Transformational Entrepreneurship: Where Technology Meets Societal Impact

The concept of transformational entrepreneurship describes one of the guiding philosophies of the Startup Genome

The last five years the global economy has been rife with turmoil. Discussion of bankruptcy, bailouts and unemployment have dominated the headlines. On the surface many of our problems stem from giving the financial sector de facto leadership over the global economy, and enabling them to exploit the system to the brink of societal collapse. On the backs of sacrificial taxpayers the economy appears to be regaining stability, but the rumblings aren’t likely to go away for we are at the crossroads of a momentous transition into the information age. To successfully make this transition, much of the socioeconomic fabric of society needs to be reinvented. But most of the world seems lost when searching for the source of reinvention. Industrial manufacturing has long passed its golden age, armies of creative freelancers are too fleeting to create enduring structural change and returning the reins to the financial sector would again tempt economic disaster. The lack of a viable plan isn’t particularly surprising because the people, process and movement that can lead this societal transition have not yet coalesced.

There are early signs however, that the two movements of Technology Entrepreneurship and Social Entrepreneurship are beginning to converge into a promising solution. An increasing number of entrepreneurs are awakening to the possibility of combining the scalable tools and methodology of Technology Entrepreneurship with the world-centric value system of Social Entrepreneurship. Together they create a new type of entrepreneurship that could become our primary source of socioeconomic value creation. What do we call this movement? We propose we call it “Transformational Entrepreneurship.”

The major socioeconomic transition we’re going through needn’t be as tumultuous as its been, but for the last few decades the financial sector has led the economy at breakneck pace into a doomed direction. Economies are based on long-term value creation, but somewhere along way short-term value extractors from the financial sector forced their way atop the economic pantheon. Its supremacy is cancerous for one simple reason: financial products cannot fundamentally create new value, they can only optimize other means of economic value creation.

Financial products are not inherently bad. Their intended purpose is to allocate capital where value can be created to maximize its potential output. But the financial sector was not satisfied in its incredibly lucrative role of financial optimizer. When the sector reached the upper limits of the growth it could create through optimization, insatiable greed propelled the sector to commit some of the most egregious feats of corruption and extortion the world has ever seen.

Exactly how the global economy collapsed is complicated, but the cause is no mystery: exploitative financial institutions on Wall Street. Enough incredibly intelligent young men and women in Generation X lived up to their idol’s famous words that “Greed is good.” Many people in the financial sector seem to behave as if they are playing a game of monopoly, where the securities they trade are not connected to the real world, and other people are merely pawns to be manipulated in pursuit of victory. This disconnect from reality via submission to the ludic fallacy not only creates erroneous models that engender massive overconfidence, it leads to a megalomaniacal worldview devoid of moral principle.

Now all around the country, citizens who are mad as hell and not going to take it any more are storming the streets and camping out in public parks, demanding justice from the economic destroyers on Wall Street and the complicit federal government. But unfortunately reining in the bad guys won’t unleash an economic revival. And pushing naive campaigns like “putting America back to work” won’t solve the crisis either. Economies don’t grow by artificially creating new jobs via governmental legislation, they grow by creating new products and services that create value. Government needs to spend less time talking about job creation and more time working to create the necessary conditions for innovation. The jobs will follow. If a worker no longer has valuable skills, then they need to retrain. Receiving a handout only makes the problem worse.

Industries that were once lucrative are drying up, and jobs that were once stable are vanishing. But growth and prosperity are not disappearing, they are just shifting to new areas of the economy. Since the industrial revolution, the agricultural sector has fed increasingly larger populations with smaller percentages of the workforce. The manufacturing sector went through a similar transition as machinery replaced most manual labor. Now the service sector is poised to do the same as software automates the repetitive intellectual tasks of accountants, clerks, stockbrokers, even doctors and lawyers. When sectors shrink because of the increased efficiency of automation, fear of economic depression is not the right response, for new frontiers of growth are often on the horizon.

Over the last few decades nearly all the economic growth and job growth in the U.S. has come from high-growth technology companies. That growth is driven by companies like Amazon, Google, Salesforce, and VMware (which didn’t even exist 15 years ago), and companies like Facebook, Twitter, Groupon and Zynga (which didn’t even exist 10 years ago). Then of course there’s Apple, which brought itself back from the grave in the beginning of this decade and is now the world’s most valuable public company. Collectively these companies have created almost a trillion dollars in new wealth over the last decade and a half.

