The Impact Tech Startup: Initial Findings on a New, SDG-Focused Organizational Category ^†

Abstract

This study sheds light on the prevalence, focus, and key structural dimensions of the Impact Tech Startup—a new organizational category of enterprise whose technologically innovative products or services are aimed at creating social or environmental impact. After tracing the Impact Tech Startup’s conceptual roots and the features it shares with startups and social enterprises, we examine the context of Israel as a particularly supportive environment for startup entrepreneurship. We then present the initial findings from our empirical study conducted in Israel, in which we examined 1657 startups, developed a machine learning algorithm to identify which of these can be classified as an Impact Tech Startup, and clustered the results within the framework of the United Nations’ 17 Sustainable Development Goals. Our findings indicate that approximately one third of Israel’s startups can be classified as an Impact Tech Startup. Of these, almost a third are producing products or services relevant to Sustainable Development Goal 3 (Good Health and Well-being). Furthermore, we find that the technologies deployed by ITSs can help optimize decisions by professionals and, in doing so, substantially contribute to tackling social and environmental challenges. This study aimed to give the Impact Tech Startup an initial “face” and to invite further, more detailed studies in the future.

1. Introduction

The growing awareness of global, social, and environmental challenges faced throughout the past decade—including food security, access to clean water, and the proliferation of non-communicable diseases, to name just a few examples—has turned more business leaders’ attention and interest towards the concept of impact (Cohen, 2020; Johnson & Schaltegger, 2020) [1,2]. This interest has not bypassed the startup world. The possibility that technologically innovative startups can create products and services that benefit not only their founders, investors, and customers, but also society and/or the environment more broadly, is increasingly recognized within the business and academic communities (Giones & Brem, 2017; Olteanu & Fichter, 2022) [3,4]. Yet, while startups tend to be classified into frequently researched, thematic categories: e.g., fintech, cyber security tech, healthtech, etc., the Impact Tech Startup (ITS)—a type of startup whose products or services are aimed at creating social or environmental impact—has not been studied empirically as a distinct category.

An initial conceptualization of the ITS as a new organizational category can be found in Gidron et al. (2021) [5]. The authors suggested that the ITS combines characteristics of a regular startup, namely a strong focus on technology and innovation, operation within conditions of extreme uncertainty, attempts to explore new business opportunities, etc., with those of a social enterprise, namely a dual mission to achieve both social/environmental and commercial objectives. Furthermore, the paper proposed a methodology based on artificial intelligence (AI) and natural language processing (NLP), enabling researchers to identify ITSs from within startup databases and using the publicly available information provided on a startup’s website. This methodology uses the United Nations Sustainable Development Goals as a framework for classifying ITSs into different areas of impact. The UN 17 SDGs provide a wide range of objectives, covering the domains of the environment, society, and the economy, thus accentuating the interrelationships among them: Harming any one of those domains impacts immediately the other two.

This paper continues that effort. It presents findings from an empirical study conducted in Israel that utilizes the above-mentioned conceptualization and methodology. It also provides, for the first time, empirical data on the new organizational category of ITSs—findings that enable researchers to build up a picture of their structural characteristics (number of employees, age, gender of founders, geographic location, etc.).

In this study, we pose the following research questions:

(a)

Within the world of startups in Israel, how many startups can be categorized as ITSs, and how are these distributed within the framework of the 17 Sustainable Development Goals?

(b)

Do ITSs differ from non-ITSs? If so, along which structural dimensions do they differ?

(c)

In a combined analysis of the 17 SDGs, broken down into the categories of social, economic, and environmental (see: Dalampira & Nastis, 2020; Folke et al., 2016; Shi et al., 2019) [6,7,8], are there any differences between ITSs along those categories? Which of these categories share characteristics with non-ITSs?

(d)

Finally, can our findings shed further light on an observation made in an earlier paper (Gidron et al., 2021) [5] in which the ITS is situated as an organizational category combining elements of startup and social enterprise?

Given that our study focuses on a new organizational category that has hitherto never been studied empirically, it is natural that the first step of our analysis is data-driven rather than theory-driven and focuses on descriptive data (Leavitt et al., 2021) [9]. The findings of this analysis should provide a starting point for the development of further research questions such as motivational antecedents of ITS founders and investors, the ecosystems in which they operate, organizational dynamics, policies towards them, and more.

The paper is divided into five parts: (1) The Impact Tech Startup Organizational Category: Rationale and Conceptual Roots (2) The Israeli Context; (3) Methodology, (4) Findings; and (5) Discussion.

2. The Impact Tech Startup Organizational Category: Rationale and Conceptual Roots

Recently, against a background of increasing social and economic inequality, widening gaps within and between societies, and the dramatically developing climate crisis, a more critical stance towards the predominant neoliberal economic model has emerged, proposing alternatives (Mazzucato M., 2013; 2018; 2021; Piketty, 2014; Gidron & Domaradzka, 2021) [10,11,12,13,14]. Meanwhile, we can also observe a growing awareness of the urgency of addressing social and environmental concerns—alongside the primary goal of achieving profits. This trend is also expressed in public policy, articulated by the OECD and European agencies (OECD, 2021) [15]. So-called green strategy, for example, has been adopted by the business sector to focus on sustainability, with greater attention paid to environmental and social concerns (Olson, 2008) [16].

Thus, in marked contrast to the organizational landscape that existed before the global economic crisis of 2008, when there was a rather clear-cut distinction between (the business and nonprofit) sectors, presently hybrid organizational forms are emerging (see Battilana & Lee, 2014 [17] for an overview). These aim to solve social and environmental problems—as well as generate profit—simultaneously. An ever-increasing volume of academic research has traced this development, expressed in concepts such as the “social economy”, “circular economy”, “social enterprise”, “social innovation”, etc. (see Defourny & Nyssens, 2008; Galera & Borzaga, 2009 [18,19] for an overview). Furthermore, technological changes and innovations derived from the neoliberal model emerged as the material and ideational manifestation of growth (Heilbrunn & Iannone, 2019) [20]. In parallel, the emergence of the startup as an organizational form, combining technology, entrepreneurship, innovation, and a focus on profit, has become a major driver of the capitalist economy. Logically, ITSs represent the next step in the journey, namely the need to harness the strengths of both the private and nonprofit sectors to address urgent social and environmental issues.

If technological solutions can address the world’s social and environmental challenges, the startup as an organizational form is well-placed to develop these. The importance of the new category of ITS lies in the fact that in the aggregate, they represent actual technological innovation in the domains of society and the environment in a country.

The following examples shed light on some current contributions from Israel and elsewhere:

• NRGene (https://www.nrgene.com/, accessed on 12 May 2023) applies innovative cloud-based genomic and data-driven solutions to maximize the potential of natural resources for food security and sustainable agriculture.
• Hilico (https://hilico.com/, accessed on 1 June 2023) a portable, lightweight, and innovative rain harvesting system, designed to sustainably provide clean drinking water to off-grid communities and disaster relief areas worldwide.
• Axilion (https://axilion.com/, accessed on 1 June 2023) Smart Mobility, whose AI-based Digital Twin platform merges the physical and virtual worlds, to create less congested, citizen-friendly streets. Empowered to be agile, cities can quickly adapt their transport networks in real time, responding to new and ever-evolving needs.

Singling out those startups that focus on solutions to challenges faced by society and the environment and identifying their specific characteristics is an essential step toward developing policies and encouraging investors to support them. Thus, a major objective of this study is to define ITS as a new category and give it an initial “face”. However, the study does not only single out these startups as a general category (ITSs) but also categorizes them into the 17 specific SDG categories, which enables mapping the phenomenon by domains of activity. This categorization allows different stakeholders (investors, regulators, etc.) to intervene on their behalf in specific fields that call for intervention.

We define the ITS as a startup aiming at social and/or environmental impact as a core part of its mission and business model. As a distinct organizational category, the ITS derives from four origins: (1) the startup form, with its focus on technological innovation and profit-generation; (2) the social enterprise form, whose core aim is to deal with a social/environmental problem or challenge within an entity that engages in commercial activities; (3) the concept of social innovation as a tool for solving social problems, and (4) the concept of impact, which distinguishes ITSs from non-ITSs. We briefly highlight these conceptual perspectives below. The first two are organizational forms that have already been analyzed within a rich academic literature; the third is a general concept that underscores the nature of the activities in which ITSs are involved; the fourth is a key feature of the category we are studying.

