How impact acts as a source of value in building a startup: The case of Ophelos
At Big Society Capital, we believe that being impact-driven (i.e. trying to solve a social or environmental problem) can be a huge source of value to businesses. Over the last 12 months or so we’ve been sharing our hypotheses around how it can be beneficial for startups. Where possible, we’ve backed this up with emerging evidence. As our thinking has matured, we’ve entered discussions with startups across our underlying portfolio to test how ourhypotheses play out. Below we share a case study on Ophelos.
Ophelos is an AI-powered, challenger debt resolution platform and pending B-Corp. Their mission on their website states:
We are deeply committed to building a fairer debt resolution process for everyone. That means no annoying calls. No deaf ears. No heavy hammers. Just an understanding and approach that works for you, at your own pace.
In Ophelos’ case, we think their impact mission interacts with commercial value in four key areas:
1. Talent
2. Building a better product
3. Customer acquisition
4. Investors
We spoke to Amon Ghaiumy, co-founder and CEO of Ophelos to explore these four areas in more detail.
Talent
The most common theme we hear from founders on this topic is that an impactful mission helps to attract, retain and inspire top-tier talent, as younger generations increasingly want to work in meaningful careers. It was no different with Ophelos, where Amon told us:
‘Attracting amazing talent is one of the best things that comes with impact. People really care when they can have a direct impact on people. This in turn drives better performance — the team is more thoughtful about what they’re building and as a result they feel motivated. Simply building tech or collaborating on projects can be great in itself, but how much can you really connect with it if there’s no meaningful purpose behind it?’
Impact leads to building a better product
Having impact at the core drives innovation and improvement. Businesses who focus on meeting the customers needs, rather than making the most profit, will be the ones who build the best products. Ophelos’ impact-driven approach to debt resolution required them to first understand the industry’s pain points and work out how to overcome them. As Amon noted:
‘Giving 100,000 customers in debt 100,000 different plans is a very manual, intensive process. Most debt collection agencies resort to a basic formula, which means that the customer doesn’t always receive the best outcome. To help people, you need to give them something that works for them. Each end user is unique, they have different affordability thresholds, outstanding debt amounts, income profiles etc. We knew that in order to improve the industry, we had to replace the one-size-fits-all approach with personalised solutions.’
With clarity on the problem that needed solving, and fuelled by top-tier talent, Ophelos found a way to use machine learning and automation to offer incredibly tailored solutions at scale and with high efficiency. Not only does this create a product that works for the user (Ophelos has a 4.5/5 rating on Trust Pilot) but this also creates impact as end users are able to manage themselves out of debt faster.
This impact on end users creates valuable outcomes for Ophelos’ customers. These are businesses which offer consumer credit and have a vested interest in higher repayment rates. Ophelos is often not the only debt platform managing non-performing loans for their customers. This offers them the opportunity to compare performance across the same book and in these cases, Ophelos is achieving >15x greater recoveries than its competitors. In terms of building a winning product, it’s clear that a desire to create impact is helping to drive value here.
Customer acquisition
Our assumption was that having a superior product would significantly drive customer acquisition. But product performance is only one of many decision points that customers use, as Amon noted:
‘Ultimately, a lot of this comes down to trust. Since we are a new player in a risk-averse and tightly regulated market, we have to build up a level of trust, which understandably takes some time.
The decision-makers we are engaging with (often the head of collections at large enterprises), have very specific KPIs that we need to appeal to around compliance adherence or other qualitative metrics. While our debt recovery performance might be market leading, we still need to be able to deliver on these other qualitative KPIs. As we build up our client base and create more case studies and references, we will convince more enterprises that we are doing the right thing in this space — technologically & ethically.’
Despite the complexity of purchasing decisions, impact does have some influence on customer acquisition. Ophelos have put impact at the core of their business and value proposition to customers which helps to get their foot in the door:
‘At top level, board, CXO etc., an impact mission makes a significant difference, which you can use it to win decision-makers over. While they might not be your buyer in the enterprise, they’re often able to influence and get you a meeting with your buyer. Impact helps you get your foot in the door.’
In particularly competitive industries, this impact advantage may help to win business for impactful companies like Ophelos.
Investors
Investors often avoid heavily regulated industries or ones with high reputational risks as these dynamics can be complicated to navigate. Debt resolution is one such space, particularly around when things go wrong with vulnerable customers. As Rory Stirling (partner at Connect Ventures) notes in his blog on why they lead the pre-seed round:
‘I really didn’t want to invest in this company. I was introduced to Ophelos by two separate people — both of whom I trust and both had strong endorsements of the founding team — and yet both times I turned down the initial invitation. My lazy lizard brain told me I didn’t want to be in the debt collection business. It conjures up all sorts of images we’d prefer not to think about — bailiffs, fear tactics, injustice and ultimately an uncomfortable amount of personal hardship.’
However, where a company has a deep commitment to impact, as Ophelos does, this can help to convince investors that a proposition might be worth looking at. As Rory continues in his blog:
‘Rather than pretending debt collection doesn’t exist, the most powerful thing we can do is focus on the quality of people, products, and services tackling this market. Or as the Ophelos team would say: “Reimagining debt collection — for good.”’
Neatly summarising the value that impact can bring in markets with high regulatory or reputational risk, Amon told us:
With the debt collection industry’s reputation, what we’re pitching to investors is already a stretch. If we didn’t have a social impact mission it’d be a near impossible task.
Final thoughts
Impact can be a source of value in building a winning business, as demonstrated by the increasing number of impact startups that are performing well. Being able to understand these dynamics is important to better support these businesses’ growth and inspiring other investors to increasingly consider impact. In Ophelos’ case we think impact is helping to attract top tier talent, build a better product, drive customer acquisition and make it easier to attract investors.
Have we said anything that triggered a thought? Want to find out more about BSC or Ophelos? Get in touch, we look forward to hearing from you!