All of these companies were created by high growth technology entrepreneurs. As the world has finally started to take notice, the inner workings of entrepreneurship ecosystems like Silicon Valley have been raised to mythical proportions. Over the last 40 years Silicon Valley has evolved a complex ecosystem geared specifically toward the development of high-growth, billion-dollar technology companies. The output is awe inspiring, but the company-creation process is not magic, though neither is it well understood. More than 90% of startups fail, primarily because of self-destruction rather than competition. We at the Startup Genome Project are committed to turning the murky art of innovation into a repeatable science that can be spread to the rest of the world. To date we’ve released two critically acclaimed research reports on the factors that determine startup success and their primary cause of failure, and put our research into a software tool that is now a digital mentor for more than 13,000 startups. Human history is littered with arts that caved into science, and the startup creation process will not remain standing.

Silicon Valley now sits at the pinnacle of this socioeconomic transition, endowed with the potential to establish itself as the new center of the world economy and reignite the flame of inexorable progress. Yet in its current incarnation, it is unfit to do so. Silicon Valley has mastered the art of building high-growth technology companies but iit hasn’t yet developed the moral compass to figure out what companies are worth building. There are simply too many talented entrepreneurs today building meaningless ventures. From advertising products that get people to buy things they don’t need, to social games that are designed to addict people to wasting their time, to “mobile-local-social” products that attempt to leverage the latest technological trends without giving much thought to the importance of the problem being solved. Furthermore, the unquenchable thirst for growth that fuels much of the wealth creation must be carefully watched, for it could easily turn malignant and lead technology entrepreneurs to commit the same kind of economic atrocities as the financial sector.

Silicon Valley is like an immature superhero who has just discovered its superpowers, but are using them largely for self-interested aims. Silicon Valley needs to recognize, in the wise words of Spiderman’s Uncle Ben that “these are the years a man changes into the man he is going to become for the rest of his life” and “with great power comes great responsibility.

The emergence of “Social Entrepreneurship” attempts to fill this moral void by refocusing energy and resources on important social problems. While Social Entrepreneurship is promising, its impact has been limited to date as its solutions are rarely devised with scalability and true economic sustainability in mind. Furthermore, while the Social Entrepreneurship community is full of bright-eyed young people intent on changing the world, many of their solutions fail to take into account the complexities of the problems they are attempting to solve, which can lead to doing more harm than good. This backfiring is far too common because the community’s propensity to descend into self-congratulation, starves the founders of the critical feedback required for them to find the holes in their vision. The standards must be set higher than good intentions.

To successfully make the transition to the new socioeconomic era of the information age, we need to learn to focus the enormous power and efficiency of capitalism on the world’s most important problems. To do so will require figuring out how to unite the scalable tools of Technology Entrepreneurship with the moral ethos of Social Entrepreneurship. This is the essence of what we at the Startup Genome are calling Transformational Entrepreneurship.

Transformational Entrepreneurs earn their name by creating innovative solutions to the world’s biggest problems that are scalable, sustainable and systematic.

A Deep Dive Into Transformational Entrepreneurship

To ground this idea, we created a matrix that positions Transformational Entrepreneurship, Technology Entrepreneurship and Social Entrepreneurship on the landscape of socioeconomic value creation.

This graph can be further divided into six categories: Exploitative Entrepreneurship, Small Business, Harmful Non Profits, Ineffective Non Profits, High Growth Entrepreneurship, Social Entrepreneurship, Transformational Non Profits and Transformational Entrepreneurship. In the following section we will discuss what factors determine where a business is placed.

The Y Axis: Economic Impact

The Y axis is relatively straightforward. We measure companies based on the economic value they create, using standard financial metrics like revenue, profit, market cap and ROI. The organizations that have the greatest impact have scalable business models that produce products and services millions of people are willing to pay for. We extend the graph in the negative direction to describe organizations that cannot sustainably support themselves like nonprofits and charities. Nonprofits that create a transformational societal impact like Wikipedia often go deeper into the negative direction of economic impact the bigger they get, because it takes more donation dollars to support their growth. There are scalable revenue generating models that some non profits can access but for the most part they have yet to be explored and developed.

The X Axis: Long Term Societal Impact

Where a business falls along the spectrum of long-term societal impact depends on what it is doing to solve one of the world’s biggest problems. There is a subjective element to what one could consider a big problem, but a number of organizations, including The Copenhagen Consensus, Singularity University, The Millennium Project, The UN and The World Economic Forum have done a good job putting structure around the problem space.

The prescriptions from these organizations fall roughly into two categories. Third-world problems that consign billions to poverty and a low quality of life, and first-world problems that if solved could ignite new societal transformations and drive the continued progress of humanity. This is the sustainability / innovation dialectic and both perspectives are necessary for progress. Some people are more drawn to bringing the third world up to the prosperous living standards of the first world, establishing a healthy baseline for our emerging global village. Others want to push the edge of first-world society, extending the story of humanity farther into the realms of possibility.