2.1. Startups

According to the well-known definition suggested by Blank and Dorf (2010) [21], a startup is a company, partnership, or temporary organization designed to search for a repeatable and scalable business model. Tech startups emerge from the digital technological transformation of entrepreneurial activities and introduce innovative ideas, products, or services (Giones & Brem, 2017; Nambisan, 2016) [3,22]. They disrupt traditional ways of doing business by providing services that are faster, smarter, and more cost-efficient.

A review of the literature on startups suggests that they possess the following common traits:

• They are “young, innovative and growth-oriented” (Dee et al., 2015: 8) [23]. However, scholars lack consensus on how young a startup must be, to be regarded as a startup.
• They aim at new business opportunities and scalability and therefore seek funding (Giones & Brem, 2017) [3].
• They create innovative goods and services in conditions of extreme uncertainty, with little or no operating history, and operate in an environment with high volatility in technologies and markets (El Hanchi & Kerzazi, 2020) [24].
• They create technology-based, innovative products and services.

2.2. Social Enterprises

Social enterprises are private or public organizations that adopt business strategies to achieve socially oriented purposes (Dacin et al., 2011) [25]. They are defined by their combination of a social mission and a commercial orientation (Austin et al., 2006; Doherty et al., 2014; Mair & Martì, 2006) [26,27,28]. Social enterprises exist along a continuum, from purely nonprofit at one end to purely for-profit enterprises on the other, all driven by a social mission of some kind (Defourny & Nyssens, 2017) [29]. Social enterprises rely on collective dynamics involving various types of stakeholders in their governing bodies. They place a high value on their autonomy and bear economic risks linked to their activity (Defourny & Nyssens, 2009; Defourny, Nyssens & Brolis, 2021) [18,30]. Social enterprises are singled out as hybrid organizations, combining the institutional logic of both nonprofit and for-profit organizations.

At first glance, ITSs seem to be a mix of those two forms. From the startup form, they derive the characteristics of being young, innovative, risk-taking, and keen to grow. From the social enterprise form, they derive the dual mission of social/environmental and commercial orientations. Indeed, the literature on social enterprises occasionally discusses technology-based social enterprises (Guckenbiehl, de Zubielqui & Lindsay, 2021) [31], which are ITSs. The question as to which of those two organizational forms ITSs resemble more is an empirical one.

Currently, the literature on hybrid technology-based enterprises is inconclusive and highlights their sheer diversity. Therefore, while the existing literature points towards the innovative approach and societally transformative nature of such hybrid organizations (Olteanu & Fichter, 2020) [32], the same authors and others point out that hybrid startups are not a homogeneous category, but differ in many ways, such as in their prioritization of environmental and social goals over their intended or actual impact on markets (Olteanu & Fichter, 2022; see also: Schaltegger & Wagner, 2011; Navon, 2023) [4,33,34]. Given the tension between the social/environmental focus and the commercial one in hybrid entities in general, our study, focusing on the hybrid startup organizational form, sheds light on that important issue.

2.3. Social Innovation

Social innovations are novel or more effective practices that prove capable of tackling societal issues and are adopted and successfully utilized by the individuals, groups, and organizations concerned. They are seen as the capacity to generate novel ideas, ways, and means of doing things, and of addressing a variety of public and social problems (Van der Have & Rubalcaba, 2016) [35]. Different actors can produce social innovations, including non-profits, business entities, and public bodies, as social innovation is not sector-specific (Krlev, Anheier & Mildenberger, 2018) [36].

2.4. Impact

Impact is a central feature of ITS’s conceptual traits. We do not attempt to measure the impact produced by ITSs and, given the inconsistent theoretical and methodological grounds for measuring the impact of hybrid and social entities (see Grieco, Michelini & Iasevoli, 2015; Cheng & Jung Ho Choi, 2022) [37,38], we take a step back and examine what type of impact is relevant to the ITS model.

We view impact through the lens of transformation and empowerment to solve pressing social and environmental problems. An ITS, by providing an innovative, technology-based product can enable, for example, people with disabilities to realize their potential as equal citizens, or farmers to reap more fruit from their trees. In this regard, impact constitutes the social mission of an ITS. In other words, when a startup’s products or services do not have a potentially transformative capacity to create impact in society and/or the environment, it is not an ITS. The understanding of the impact dimension is therefore strategically important in helping ITSs to clarify their social mission. Thus, in this paper, we define the impact created by ITSs with reference to their new, technology-based, innovative product or service that has a transformative capacity. This focus on transformation as a key objective should be seen as distinct from scenarios in which impact is a mere by-product or supplementary product created as part of the process of production or by the type of staff employed (for example when a cigarette company uses green energy or employs persons with disabilities).

In addition to these major foci on the nature of the Impact Tech Startups—their hybridity and their role as social innovators, our study highlights another perspective related to the ITS phenomenon:

The fact that it is a new organizational category. The creation of a new organizational category or form is often discussed in the organizational theory literature. In this study, we lay the foundations for future empirical studies on this new category. The organizational theory literature uses different lenses to analyze such phenomena. These include the hybridity lens, as ITSs are assumed to combine two institutional logics (Battilana & Lee, 2014) [17], the unique organizational culture and identity lens and the neo-institutional lens (Negro et al. 2010) [39], the stakeholders’ theory lens (Grimes, 2010) [40] and more. However, as this study focuses on structural characteristics of ITSs and relies on an algorithm that is applied to a database (see Methodology), it is impossible to obtain relevant data to enable the use of such lenses in this study. In our Discussion section, we outline in detail the proposed future direction of ITS research, which should address the issues listed above and will, necessarily, use appropriate methodologies to enable viewing the ITS phenomenon from such theoretical lenses.

In summary, the paper contributes to the organizational literature by introducing a new organizational category as well as the literature on hybridity social innovation, and impact. It will make an empirically grounded contribution by portraying the presence and characteristics of a hybrid organizational category among startups.

3. The Israeli Context

Israel has been coined The Startup Nation (Senor & Singer, 2009) [41]. Startups have been a major factor in Israel’s successful economic development throughout the last two decades. One early catalyst for the startup evolution was the establishment of the “Office of the Chief Scientist” in 1968, which had a public budget aimed at coordinating and supporting the development of scientific activities in diverse sectors and industries. However, until the 1970s, Israel’s economy had been more traditional than innovation- and knowledge-based (Gidron & Domaradzka, 2021) [10]. It was not until the 1980s, when major national economic crises struck, including a bank and stocks crisis in 1983 and hyperinflation reaching 450% in 1984, that the Israeli government introduced an Economic Stabilization Plan (Bruno & Piterman, 1987) [42]. This has set in motion a series of significant reforms that would move the country towards a capitalist, market-based economic model (Maron & Shalev, 2017) [43]. As a result, since the 1990s, the Israeli high-tech sector has entered an intensive developing phase to become a central part of the economy and a global technological innovation hub.

According to the Israeli Central Bureau of Statistics (CBS), from 1990 to 2001 the total production, including manufacturing and services, of the high-tech sector grew by 336%. Furthermore, in 1990 the high-tech sector represented 12% of Israel’s exports and 9.9% of its total GDP. By 2000, those figures had risen to 30.7% and 22.7%, respectively. In parallel, the total number of employees in the high-tech sector grew by 51% from 1995 to 2000 (Caplan & Goldmann, 2002) [44]. Throughout the first and second decades of the 21st century, the high-tech sector has continued to grow steadily. In 2020, the sector represented 52% of Israeli exports (Israel Export Institute, 2021) [45], 9.2% of the national workforce (CBS, 2021) [46], and 15% of Israeli GDP (Israel Innovation Authority, 2021) [47]. Moreover, Israel spends 5.44% of its GDP on research and development, making it the global leader in this category (The World Bank, 2022) [48]. The intensive development of the Israeli high-tech sector is also reflected in the global arena. In terms of innovation, Israel was ranked 5th in the Bloomberg Innovation Index (Bloomberg, 2021) [49] and 10th in the Global Innovation Index (WIPO, 2019) [50]. In terms of supporting ecosystem, the StartupBlink Global Startup Ecosystem Index ranked Israel 3rd and Tel Aviv 10th and The Global Startup Ecosystem Report ranked Tel Aviv in the 5th place (GSER, 2023) [51]. These conditions support the fact that more than 300 multinational companies established research and development centers in Israel and that 117 Israeli companies are listed on the NASDAQ, the fourth most companies after the United States, Canada, and China (Bureau of Economic and Business Affairs, 2022) [52].

