role that public procurement could play in the making of green technology markets.
The data provides early evidence to support the idea that PPT development is occurring across diverse regions —with Europe a leader. The top 5 producers of high-quality PPT according to data on our Nebula public-purpose tech intelligence platform at StateUp places the US, UK, Israel, Germany, and Spain respectively as the top PPT producers. These countries, all advanced economies, have robust wider technology ecosystems in place with policy support for innovation. They also all rank relatively well for government digitalisation efforts (see, for example, the World Bank GovTech Index, a government digitalisation index), which suggests a dynamic relationship between state digitalisation capacity and the broader development of technologies that address public needs. These more digitalised public sectors may also be better placed to procure PPT through the use of online marketplaces.
I’d also like to add that the definition of PPT is necessarily still evolving, and being actively shaped by current affairs. Europe is at the centre of this. For example, when Spotify CEO Daniel Ek invested upwards of 100 million euros in AI defence tech startup Halsing.AI last year “to support democracies” in Europe, he met backlash. But the Ukraine war has quickly changed how European defence, and with it defence tech, is imagined. I’m willing to bet that more Europeans than previously would be comfortable with Ek’s framing today, and by extension perhaps with the idea of defence tech – if used to defend democracy – as PPT.
Lyel, what are big roadblocks that you are seeing for PPT being more widely adopted? Is it something that is recognised as being too impact-y and hence prevents big money from flowing in? Who / what is holding PPT back?
LPs need to become more forceful for pushing for something - in their due diligence, to begin with. They need to ask about stakeholder values, DEI, ESG, social responsibility. There is a new essential set of questions that needs to be pushed forward and the LPs are in the best position to demand things. That is the stakeholder group that VCs respond to the most. If VCs keep raising their 2bn funds because LPs are not pushing hard enough, we wont get anywhere with PPT. LPs really need to develop capacity and develop people in-house with the right expertise. They need to be more intentional about it. Both in terms of due diligence and then make VCs offer proper portfolio services! There is a new set of competencies that are required from founders now and they need to be equipped properly. You can make an argument that there is a growing premium for founders getting it right and it needs to be incorporated.
On the side of exits we have not innovated properly, either. People need exits - it is not unfair to have people ask for some promise to achieve liquidity at least in the next decade or so. People need to be innovating there too - what new kind of exit does PPT require? The Long Term Stock Exchange is a good example of how that could look like - we need more of that. The listing requirements are fundamentally different: stakeholder driven, longterm, requiring statements around DEI and stakeholder value. THat is a good starting point but now we need to scale it and make it something that more startups do.
Tanya, perhaps you can jump in here - what other stakeholders need to move, particularly in Europe?
I consider PPT to be tech defined by the outcome of addressing a major public need rather than by a specific market or vertical. Nonetheless, PPT companies are likely to have a close relationship to governments – whether in terms of direct procurement or innovation policy. Yet, despite the quality and range of technology developments, governments and startups often still struggle to collaborate. Central to this difficulty is scant knowledge exchange across sectors. Entrepreneurs find tendering processes inscrutable and think government agencies are closed-minded regarding new solutions.
For their part, public servants often feel in the dark when it comes to public-purpose innovation. In a recent survey, half of 167 cities globally described difficulty in identifying partners and suppliers as one of the greatest obstacles to achieving the Sustainable Development Goals. While procurement reform may sometimes be needed, there are myriad examples of currently existing procurement vehicles, including challenge-led approaches, that can be deployed. It is often knowledge exchange, not law or even supply, that is the major stumbling block. This is a good problem to have because it is hard but addressable. Our foundational motivation in developing the knowledge and ideas infrastructure for PPT at StateUp is to help to overcome these silos in knowledge, data, and relationships.
There may also be a more proactive role for states to play in their capacities both as LPs and procurers to much more explicitly support a shift towards business with a public purpose, possibly even building it into funding agreements. As I know you have noted previously, Johannes, the overall goal of the EU’s Green Deal, for instance, is highly aligned with a thriving PPT sector. The companies that LP-backed VCs are financing now will be the big tech companies in ten years. Evidently, more deliberate support for PPT could lay the groundwork for a more sustainable economy going forward.
For both of you, what would you say public purpose tech’s future looks like, for the coming 5 years. What is in the cards?
Tanya Filer: In terms of developing PPT technologies, I see a great role for universities moving forward. Big public needs require multidisciplinarity, pairing technical skills with deep appreciation of societal needs and cultural contexts. Universities are natural launchpads for these kinds of startups, providing access to specialist and emergent talent from across different fields. Although departmental silos exist, the opportunities to interact across disciplines, either through formal or informal mechanisms, is already giving root to a set of very high quality startups driven by a mission to address key public challenges, from recycling (like Recycleye, Imperial) to local mobility options (like Superpedestrian, MIT). But to encourage further university-born PPT innovation, particularly in the UK and Europe, there are structural and bureaucratic barriers to overcome, including questions over intellectual property rights and equity sharing arrangements.
As Lyel describes above, PPT is already at the heart of an emergent discussion about whether the conventional VC model provides the most appropriate kind of financing for companies seeking to effectuate big public change. We have already seen PPT startups pivot away from addressing public needs towards more conventional B2B plays (for example, pivoting from tackling misinformation to adtech and brand reputation) in an effort to win VC investment or placate current investors. And there is an awareness that if pushed towards quick acquisition, PPT startups could end up in environments less supportive of their mission.
As a result, we are beginning to see emergent conversations about new models of “exiting” a startup. For example, the Exit to Community movement encourages a transition from investor ownership to community ownership. Rather than exiting to an acquisition or IPO, companies like the VC-financed Open Collective seek to transfer ownership to their community. Though we do not yet see evidence of widespread uptake of new models, it seems likely that some forms of PPT will be at the centre of their development over the next few years.
Lyel Resner: I see two areas: 1) VC accountability. We need mechanisms to incentivize US-based VCs to both better understand and implement ESG, stakeholder value, DEI, ethics, social responsibility into their practice. LPs need to step up here. 2) To Tanya’s point, we need to paint a different set of aspirations for the next generation of founders. I want to think that PBCs in the states — which function very much like C-Corps — can be a powerful intermediary step. There are growing examples of PBCs raising venture, scaling, and even having exit events. I don’t think changing a company’s fiduciary to stakeholders is necessarily sufficient, but I do think its a powerful start and a meaningful improvement over shareholder primacy. This is why we are trying to build educational assets and community around more stakeholder-driven models of building technology companies at the Startups & Society Initiative.
Lead image provided by NASA