The Copenhagen Consensus produced the most rigorously evaluated list of grand challenges. They began by convening many of the world’s top economists who were tasked with finding the best ways of advancing global welfare in third-world countries. Their final list ranked solutions by their ability to cost effectively improve life in the developing world. It was ordered as follows:

1. Malnutrition & Hunger 2. Subsidies & Trade Barriers 3. Diseases 4. Education 5. Women Empowerment 6. Global Warming 7. Sanitation & Water 8. Conflicts & War 9. Air Pollution, and 10. Terrorism.

The frameworks for analyzing first-world problems were noticeably weaker. Perhaps this is evidence of the complacent malaise that has swept much of the first world. There seems to be a script running through the minds of many that the future has arrived. There are no major innovations on the horizon and society has reached the end of its evolution. #firstworldproblems are trivial ones like the waiter at the restaurant being too slow or being locked out of your house.  All that’s left to do is to give the developing world the same quality of life as the developed world. The fact that we refer to the first world with the past tense verb “developed” is further evidence of how embedded this story of stagnation has become in our cultural consciousness.

But this story couldn’t be further from the truth. We are just at the cusp of a new societal era. Humanity doesn’t see new eras very often, but when they come, every aspect of society yearns for reinvention: Government, Business, Finance, Education, Health, Energy, Technology, Art and Science all need upgrading. The Industrial Revolution was the last great societal transformation, and the scientific enlightenment that ensued gave rise to modernity. With two billion broadband internet users and billions of smartphones entering circulation, the necessary tools and infrastructure are now in place for the information age to burst into full bloom, moving beyond the confines of the technology industry to reinvent all aspects of society.

Defining X Axis of Long Term Societal Impact

Establishing the X axis of long-term societal impact is our call for entrepreneurs and business leaders to turn away from incremental improvements on the status quo and focus on solving problems that will transform the world.

Here are a few guiding principles for where to place a company along the x axis of long-term societal impact and then we will provide a number of examples.

Section 1: Negative Long Term Societal Impact [-5,0]
Persuade people to buy things they don’t need or that harm them long term
Exploit people
Waste people’s time
Make people or the world unhealthy
Give a false sense of satisfaction or accomplishment

Many companies make a profit while making some of the world’s biggest problems worse. They do this by either providing convenient painkillers that hide the problem rather than treating it, or merely shift the problem somewhere else rather than solving it. Examples include McDonalds and Zynga, discussed in more detail in the next section.

Section 2: Marginal Long Term Positive Impact [0,5]
Treat symptoms
Incrementally improve relatively efficient areas
Make people feel better about themselves
Help people make a living
Niche focus

Most businesses fall in this section.

Section 3: Transformational Societal Impact [5,10]
Approach problems systematically, treating root causes
Teach men to fish rather than giving them fish
Focus on unlocking human potential
Create more value than they capture
Seek to empower people
Improve people’s relationships, their ability to create and ability to learn
They nurture ecosystems and platforms

“We don’t build services to make money; we make money to build better services” – Mark Zuckerberg in Facebook’s IPO Filing letter.

Examples: Mapping Socioeconomic Value Creation

With the basics of the framework defined, here we put it to use to classify a number of markets, product types and companies on our map of socioeconomic value creation.

An appendix which contains examples for how a number of markets and companies were mapped to this matrix of socioeconomic value creation can be found here. Where a market or company falls is not set in stone, but is in fact a very important debate. This matrix is intended to provide structure for having the conversation about the value we, as a society, are creating and what opportunities we should be directing our attention and energy towards. 

The Startup Genome As A Transformational Company
I would be remiss not to include a personal story describing the transformational philosophy guiding the direction of the Startup Genome, the company I founded last year with Bjoern Herrmann and Ertan Dogrultan. A few years ago when I was immersed in the futurist community, I learned about Moore’s Law and the more expansive accelerating pace of technological change. The implications for the future of society were immense and I was struck with an impulse to find a way to contribute to the revolution on the horizon. My search process led me to conclude that one of the biggest leverage points for socioeconomic evolution would be to find a way to increase the success rate of startups. Startups are the primary carrier and distributor of technological innovation but 90% of them are failing, mostly due to self-destruction rather than competition. We set out to find a scalable solution to this problem and arrived at the Startup Genome. We conducted research with leading thinkers in the field on the primary causes of startup failure and released our findings to the world. This research formed the basis for intelligent technology tools that will enable businesses small and large to be more innovative and scale faster to success. We believe this can accelerate the pace of innovation all around the world, and together with a new generation of transformational entrepreneurs, unleash a socioeconomic revolution.