Many studies have dealt with the diverse factors that contributed directly and indirectly through recent decades to the positioning of Israel as an outstanding startup ecosystem (Senor & Singer, 2009) [41]. One significant and broad factor is the entrepreneurial culture that has emerged over recent decades (Röhl, 2019) [53]. The concept of entrepreneurship has become increasingly culturally present and positively associated with success. Moreover, entrepreneurial skills began to be perceived as fundamental to success in any field and therefore significantly present in education. Indeed, the Ministry of Education introduced entrepreneurship studies in various forms in high schools, and in the past 10–15 years almost all universities and colleges developed distinct programs focusing on entrepreneurship. Furthermore, it is worth highlighting two direct prominent drivers that significantly helped in the formation of the Israeli high-tech industry. The first was the establishment of the government program Yozma (“initiative” in Hebrew), aimed at prompting venture investments in Israel (Yozma, 2023) [54]. Launched in 1993 with a budget of USD 100 million, Yozma attracted foreign money to jointly fund ten domestic VCs aimed at the high-tech cluster, triggering the emergence of the Israeli Venture Capital (VC) industry. Yozma was a remarkable success, achieving within 10 years an Exit (IPO or M&A) rate of 56% and a total sum of USD 3.2 billion managed by this group of funds (Avnimelech, 2009) [55]. A second significant factor is the knowledge spillover from the Israel Defense Forces (IDF) into the civilian sector (Honig, Lerner, & Raban, 2006) [56]. The skills developed during military service, mainly through serving in the elite technological units and by participating in academic reserve tracks, enable a seamless transition to the private sector (Baram & Ben-Israel, 2019) [57]. This spillover effect contributes to the whole Israeli startup ecosystem but is most clearly demonstrated in the Israeli cybersecurity sector, which includes some world-leading companies such as Check Point and Cyber Ark.

This compelling economic success has a dark side, however. Critics have pointed out the potentially harmful effects of Israel’s high-tech sector’s products and the unequal distribution of its benefits—aspects masked by the country’s impressive macroeconomic data as described above. In her recent book Heilbrunn (2022) [58] argues that the main beneficiaries of Israel’s high-tech industry are those who work in the industry itself, constituting less than 10% of the total Israeli workforce, and the investors, who are primarily multinationals and VCs. The rest of Israel’s society, in particular the disadvantaged groups such as Arab-Palestinians, Ultraorthodox Jews, and women, does not (directly) benefit from this economic success. Furthermore, major parts of the industry are devoted to gambling or cyberattack technologies, raising significant ethical questions and generating a great deal of media attention (Mazzetti & Bergman, 2023) [59].

Consequently, although the rise of the high-tech sector has significantly contributed to Israel’s economy, the need to harness this success for social and environmental purposes has become ever more relevant. A major advocate for this trend is Sir Ronald Cohen, an investor in Israel’s economy, who has stated that Israel was transforming itself “from startup nation to impact nation” (Cohen, 2020) [1]. Cohen ushered in impact investment in the country, resulting in a variety of organizational tools, such as investment companies, accelerators, consultants, etc. that have been established to aid companies interested in impact.

In a comprehensive study on the evolution of the impact field in Israel, Navon (2023) [33] analyzes the social entrepreneurship phenomenon. The author focuses on the developments that followed the economic crisis of 2008–2009 and the ensuing demonstrations that targeted the neoliberal economic system in the country as a cause for social inequalities. In the following creative phase, entrepreneurs experimented with new organizational structures that would unite business and social logic. Rejecting the model of cooperative on which a familiar Israeli institution—the Kibbutz—is based, a new and exciting model—social business—gained traction. It was based on the work of Nobel Peace Prize Laureate (2006) Muhammad Yunus’ in the Grameen Bank in Bangladesh and the series of books he wrote on the topic. This model, which evolved into the concept of social enterprise, creates an organizational entity that strives to achieve both social/environmental objectives and commercial ones. This idea captured the imagination of social entrepreneurs, was encouraged to an extent by the government, and attracted private investments. This coincided with the development of the high-tech industry, which created its own distinct branch that became interested in impact.

Navon analyzes the three “frames” of cooperative, social business, and impact to illustrate the evolution of social entrepreneurship from 2010 to 2018. In the study, the author “uncovered three micro-processes underlying the emerging structures of meaning and relationships in the social entrepreneurship field”, which essentially positioned them either closer to or further from the financial and social poles. She further shows that the narratives associated with the social business and impact frames were those of successful businesses, which valued the financial pole and devalued the social pole. In the case of the cooperative frame, the narratives valued the social pole over the financial one. Furthermore, “actors associated with the social business frame positioned themselves as closer to the financial pole and therefore better than social organizations and philanthropy. Actors associated with the impact frame used the same value structure but associated themselves with the high-tech sector, closer to the financial pole and superior to social businesses” (111). Finally, the author traces the field’s trajectory and shows how actors’ frame-ratio and network positions change over time. The author shows how during 2010–2011, the field began with the social business frame and then expanded during 2012–2013, as actors using the cooperative and impact frames joined and interacted with each other. However, between 2014 and 2017, as the field matured, “actors associated with the …Cooperative frame were marginalized, and actors associated with the social business and impact frames, which were more aligned with the institutional environment, became more central but separated from each other, leading to field divergence” (abstract). According to the author, these trends persisted into 2020, with cooperatives no longer affiliated with the field of social entrepreneurship. At the same time, while both the social business and impact frames continued to exist, the actors associated with the impact frame became more central, and the actors associated with the social business frame moved to the margins of the field. “This was reflected in the growing tendency to relate to the field as the impact field versus the social entrepreneurship or social business field” (109).

This work by Navon illustrates the sources and the evolution of the trend toward integrating social/environmental objectives within the logic and organizational framework of business. It focuses on the tension between the two orientations and demonstrates that the impact and social business frames lean more towards the financial/business orientation over the social one in managing their affairs. In other words, the social mission is dependent on the commercial success of the enterprise. That study on the impact field in Israel clearly shows its roots in the social enterprise domain. The high-tech industry and the startup organizational form have a clear advantage over the social enterprise form, as they are capable of scalability, which is rarely the case for social enterprises. The idea that Israeli startups could sell their products internationally was appealing to those interested in impact. Gradually, as we saw, they began to dominate the field, in which the language of “impact” is more common than the “social” one.

The Navon study indicates the common roots in the evolution of the “impact” concept in Israel. In light of the strong emphasis on high-tech in the Israeli economy, the years following the 2008 crisis saw the need to develop a hybrid organizational structure that could stand on its own economic feet while contributing to society and the environment, eventually giving way to a focus on impact.

4. Methodology

When coming to study the ITS phenomenon, given that this organizational category had never been studied empirically before, we faced two interrelated methodological issues:

(1)

How do we identify and single out the ITSs from the rest of the startup population?

(2)

How do we define the impact dimension of startups and how can impact be identified? The aim was not to measure impact, but to create a methodology that helps us identify the domains in which the startup organizational form is creating impact.

For this purpose, we refer to the United Nations Sustainable Development Goals (SDG) framework. The SDGs are a widely accepted framework for defining the parameters of impact. This framework was created in 2015 and includes 17 interlinked goals as well as 169 more specific targets, all of which are intended to be a blueprint for a better and more sustainable future for all. We define the area or domain in which ITS generates impact by placing an ITS within one of the 17 SDGs. Through an analysis of the targets of particular SDGs, we obtain a more precise and concrete idea of their type of contribution to the specific SDG.

Identifying ITSs by the SDG Categories. Our methodology involves developing and employing a machine learning algorithm to automatically allocate each startup to a singular SDG group. We posit that most of the crucial information regarding a startup’s primary objective can be found in the free-form description typically included in the “About Us” section of a startup’s website. Our algorithm was able to analyze an entire database of startups, using the “About Us” section to align the startup with one or more of the 17 SDGs, or to categorize it as “0”, which indicated a non-ITS.