The opportunity to reinvent society is within our power, but the future doesn’t invent itself. We must create a culture that encourages and empowers transformational entrepreneurs and celebrates little else. Anything less is selling short ourselves, our ancestors, and the future of the human race. That may feel like hyperbole, but the latent socioeconomic revolution that now lurches beneath the surface has only arisen four other times in human history. Revolutions are dangerous transition periods that can cause a societal slide into turmoil just as easily as a rise into transformation. It’s up to transformational entrepreneurs to rise to the occasion of the present moment.

We encourage everyone to look within themselves and around their environment and seek out opportunities for transformational change. Ask the entrepreneurs you know how the company they are starting is transformational. Ask students and job seekers what transformational problem they want to solve. Ask everyone else what transformational ideas, projects and companies they are excited about. Get people talking, reading, writing, researching and creating in the spirit of transformation — because it is our best hope for reviving socioeconomic progress.

Further Exploration: Transformational Thinkers And Entrepreneurs

The Founders Fund Manifesto
Long Shots, Vinod Khosla
Why Software is Eating the World, Marc Andressen
Innovation: Crucial to Our Future, Judy Estrin
What’s Better: Saving the World or Building Another Facebook App?, Vivek Whadwa
Do Great Things, Justin Rosenstein
The End of the Future, Peter Thiel
The Failed Promise of Innovation in the U.S, Michael Mandel

A special hat tip to Tyler Emerson for compiling this list and many great discussions over the last year on this subject. Tyler is the founder of Belong, an upcoming initiative that aims to facilitate, inform and honor the people investing in the long-term potential of humanity.

  • IvanRapinSmith

    Hi guys. Great content! Thanks for that. There seems to be a problem with the images. I can’t see them in Safari on my Mac.

  • IvanRapinSmith

    Forget my last comment about the pictures. After a few page refreshes the images did load.

  • woodhull

    You placed “Disease Treatment and Prevention” on absolutely the wrong end of the Economic Impact scale. Eliminating malaria would jump start entire economies as millions of people’s full economic potential is unleashed. Nutrition and health have enormous, transformative, economic impacts.

  • erikdlarson


  • L1AD

    incredible post. well done

  • erikdlarson

    The transformational entrepreneurship concept is great, and I blogged about it (, but I think your framework would benefit from a tighter focus on startups that leverage high scale and low capital cloud-mobile-social models with an explicit societal benefit in mind, rather than sketching a broader theory of economic growth and corporate societal impact. As it is, you seem to be blurring goals and outcomes in a way that makes your ideas less clear and actionable, and that strays from the insights of the Startup Genome.

    Silicon Valley companies, like Facebook and Apple, have always being about putting a dent in the universe and thinking big, but you seem to be saying that now is a time and place where we can and should be thinking big thoughts about doing good. Is that right? If so, this post is a stirring call to action but provides little evidence, which is concerning for me as a CEO setting out to do just what you describe.

    In terms of societal change, it is easy to bring up how Twitter/Facebook and Apple’s iPhones were enabling factors for the Arab Spring, or to tell stories about how they help people connect for good in all sorts of ways. However, that was and is not their purpose as corporate entities, and for me that calls into question your designation of these companies as examples of “Transformational Entrepreneurship.” If you create a company that changes the world for the better because you successfully build a great product or a great business, that is fantastic, but clearly based on those examples there is no need to have a major societal benefit or triple-bottom-line in mind when you first found the company, or even once you are running it at scale.

    Steve Jobs and Mark Zuckerberg are geniuses, and they created great opportunity for all of us to create and do amazing new things on top of what they built, but they didn’t have to have society’s greater good in mind to do it. Those companies are as happy to help people to share LoL Cat pictures and porn or to bully and ostracize each other as they are to help with cries for democratic freedom and artistic creativity – they track and drive their business based on total users and revenue, not the net societal value of the usage. It seems pretty clear to me if they had tried to do otherwise then they probably would not have succeeded so fast at such a scale. There is nothing wrong with that, but it is fundamentally different from creating a company that is explicitly focused on solving big problems while being careful not to create any new ones. As a result, any attempt those companies make to enhance their net societal impact is laudable but much more akin to my understanding of Porter’s Creating Shared Value concept than what you seem to be saying with the Transformational Entrepreneurship idea.

    I am betting my company on the idea that there is a viable new model for transformative entrepreneurship, where companies are formed with the explicit goal of solving big human problems with highly scalable low capital models built on the foundations that Facebook, et al. have created. If you have a framework for that along the lines of your Startup Genome work, please share it, I think we would all benefit.