As such, our categorization algorithm relies on natural language processing (NLP) techniques to extract pertinent details for SDG categorization from descriptions written in English. We utilize BERT, a language model adept at capturing the extensive semantic variability inherent in natural languages. We fine-tuned the model using a dataset of startup descriptions accompanied by one of the 17 SDG labels assigned by subject-matter experts. The dataset was initially formed by merging information from two primary sources: Rainmaking Compass (https://rainmaking.io/impact/, accessed on 2 July 2021) and Startup Nation Central (https://startupnationcentral.org, accessed on 1 June 2023). Rainmaking startups originate from various countries and are all classified as ITSs. On the other hand, the companies listed under SNC are all Israeli-based, and not all are considered ITSs. As a result, our classification model was designed to assign one of the 17 SDGs or the “no-impact” label. We managed to gather approximately 2000 startups from each source, culminating in a total of 4247 startups utilized for fine-tuning our model. We have obtained permission to use the data from both sources (see: Gidron et al. 2021) [5].

We were aware that the data acquired from both sources may have been generated following distinct guidelines; we therefore chose to assess our model’s performance using an alternative dataset, constructed from the ground up in accordance with guidelines that we developed specifically for this work. This new evaluation dataset comprises 343 startups from various countries, each manually assigned an SDG label. The guidelines for assigning SDG labels were devised based on the SDG targets and indicators published by the United Nations. During our annotation process, two experts (who are also authors of this paper) independently assigned a label to each startup. Instances of label disagreements were discussed among the experts, and necessary adjustments were made over two annotation rounds. Our model’s accuracy on the evaluation dataset was determined to be 75%. To enhance our model’s performance, we engaged an external expert (not an author of this paper) to annotate startups randomly selected from Crunchbase, adhering to our annotation guidelines. This additional dataset, comprising 903 startups, was combined with the initial 4247 startups from Rainmaking and SNC to fine-tune our classifier. Utilizing this expanded dataset, we successfully achieved an improved accuracy of 78%.

Given that not all types of organizations can contribute to all SDGs, this framework enables a researcher who is interested in a specific organizational form or category to map its contribution based on its specific characteristics. Thus, for example, a map of the specific SDGs to which an institution of higher education contributes will be very different from that of a bus company or a nonprofit organization engaged in creating a dialogue between opposing groups in society. The initial idea is to create such a map for the startup organizational form.

Once we had distributed the ITSs into SDG categories, we could start analyzing their structural characteristics, such as gender of founders, number of employees, total funding, etc. We obtained this information from the homepage of each ITS. These data also enabled us to create a “map” of the ITS phenomenon in the country by the SDG frequencies. We later divided those 17 SDGs into three categories, namely social, economic, and environmental (Dalampira & Nastis, 2020; Folke et al., 2016; Shi et al., 2019) [6,7,8], which enabled us to engage in additional analyses.

Defining Startups’ Impact. We define a startup’s impact through the innovative product it produces or service it delivers, the utilization of which creates impact. This could include a startup that develops technology to identify populations at risk of breast cancer, or another that can “read” texts for blind people. Hence, we do not take into account in our impact definition the process of production (e.g., green energy), the type of staff employed by the startup (e.g., minorities), or other aspects. As we are not measuring impact and focus on the product/service as the creator of impact, we assume that an existing ITS, regardless of its level of sales (as opposed to those who failed and no longer exist), has demand for its products/services. Thus, this product/service is the creator of impact. As we are not focusing on the individual ITS but rather on their categories, represented by the 17 SDGs, we aim to classify the types of impact achieved in each relevant SDG, which enables us to identify the specific domains in which ITSs contribute to society and the environment.

This was done via an analysis of the 17 SDGs’ 169 targets. These targets are more concrete and shed light on the types of contribution ITSs can have along the different SDGs. Thus, as startups rely on technologies, multi-source, and big data analytics, they can develop data-driven systems for better management and decision-making. In our analysis of the targets of the Good Health and Well-being area (SDG 3) for example, we found that ITSs are developing medical and monitoring devices for personal use and hospitals, diagnostics devices for better patient treatment and healing, as well as new medicines, with complex data foundations. This analysis enables us to state that ITSs’ concrete impact on SDG 3 includes new modes of disease detection, the laboratory-based development of new drugs and treatment protocols to improve clinical outcomes as well as devices for facilitating communications for people with disabilities. Such analyses of the SDG’s targets enable us to pinpoint the specific contributions of the ITS organizational category and more broadly, the startup organizational form, towards different SDGs and therefore to society and the environment.

5. Findings

We divide our findings section into two: (1) The analysis of the statistical data regarding the structural dimensions of the ITS as a distinct organizational category, and (2) the analysis of the impact data and the identification of the specific domains to which ITSs contribute.

5.1. Structural Dimensions of ITSs

A total of 1657 startups that were established in Israel between 2002 and 2022 were found in the Crunchbase dataset. Of these 1657, 546 (32.95%) were categorized as ITSs, and 1111 (67.01%) were categorized as non-ITSs.

Table 1. Distribution of ITSs along 17 SDG categories.

	No. of SDG	Number of ITS	% ITS of Total
No Poverty	1	17	3.11
Zero Hunger	2	38	6.96
Good Health and Well-being	3	155	28.39
Quality Education	4	57	10.44
Gender Equality	5	1	0.18
Clean Water and Sanitation	6	16	2.93
Affordable and Clean Energy	7	30	5.49
Decent Work and Economic Growth	8	59	10.81
Industry, Innovation, and Infrastructure	9	67	12.27
Reduced Inequality	10	6	1.1
Sustainable Cities and Communities	11	34	6.23
Responsible Consumption and Production	12	12	2.2
Climate Action	13	1	0.18
Life Below Water	14	2	0.37
Life on Land	15	5	0.92
Peace and Justice Strong Institutions	16	45	8.24
Partnerships to Achieve the Goal	17	1	0.18
	Total	546	100%

presents the distribution of ITSs among the 17 SDG categories.

As can be seen from Table 1, 62% of all Israeli ITSs are concentrated along four SDGs. ITSs focusing on Good Health and Well-being (SDG 3) comprise over 28% of the total; other ITSs work on quality education (SDG 4); decent work and economic growth (SDG 8) and industry, innovation, and infrastructure (SDG 9). An additional 27% can be found along the following SDGs: Zero Hunger (SDG 2); Affordable and Clean Energy (SDG 7); Sustainable Cities and Communities (SDG 11) and Peace, Justice and Strong Institutions (SDG 16).

Given the small figures in most individual SDG categories, we combined the 17 SDGs into three categories: Social: SDGs 1, 3, 4, 5, 16, and 17; Economic: SDGs 2, 8, 9, 10, 11, and 12; and Environmental: SDGs 6, 7, 13, 14 and 15 (see Dalampira & Nastis, 2020; Folke et al., 2016; Shi et al., 2019) [6,7,8]. On this basis, we found that the majority of ITSs in Israel belong to the social category (50.55%), followed by the economic category (39.56%) and the environmental category (9.89%).

Next, we introduced a set of structural organizational variables that were listed on the Crunchbase website of the startups we studied and tested those for significance along two tracks: (1) comparing ITSs to non-ITSs, and (2) within the ITS category, comparing among ITSs of the three categories—social, economic and environmental.

The eight variables we analyzed were along four structural dimensions:

A.

Founding: (i) number of founders; (ii) gender of the founder (s); (iii) year of foundation

B.

Number of Employees

C.

Finances: (i) number of investors; (ii) total funding; (iii) revenues

D.

Geographic Location

5.1.1. Founding of Startups

Number of Founders

Table 2. Number of founders in the startup within different categories. % from total in parenthesis.

	Panel A: Number of Founders in the Startup
	1	2+	Total
ITS	172	239	411
	(41.85)	(58.15)	(100)
Non-ITS	323	461	784
	(41.2)	(58.8)	(100)
Total	495	700	1195
Pearson chi2(1)	0.047	Prob.	0.8284
	Panel B: Number of Founders in the Startup
	1	2+	Total
Economic	55	104	159
	(34.59)	(65.41)	(100)
Environmental	17	21	38
	(44.74)	(55.26)	(100)
Social	100	114	214
	(46.73)	(53.27)	(100)
Non-ITS	323	461	784
	(41.2)	(58.8)
Total	495	700	1195
Pearson chi2(1)	5.7296	Prob.	0.1255

Notes: The tables show frequencies and % of the total in parentheses.