  • rdale

    Great article. Perhaps there is a distinction between overall economic impact and who harvests value (or wealth creation). The airline industry, which, as an industry, has sometimes been entirely unprofitable also becomes difficult to place on this chart without that distinction. I also ask a similar question about Pharma, and about Oil and Gas over that industry’s lifetime… see

  • Arnold Beekes

    Excellent article. I suggest to create a virtual co-creation space where likeminded change-agents can meet and start working! A Twitter #, would also help to bundle resources, e.g. #transfent. We need to facilitate this transformation!

  • Anil Sethi

    I internalized Max’s comments as: you can “do good,” a social benefit, and “do well,” the economic benefit. They’re not mutually exclusive. It turns out that some amazing companies make truly great products, and that these products just happen to also be used to “do good.” But one can argue whether the original intention was in fact to do good, or just to do well.

    Regardless, I offer the following example of Transformational Entrepreneurship from an industry we would all agree is a sector looking primarily to line their coffers—the pharmaceutical industry that routinely invents conditions like “restless leg syndrome” in order to conjure up yet another $300M/year drug. Jeez, I didn’t even know I could get restless legs syndrome?

    Max has correctly put Personalized Medicine (PM) in the upper right quadrant. PM offers an incredible opportunity for Transformational Entrepreneurs to do well, and good, all at the same time. Lets examine a few trends.

    (1) Big Pharma’s traditional “wet chemistry” is quickly giving way to computational biology, using both hardware and software. Genomics, and by extension gene sequencers, are all about chips (hardware), and big data (software). Where in the US do we do this better than any other place, yes, Silicon Valley. So there’s a trend away from New Jersey ($Big Pharma$) and towards social entrepreneurship (Silicon Valley).

    (2) The pharmaceutical industry was once all about “Formulation IP.” Specifically, “invent a synthetic molecule” simply because they demanded intellectual property protection as a benefit of their invention. Forget about the fact that natural biologics are typically safer and often effective when compared to stuff… dreamed up in a lab. But, is big Pharma about safety and efficacy, or are they about patent protection and profits? (Asked, and answered) So when it comes to PM, protein therapeutics and genomics leads the day—sorry Big Pharma—but God owns the IP protection on that stuff. You’re SOL. So, Pharma and Biotech are now looking for their second lines of IP, namely drug-delivery patents . If they can’t get IP protection around the molecule itself, the next best IP is drug-delivery technologies such as implantable insulin pumps, or novel microneedle transdermal patch technology etc. Soo…it turns out that we in the Bay Area specialize in drug-delivery and medical devices (natch). Personally, I see a move away from New Jersey/San Diego, and towards tech centers. Away from exclusively profit-oriented motivations, and towards a balanced do good+well approach.

    (3) Finally, let’s look at the output of PM technology resulting from sequencing patent’s genomes. Lets all say this together, BIG DATA. Once we know the genotype information, we can start manufacturing niche biotech drugs, IP protected through novel delivery technology—all based on the massive analytic IT software, yet to be created. Once again, here’s a segue to the technology centers, worldwide. It’s a natural progression from a genotype databanks (BIG data), to the phenotype knowledge (analytic software) that drives niche/orphan drug development of the future. An ability to solve niche social problems without need for paydays from only blockbuster drugs. I immediately see drug development moving from broken pharma elsewhere in the US, to tech.

    This is just one 30,000ft example for socially beneficial entrepreneurship—to do good, and do well, all at the same time.

    Flame suit on, back to lurking, thanks to Max for an incredibly well articulated thought.

  • evan-a

    Very nice post… I finally understand what I do…

    I do Transformational Entrepreneurship… a hard thing to do nowadays…

    Our team from Greece, Portugal, Germany, UK and Belgium is trying to re-invent how public funding is happening for startups and how we can convergence liberal markets and democracy…

    It seems that we have found a way that we have all, Aristotle, Marx, Hayek and mr. Smith very happy…

    What we do is a very new thing… is Crowdnovation… innovation that comes from the crowd… or in more specific terms:

    Crowdnovation describes the crowd sourced process of leveraging ideas, people and assets which generate innovation and sustainable growth by mitigating the dominance of tangible capital with the substitution of it with intangible values.

    The huge question is how a Transformational Entrepreneurship can rise funding to be realized and change the world once more…

    More at:

  • Nick Such
  • Terrible

    Ug. Terrible second matrix. Please see here why this is very wrong:

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  • simaryoos

    great work. What was the research method used for project Genome?