, Panel A presents the number of founders that established the startup. We divided the number of founders into two categories: “1” and “2+”. We found no significant difference between ITSs and non-ITSs, nor within the ITS-combined categories in such an analysis. However, as we can see in Panel B, there is a higher percentage of solo founders in the social and environmental categories than in the other two categories. When we combined social and environmental categories, we found that economic ITSs tend to have significantly more founders than the non-ITSs and the other two categories (6% significant).

Gender of Founders

Table 3. Number of startups with female founders in the founders’ team. % from total in parenthesis.

Panel A: Startups with Female Founders
	At Least One Female Founder	No Female Founder	Total
ITS	62	349	411
	(15.09)	(84.91)	(100)
Non-ITS	94	690	784
	(11.99)	(88.01)	(100)
Total	156	1039	1195
	(13.05)	(86.95)	(100)
Pearson chi2(1)	2.2762	Prob.	0.1314
Panel B: Startups with Female Founders
	At Least One Female Founder	No Female Founder	Total
Economic	20	139	159
	(12.58)	(87.42)	(100)
Environmental	3	35	38
	(7.89)	(92.11)	(100)
Social	39	175	214
	(18.22)	(81.78)	(100)
Non-ITS	94	690	784
	(11.99)	(88.01)	(100)
Total	156	1039	1195
Pearson chi2(1)	6.7452	Prob.	0.0805 *

Notes: The tables show frequencies and % of the total in parentheses. * denotes significance at 10%.

presents the share of women in the founding team. In general, there are few women founders in the startup sector (13%). In the ITS category, the ratio is slightly higher (15% vs. 12%) than in the non-ITS category but it is not statistically significant. Within the ITS category, the highest number of women can be found in the social category (18%) and the lowest in the environmental category (8%); economic ITSs and non-ITSs have a similar proportion of women founders (12%), which is significant at a statistical level of 8%. When we combine economic ITSs and non-ITSs, our result is significant at a statistical level of 3.5%.

Year of Foundation

No significant differences were found in the comparison between ITSs and non-ITS regarding the time of their establishment. However, a significant difference was found within the ITS category: Only 14.81% of the environmental ITSs were established from 2015 to 2022 as compared to 29.63% in the economic category and 25.72% in the social category. Those differences are significant at 1.42% (

Table 4. Number of startups founded from 2002. % from total in parenthesis.

Panel A: Foundation Years of Startups 2002–2022
	2002–2009	2010–2014	2015–2022	Total
ITS	150	253	143	546
	(27.47)	(46.34)	(26.19)	(100)
Non-ITS	287	570	254	1111
	(25.83)	(51.31)	(22.86)	(100)
Total	437	823	374	1657
Pearson chi2(1)	3.88	Prob.	0.14
Panel B: Foundation Years of Startups 2002–2022
	2002–2009	2010–2014	2015–2022	Total
Economic	47	105	64	216
	(21.76)	(48.61)	(29.63)	(100)
Environment	23	23	8	54
	(42.59)	(42.59)	(14.81)	(100)
Social	80	125	71	276
	(28.99)	(45.29)	(25.72)	(100)
Non-ITS	287	570	254	1111
	(25.83)	(51.31)	(22.86)	(100)
Total	437	823	397	1657
Pearson chi2(1)	15.92	Prob.	0.0142 **

Notes: The tables show frequencies and % of the total in parentheses. ** denotes significance at 5%.

).

5.1.2. Employees

In analyzing employee numbers, we divided startups into the following three categories: 1–10 employees, 11–50, and 51+, respectively (

Table 5. Number of startups within a different number of employees’ categories. % from total in parenthesis.

Panel A: Number of Employees
	1–11	11–50	51+	Total
ITS	276	201	69	546
	(50.55)	(36.81)	(12.64)	(100)
Non-ITS	559	449	103	1111
	(50.32)	(40.41)	(9.27)	(100)
Total	835	650	172	1657
Pearson chi2(1)	5.2109	Prob.	0.0739 *
Panel B: Number of Employees
	1–11	11–50	51+	Total
Economic	102	84	30	216
	(47.22)	(38.89)	(13.89)	(100)
Environmental	33	19	2	54
	(61.11)	(35.19)	(3.7)	(100)
Social	141	98	37	276
	(51.09)	(35.51)	(13.41)	(100)
Non-ITS	559	449	103	1111
	(50.32)	(40.41)	(9.27)	(100)
Total	835	650	172	1657
Pearson chi2(1)	11.9252	Prob.	0.0637 *

Notes: The tables show frequencies and % of the total in parentheses. * denotes significance at 10%.

). When we compared ITSs to non-ITSs, we found a similar ratio of small enterprises (a little over 50%) in both categories. However, 12.64% of ITSs had 51+ employees, in contrast to 9.27% of the non-ITS category, which is statistically significant at the level of 7.39%. In our analysis of ITSs, we found that the environmental category contained the highest proportion (61.11%) of small enterprises, whereas the economic and social categories contained the highest proportion of large enterprises (13.89% and 13.41%, respectively). These differences were significant at the level of 6.37%.

5.1.3. Finances

Number of Investors

Over 40% of each startup category has three or more investors. No significant differences were found in the comparison between ITSs and non-ITSs, nor the comparison within the three ITS-combined categories. (

Table 6. Startups with different numbers of investors. % from total in parenthesis.

	Panel A: Number of Investors
	1	2	3+	Total
ITS	85	40	120	245
	(34.69)	(16.33)	(48.98)	(100)
Non-ITS	128	62	156	346
	(36.99)	(17.92)	(45.09)	(100)
Total	213	102	276	591
Pearson chi2(1)	0.8868	Prob.	0.6418
	Panel B: Number of Investors
	1	2	3+	Total
Economic	33	16	48	97
	(34.02)	(16.49)	(49.48)	(100)
Environmental	10	3	9	22
	(45.45)	(13.64)	(40.91)	(100)
Social	42	21	63	126
	(33.33)	(16.67)	(50)	(100)
Non-ITS	128	62	156	346
	(36.99)	(17.92)	(45.09)	(100)
Total	213	102	276	591
Pearson chi2(1)	2.1131	Prob.	0.909

Notes: The tables show frequencies and % of the total in parentheses.

).

Total Funding

Table 7. Number of startups within different funding amounts, in USD % from total in parenthesis.

	Panel A: Total Funding Amount, in USD
	0–500 k	500 k+	Total
ITS	75	198	273
	(27.47)	(72.53)	(100)
Non-ITS	166	272	438
	(37.9)	(62.1)	(100)
Total	241	470	711
Pearson chi2(1)	8.1604	Prob.	0.0043 ***
	Panel B: Total Funding Amount, in USD
	0–500 k	500 k+	Total
Economic	34	75	109
	(31.19)	(68.81)	(100)
Environmental	9	16	25
	(36)	(64)	(100)
Social	32	107	139
	(23.02)	(76.98)	(100)
Non-ITS	166	272	438
	(37.9)	(62.1)	(100)
Total	241	470	711
Pearson chi2(1)	10.874	Prob.	0.0124 **

Notes: The tables show frequencies and % of the total in parentheses. ***, ** denote significance at 1% and 5%, respectively.

presents the total funding of the different startup categories.

Almost ¾ (72.53%) of ITSs had total funding of USD 500,000 or more, as compared to 62.1% in the non-ITS category. This finding was significant at 0.43%. A comparison within the three ITS categories reveals that in the social category, 76.98% had total funding of more than USD 500,000, as compared to 68.81% in the economic category and 64% in the environmental category.

When averages of total funding were compared, we saw that the average funding of ITSs—at USD 25,746,183—is significantly higher than the USD 14,585,261 enjoyed by non-ITSs. Furthermore, the average funding of social ITSs (USD 30,091,582) is higher than that of economic ITSs (USD 24,717,268) but this difference is not significant. Both categories enjoy significantly higher average funding than both non-ITSs (USD 14,585,261) and environmental ITSs (USD 6,071,833).

Revenues

Over 50% of startups of all kinds had revenues in the USD 1–10 million category. No significant differences were found in the comparison of revenues between the different categories of startups tested (

Table 8. Number of startups within different revenue categories, in USD. % from total in parenthesis.

	Panel A: Revenues Amount, in USD
	Less than USD 1M	USD 1 M to USD 10 M	USD 10 M to USD 50 M	Total
ITS	208	295	43	546
	(38.1)	(54.03)	(7.88)	(100)
Non-ITS	436	603	72	1111
	(39.24)	(54.28)	(6.48)	(100)
Total	644	898	115	1657
Pearson chi2(1)	1.1546	Prob.	0.5614
	Panel B: Revenues Amount, in USD
	Less than USD 1 M	USD 1 M to USD 10 M	USD 10 M to USD 50 M	Total
Economic	80	119	17	216
	(37.04)	(55.09)	(7.87)	(100)
Environmental	20	31	3	54
	(37.04)	(57.41)	(5.56)	(100)
Social	108	145	23	276
	(39.13)	(52.54)	(8.33)	(100)
Non-ITS	436	603	72	1111
	(39.24)	(54.28)	(6.48)	(100)
Total	644	898	115	1657
Pearson chi2(1)	2.0829	Prob.	0.9119

Notes: The tables show frequencies and % of the total in parentheses.

).

Next, we combined the variables of revenue and total funding and tested those across the categories on which we focused (

Table 9. Total Funding vs. Revenue.

Panel A: Funding vs. Revenue
	High Fd. High Rev.(1)	Low Fd. Low Rev.(2)	Low Fd. High Rev.(3)	High Fd. Low Rev.(4)	Total
Non-ITS	187	86	80	85	438
	(42.69)	(19.63)	(18.26)	(19.41)	(100)
ITS	149	37	38	49	273
	(54.58)	(13.55)	(13.92)	(17.95)	(100)
Total	336	123	118	134	711
Pearson chi2(1)	10.7252	Prob.	0.0133 **
Panel B: Funding vs. Revenue
	High. Fd. High Rev.(1)	Low Fd. Low Rev.(2)	Low Fd. High Rev.(3)	High Fd. Low Rev.(4)	Total
Economic	61	18	16	14	109
	(55.96)	(16.51)	(14.68)	(12.84)	(100)
Environment	10	5	4	6	25
	(40)	(20)	(16)	(24)	(100)
Social	78	14	18	29	139
	(56.12)	(10.07)	(12.95)	(20.86)	(100)
Non-ITS	187	86	80	85	438
	(42.69)	(19.63)	(18.26)	(19.41)	(100)
Total	336	123	118	134	711
Pearson chi2(1)	16.891	Prob.	0.0505 *

Notes: The tables show frequencies and % of the total in parentheses. **, and * denote significance at 5% and 10%, respectively.

). We looked at four possibilities: (1) high total funding (more than USD 500,000) and high revenue (more than USD 1 million); (2) Low total funding (USD 0–500,000) and low revenue (Less than USD 1 million); (3) Low total funding and high revenue; and (4) High total funding and low revenue.

In the first possibility—high total funding and high revenue—we found a higher percentage of ITSs as compared to non-ITSs (55% vs. 43%), and a higher percentage of ITSs belonging to the economic and social categories (56%), as compared to the environmental category (40%).

In the second possibility—low funding and low revenue—we also found a difference between ITSs and non-ITSs. 13.55% of the ITSs, as compared to 19.63% of the non-ITSs had low funding and low revenue. Within the ITS category, 20% of environmental ITSs had low funding and low revenue as compared to 16.51% of the economic and 14% of the social categories.

In the third possibility—low funding and high revenue—a higher proportion of non-ITSs (18.26%) as compared to ITSs (13.92%) were concerned. Within the ITS category, 16% of the environmental ITSs, as compared to 14.68% of the economic and 12.95% of the social ITSs, had low funding and high revenues.

Finally, when we analyzed those startups with high funding and low revenues (the fourth possibility), we found slightly more non-ITSs than ITSs: 19.41% vs. 17.95%. Within the ITS category itself, we found a major difference between the economic ITSs, of which only 12.84% had high funding and low revenues, as compared to 24% of the environmental and 20.86% of the social ITSs.

The levels of significance for these analyses were 1.33% for the comparisons between ITSs and non-ITSs and 5% for the comparisons within the ITS category.

5.1.4. Geography

In testing startups’ geographic locations, we devised three categories: (1) Tel Aviv city as the economic hub of Israel; (2) Tel Aviv vicinity, namely the towns and cities surrounding Tel Aviv, such as Herzliya, Petach Tikvah, Rishon Le’Zion, Ramat Gan, Holon and (3) Other, which includes both large cities such as Jerusalem and Haifa and smaller cities and towns along the coastal shore (Hadera, Netanya) in the Galilee (Safed, Nahariya, Kiryat Shmona) and the Negev (Beer-Sheva, Ashkelon, Ashdod) (

Table 10. Number of startups in different geographic locations in Israel. % from total in parenthesis.

	Panel A: Geographic Location in Israel
	Tel Aviv City	Tel Aviv Vicinity	Other	Total
ITS	270	156	120	546
	(49.45)	(28.57)	(21.98)	(100)
Non-ITS	678	233	200	1111
	(61.03)	(20.97)	(18)	(100)
Total	948	389	320	1657
Pearson chi2(1)	20.5765	Prob.	0.0001 ***
	Panel B: Geographic Location in Israel
	Tel Aviv City	Tel Aviv Vicinity	Other	Total
Economic	113	68	35	216
	(52.31)	(31.48)	(16.2)	(100)
Environment	17	22	15	54
	(31.48)	(40.74)	(27.78)	(100)
Social	140	66	70	276
	(50.72)	(23.91)	(25.36)	(100)
Non-ITS	678	233	200	1111
	(61.03)	(20.97)	(18)	(100)
Total	948	389	320	1657
Pearson chi2(1)	37.0558	Prob.	0.0001 ***

Notes: The tables show frequencies and % of the total in parentheses. *** denotes significance at 1%.

). Our first important finding was that 80% of all startups in Israel are in and around the Tel Aviv hub.

We then found significant differences when comparing ITSs to non-ITSs: more ITSs are in the vicinity of Tel Aviv and other locations in Israel than non-ITSs. Thus, in effect, a small majority of the ITSs (50.55%) are located outside of Tel Aviv city. A total of 29% of ITSs and 21% of non-ITSs are situated in the vicinity of Tel Aviv; in the “Other” category the difference is smaller (22% vs. 18%); the level of significance is 0.01%.

In the comparison between the different categories of ITS, over 50% of all ITSs in the social and economic categories are in Tel Aviv city, compared to only 31.48% of the ITSs in the environmental category. The percentage of companies that are in the “Other” geographic category is much higher in the environmental and social categories (27.78% and 25.36%, respectively vs. 16% and 18% in economic and non-ITSs). These findings are significant again at the 0.01% level.

Summary of Statistical Findings

Based on the data analyzed, we categorized approximately one third of Israeli startups as ITSs, with most of these working on issues relevant to SDG 3 (Good Health and Well-being). After clustering the ITSs into three thematic categories (social, economic, and environmental), we found the social category to be the largest, followed by economic and environmental.

Next, the focus of the statistical analysis was on the structural characteristics of the startups, namely the founding, financial, demographic, and geographic variables. Here, we tested for significant differences both between ITSs and non-ITSs and between the three aforementioned thematic categories of the ITSs—the social, economic, and environmental.

Several issues stand out from the analysis of our findings:

• There are neither significant differences nor small significant differences in the comparison between ITSs and non-ITSs along most structural variables.
• Within the ITS category, the economic cluster seems to be closest to the non-ITS category in several dimensions.
• There are two variables in which significant differences were found that should be highlighted, namely the gender of founders and the geographic location of the startups.
• Gender: There are proportionately more women in the founding teams of ITSs than in non-ITSs. Within ITS, more women can be found in the social category than in the other two. However, startups with women entrepreneurs constitute only a small share (roughly 1/8) of the total population of startups.
• Geography: The data on the geographic distribution of startups in Israel highlights the role of the hub city of Tel Aviv in the startup phenomenon—roughly 80% of all startups are in or around Tel Aviv. We suggest that the choice between Tel Aviv city or its vicinity is most likely driven by the affordability of office rents. A higher proportion of non-ITSs are in Tel Aviv city and, within the ITS category, a lower proportion of the economic category are located outside of the Tel Aviv hub—in the “periphery”, similarly to the non-ITSs. A high proportion of the environmental ITSs are in the vicinity of Tel Aviv.
• The analysis of the relationship between total funding and revenue should give a certain indication regarding the “cost-effectiveness” of the categories we tested—those with low funding and high revenues. Non-ITSs seem to prevail in this comparison, as does the environmental category of ITSs. In the opposite case, where there was high funding and low revenues, there were hardly any differences between ITSs and non-ITSs, but there were major differences within ITSs themselves, with proportionately more social and environmental ITSs than economic ITS operating within these conditions.

5.2. The Impact Dimension of ITSs

Analysis of the Israeli ITS organizational type revealed several main areas of impact. Most Israeli ITSs focus on four SDGs—Good Health and Well-being (SDG 3), Quality Education (SDG 4), Decent Work and Economic Growth (SDG 8), and Industry, Innovation, and Infrastructure (SDG 9). Others focus on Zero Hunger (SDG 2), Affordable and Clean Energy (SDG 7), and Sustainable Cities and Communities (SDG 11).

Table 11. Main Domains of Impact by Israeli ITSs.

SDG	SDG Targets, Addressed by ITSs	Specific Domains of ITSs’ Contribution	Examples
3. Good Health and Well-being	3.8. universal health coverage, financial risk protection, access to quality essential healthcare services, and access to safe… essential medicines and vaccines for all 3.b. research and development of vaccines and medicines … for the diseases that primarily affect developing countries	Early detection of illnesses Remote monitoring	Convergent R.N.R Biobeat
		Digital therapeutics Decision support Systems of patient management	Navina Medivizor
		Discovery and development Drug delivery	Prilenia Omnix Medical Kadimastem
		Assistive technologies	Prilenia
4. Quality education	4.1. … free, equitable, and quality primary and secondary education 4.6. …achieve literacy and numeracy 4.a. …provide learning environments for all	Learning systems Systems of learner management	Mashov
		Online education	Symbolab
8. Decent work and economic growth	8.3. … development-oriented policies that support productive activities, decent job creation, entrepreneurship, creativity, and innovation… access to financial services 8.5. …full and productive employment and decent work for all…	Data-based decision support HR-Tech	Restigo Fillip
9. Industry, innovation, and infrastructure	9.b. …domestic technology development, research, and innovation in developing countries… 9.4. …upgrade infrastructure and retrofit industries to make them sustainable…	Tech-management solutions Tech-diagnostics for production	Locusview Datumate Asterra
		Tech-delivered new materials Clean industry tech solutions	PrintCB Stemrad
2. Zero Hunger	2.3. …double the agricultural productivity and incomes of small-scale food producers … through secure and equal access to land, other productive resources, and inputs… 2.4. … sustainable food production systems and implement resilient agricultural practices that increase productivity and production, that help maintain ecosystems… improve land and soil quality 2.a. Increase investment … to enhance agricultural productive capacity in developing countries	Agronomic optimization and trade Tech decision-making solutions	FieldIn Prospera Technologies
		Tech-yield optimization and harvest Plant protection Pathogens pests	WeedOut EdenShield
		Plant-based foods Food enrichment Cultivated foods	Brevel MeaTech
7. Affordable and clean energy	7.3. double the global rate of improvement in energy efficiency 7.a. ….facilitate access to clean energy research and technology, … promote investment in energy infrastructure and clean energy technology 7.b. … expand infrastructure and upgrade technology for supplying modern and sustainable energy services for all in developing countries…	Eco-efficient energy transition, usage, and storage	Sol Chip Shmuel De-Leon Energy GenCell
11. Sustainable cities and communities	11.2. … access to safe, affordable, accessible, and sustainable transport systems …	Eco-efficient transportation and logistics Smart mobility and traffic optimization Digitally based reducing transportation costs Smart parking solutions	MobilityInsight Trucknet Enterprise sPARK Parking Technologies Axilion Smart Mobility

presents the SDGs in which the highest concentration of ITSs in Israel are engaged. It further analyzes specific targets derived from those SDGs. This enables us to focus on the domains of their activity and hence, to demonstrate the kind of impact ITSs are creating in specific SDGs. Thus, the analysis of the SDG targets directs us to identify with greater precision the domains in which ITSs are engaged. The table provides several examples in each category of specific ITSs providing those impacts.

As such, the analysis of the SDG targets provides the base for a more detailed indication of the type of contribution the ITS category can make to society and the environment in the different fields.

The table highlights the specific areas in which Israeli startups most contribute to society and the environment. When the technological and AI capacities are deployed in the different fields of activity represented by the SDGs, we see that the contribution of startups can generate the creation of novel, more cost-effective processes that are better able to detect and deal with a variety of challenges and problems. These can range from the treatment of specific illnesses to fruit-picking in an orchard, to combating traffic congestion in cities. In all those cases and many others, the technologies deployed by ITSs can help optimize decisions by professionals and, in doing so, substantially contribute to society and the environment.

The list of the predominant SDGs and their targets is based on Israeli data. Nevertheless, it appears that the nature of the problems that ITSs deal with is not dramatically different in other countries, although there may be different foci, arising from each country’s characteristics and public policies.

It is instructive that some SDGs are not at all represented in our findings. These include SDGs 1—no poverty; SDG 5—gender equality; SDG 10—reduced inequality; SDG 14—life below water; SDG 15—life on earth; and SDG 16—peace and justice. This is not to suggest that certain ITSs do not belong to those categories, but they are a small minority within the bigger picture. It is striking that the issues pertaining to justice—SDGs 5, 10, and 16—are not included in our list of contributions by ITS. Although some may argue that justice issues are not subject to technological intervention, they may also be viewed as less attractive to investors. The lack of representation of these SDGs in our findings gives us an indication of what to expect of the startup organizational form and what not to expect of it. These domains currently call for intervention by other organizational forms.

6. Discussion

The goal of this study was to provide an initial empirical foundation for a new organizational category—the Impact Tech Startup—which refers to those startups engaged in creating social and environmental impact. Researchers are still debating which exact term best depicts the category. SDG-oriented, tech4impact, impact-aligned, and technology-based social enterprise are currently used synonymously with Impact Tech Startup. Regardless of which exact term finally prevails, our common focus is on the phenomenon of an innovative, technology-based business that creates products or services to benefit society and the environment. We argue that, because of its social/environmental focus, an Impact Tech Startup is likely to have some unique features that distinguish it from other startups. We aimed to give that category an initial “face” as a starting point for more detailed studies in the future.

Our findings provide interesting answers to the research questions we posed. Regarding the first question, we found that roughly a third of Israel’s startups can be categorized as ITSs. In general, these are distributed primarily around the social category in the clusters of the SDGs, with a majority of ITSs geared towards SDG 3, in particular (Good Health and Well-being). These contributions mainly focus on areas of healthcare technologies, biotech and pharmaceuticals, and health infrastructure and systems, which are attractive not only in Israel but in the global market. Other aspects of SDG 3 such as public health and preventive measures, health education, disease surveillance, and vaccination programs as well as mental health were found to be less attractive to startups. These findings are an example of the reason to dig deeper into the targets of the SDGs to gauge the specific domains in which ITSs contribute the most. Since there is limited evidence in the literature on the impact achieved by startups (with some exceptions, see: Numa, Wolf & Pastore, 2023) [60], outlining the domains of impact by ITSs adds value to the current discussion.

The list of specific domains that Israeli ITSs engage in and contribute to, may or may not be similar to ITSs in other countries. It would be important to probe into the reasons for such differences. The analysis of the targets of the SDGs provides a more precise illustration of the domains in which the startup organizational form can specifically contribute to the Sustainable Development Goals.

The fact that ITSs and non-ITSs are broadly similar in their structural (especially financial) features and that the economic cluster of the ITSs is close to the non-ITS category in certain features, stresses the social dimension of the ITS category. This calls for future studies to probe deeper into the issues that were not covered in this study, such as founders’ and investors’ motivations, the ecosystem (s) of ITSs, government policies, and more.

ITSs’ social domain can serve as a valuable and sustainable business model for startups and investor communications. Previous research has shown that environmental, social, and governance (ESG) focus can encourage companies to better integrate sustainability into their strategy (Khan, 2022) [61] and have positive effects on financial or investment aspects (Fenwick et al., 2022) [62]. Similar to the ESG literature (see Clément et al., 2023 [63] for a review) that suggests positive relationships between ESG engagement and financial performance, expanding and focusing more on an ESG-based approach can help ITSs not only improve their social and environmental impacts but also enhance their financial performance and long-term competitiveness. Companies with a strong ESG commitment may have better access to capital because they are perceived as lower-risk and are more likely to be able to create long-term value (Cohen, 2023) [64]. Scholars suggest that strong ESG commitment can positively impact a company’s return level and quality in the areas of cost efficiency and risk mitigation, brand reputation and customer loyalty, long-term value creation, and innovation and market opportunity. ESG engagement can drive innovation and lead to the development of new products and services that address emerging sustainability challenges (see [65,66] Henisz, Koller & Nuttal, 2019 Wang et al., 2023 for an overview). Startups that are at the forefront of environmental and social issues can have a competitive advantage and access to new market opportunities. Following the review by Atz et al. (2023) [67] and the startup study by Mansouri and Momtaz (2022) [68], we suggest that ITSs could further integrate their communication and publicity strategies and their sustainability focus into the business model to emphasize their long-term commitment to the ESG agenda to better meet investor expectations. However, as Hassani and Bahini (2022) [69] have shown, complex external and internal factors such as the country’s level of sustainable development, the size of companies, and their development potential influence the actual relationships between ESG and corporate financial growth need to be considered in such a campaign. This calls for future validation of the links between ESG sustainability and financial performance in local contexts.

Following these insights, a preview of such analyses could be our findings regarding the two variables that particularly stand out in emphasizing that the differences both between ITSs and non-ITSs and within the ITS category are gender and geography.

Gender: The fact that a large share of women entrepreneurs can be found in the social ITSs could be interpreted as a manifestation of traditional gender roles, whereby women are more attracted to social issues, while men are primarily driven by economic success (Hechavarría et al., 2017) [70]. The relatively high proportion of female entrepreneurs in social ITSs can also be interpreted as a positive trend that could highlight the link between gender and the SDGs that the startups are striving to achieve. Tiba et al. (2021) [71] claim that we can expect the proportion of enterprises in industries that contribute to sustainability to be higher in ecosystems with a higher proportion of female founders. Social ITSs provide a platform for these women to channel their intentions. At the same time, we expect that women-led social impact startups may differ from startups founded by men in terms of their SDG outcomes, particularly in addressing gender challenges and promoting gender equality. For example, female social entrepreneurs often serve as role models and mentors who encourage other women and girls to pursue entrepreneurship and leadership roles. This can have a cascading effect, inspiring and encouraging young girls to pursue education and careers in a variety of fields. These outcomes are consistent with SDG 4, which seeks to ensure inclusive and equitable quality education for all, and SDG 5, which seeks to increase women’s participation in decision-making and leadership roles. In addition, ITSs founded by women can focus on innovative solutions to address specific gender challenges, leading to the development of inclusive and sustainable technologies and infrastructure (Cropley & Cropley, 2017) [72]. This contributes to SDG 9’s goal of promoting resilient and sustainable industrialization and driving innovation.

Organizational literature suggests that women-led ITSs have a more inclusive and collaborative culture, prioritize diversity, and welcome a variety of perspectives and problem-solving approaches (Abu-Jarad et al., 2010) [73]. However, further research is needed to empirically test these propositions regarding the impact of gender on the link between startups and SDGs and organizational culture. Further research can also dive into the representation of women and underrepresented groups within ITSs. Understanding the challenges faced by diverse founders and employees and their contributions to social impact can help address equity issues within the sector.

Geography: The attraction of Tel Aviv and its vicinity to startups in Israel can be explained by the fact that Tel Aviv is Israel’s economic and cultural hub, where major financial and investment enterprises are located. It is also a city favored by young people who prefer to commute to the workplace by bike or scooter. However, a sizeable proportion of ITSs can be found in the vicinity of Tel Aviv or outside the Tel Aviv hub, placing them geographically closer to the social issues they are trying to address.

Based on our findings, we can also provide an answer to the question of whether ITSs are more similar to the startup organizational form or the social enterprise form. Despite the differences derived from our findings, we can conclude that ITSs are, primarily, startups. The fact that they list themselves as startups in databases, try to attract investors (not donors), and manage their finances similarly to non-ITSs, clearly points in this direction. Hybridity, a characteristic of social enterprises, is not reflected in our findings on the structural variables we studied. The issue regarding the degree of commitment to the social/environmental objective as opposed to the financial one, is likely to be reflected in a study of the motivations of founders and investors (See: Olteanu & Fichter, 2022) [4].

Also, from probing into the issues and problems ITSs are engaged in, it is clear that they play a transformative role. This role is created because certain problems humanity faces have found technological solutions that enable people to live longer and more safely, be less dependent on others, and be in a more protected environment. ITSs help to generate these solutions. Developing a clear category for this type of startup is the first step in creating public and private support systems that can help ITSs achieve their goals. This is not to suggest that uncontrolled technology may not have negative consequences on humanity. These will have to be discussed in a broader context.

Finally, as indicated, we consider ITSs a new organizational category and this study should be a prelude for more conceptual and empirical research on it. The following are some ideas for follow-up research.

A. As the study was conducted in one country only, for the ITS organizational category to have a solid scientific base, an international dimension needs to be added. Additional country studies as well as comparative studies on ITSs can solidify the recognition of this new organizational category. A case in point is the comparative studies on the nonprofit sector—a new concept at the time, conducted in the 1990’s at the Center for Civil Society of the Johns Hopkins University (see: Toepler et al, 1999) [74].

B. Another important research direction has to do with the internal dynamics of ITSs. Studies on (1) Entrepreneurs who form ITSs and how they differ from non-ITS entrepreneurs in dimensions such as their backgrounds (educational, socioeconomic, previous entrepreneurial experience), motivations (connection to the problem on which the startup evolves, willingness to modify the startup’s vision and include contribution to SDGs); (2) Funders of ITSs, distinguishing between investment companies and individuals, as well as investment patterns and motivations of the funders; (3) Typical financial structures and cycles of ITSs and how they attract and combine various resources; (4) Governance structures of ITSs—organizational cultures, management styles compared to non-ITSs. (5) Ecosystem of ITSs, policy-environment, and social networks environment as enabling factors for ITSs.

C. Viewing this study from the SDG angle, we observed that ITSs do not deal with all 17 categories; in fact, no organizational form does. An interesting line of research can focus on clusters of organizational forms around specific SDGs, which can help coordinate activities among them.

We acknowledge the following limitations of the study: (1) As the organizational category we focus on had never been studied empirically (except for case studies), our first step was to develop an algorithm to identify the target organizations from within datasets. In building the algorithm that enabled us to categorize each organization with reference to the 17 SDGs, we relied on the “About Us” texts in which the startups present themselves on their websites. We acknowledge the limitations of this approach and therefore entitled our paper Initial Findings, inviting additional studies to corroborate (or negate) our own. (2) The three clusters we used (social, economic, environmental) to enable a meaningful analysis of the data, are not always an exact depiction of a specific startup’s orientation; many of them can also belong to a different cluster. In placing a startup in a specific cluster, the assumption is that it belongs to a certain cluster more than to the other two.

To sum up, the new category of ITSs represents technological innovation in the domains of society and the environment and is important as it can provide solutions for a variety of problems the world is facing. Our goal in this study was to identify and define this category and describe and analyze its unique features to create a scientific base for future exploration of its characteristics. The study contributes to the understanding of hybrid startup entities that to date are almost exclusively grounded in the economic framework. We provide an initial empirical portrait of the ITS category, divided by different worlds of content (represented by the SDG categories) and analyzed by a host of structural variables. Thus, we lay the foundations for future probing into ITSs’ specific features, which in turn should create a base to build a favorable environment for both policymakers and investors.