About ImpactPHL Perspectives:

ImpactPHL Perspectives is a multi-part content series that explores the many facets of the impact economy in Greater Philadelphia from the perspectives of its doers, movers, shakers, and agents of change. Each volume is written directly by a leader in this space to discuss best practices and share lessons learned while challenging our assumptions about financial and impact returns. For more thought leadership like this, check out the full catalog of ImpactPHL Perspectives.

Amanda Levinson and Natasha Freidus, Co-founders of NeedsList

Earlier this year, we achieved a significant milestone for NeedsList — we successfully exited to a values-aligned company that shares our values and is committed to scaling our impact. As we shared this news with our networks, we were struck by the number of impact founders asking us for advice and to share our journey. With so few resources and case studies available to impact entrepreneurs, we hope our story can shed some light on what we learned.

Since we founded NeedsList in Philly in 2016, we had been relentlessly focused on scaling our needs-to-resource matching software to as many contexts as possible to prove our thesis that, in a world of polycrises, organizations need better ways of communicating and meeting needs on the ground.  We had grown from a boot-strapped startup with an MVP built on WordPress to a venture-backed company with major corporate backing and software being used in 25 countries to meet the needs of millions of people. But we were hitting a wall in terms of our ability to scale.

“While startups typically exit at a later stage, we knew intuitively that a larger brand with greater resources, connections, and supply chains would be better equipped to drive impact.”

In 2022, NeedsList received financial support from Google.org, part of which was designed to ensure a long-term sustainable home for a free and public version of the software. While we started NeedsList with a focus on refugee aid, the model had rapidly expanded to support during the pandemic, natural disasters, and longer-term resiliency work. By May 2023, our product was finally in solid shape and prepared for scale. But the most obvious option to continue scaling – to raise a few million dollars – was extremely unlikely given the current impact investment climate. 

While startups typically exit at a later stage, we knew intuitively that a larger brand with greater resources, connections, and supply chains would be better equipped to drive impact. When we started to evaluate the multiple ways to amplify our impact, acquisition through a company, network, or broader use case emerged as the most solid option. 

In traditional startups, the “exit’ is the ultimate goal – typically via an IPO (initial public offering), strategic acquisitions, or other structured exits. In the social impact space, however, there are few examples of successful exits. Wanting to talk with other impact founders who had successfully exited, we initially turned to our contacts at the Miller Center, who ran one of the programs we had joined. Based at the University of Santa Clara, the Miller Center has supported over 1400 social enterprises. But when we asked for introductions to social entrepreneurs who had successfully exited, they could only provide one example. Perhaps they don’t call them unicorns for anything - in the case of social impact exits, mythical is right on. 

Undeterred, we set an exit target of the end of 2023 and began to do everything we could to find a home for NeedsList. Since one of the main questions we’ve gotten since exiting is “How did you do it?” (most often from exhausted impact founders), here was our process:

1. Start with who you know. Often, exit conversations begin with an inquiry from a potential buyer. While this was not our situation, we did have several partners and organizations we had spoken to over the years who we knew needed a custom solution such as ours. This is where we started, with known entities including customers, partners, and friendly “competitors.” We put together an updated deck, started outlining prospects, and reached out with a simple email to see if our partners would be interested in having a conversation. Simultaneously, we began to update investors, advisors, and other key friends of the company to get the word out. 

2. Find the market-makers. While NeedsList was not a traditional startup, we decided to consider some of the more known paths to sell a business. First, we spoke with a few different brokers. We also listed the company on one of the many online marketplaces focused on matchmaking for people looking to buy businesses with sellers. These led to several key conversations, but it was challenging to find a good match as there are no marketplaces focused on mission-driven businesses (yet?!)

3. Identify a buyer. By the end of the summer, we had a short list of organizations in due diligence. For anyone who has gone through the process of raising capital, our experience was similar. We shared a deck and teaser and made a “data room” available that included financial information, technical documentation, impact reports, etc. We set a date for LOIs, and we waited. 

4. Expect a rollercoaster. Like all startups, NeedsList’s trajectory throughout our seven years was one of extremes. Our sale process was no different. The same week all three of our potential buyers said no, we received two unsolicited expressions of interest. And thus the process and conversations began again.

5. Continue to focus on impact through the sales process. After multiple conversations, in person and online, we found ourselves in discussions with Armillaria, a tech for good company working on a broader set of solutions to accelerate the SDGs. We had known two of the three founders for years and were well aligned with both their vision for our product, but also their values as a double bottom line business. We were also aligned on a process that would be collaborative and remained focused on maximizing the impact we could achieve through the sale. Being collaborative will also save you time and money in attorney’s fees. Which brings us to….

6. Get an attorney who understands M&A for startups. In the end, selling a business is a bit like a divorce or selling a house–the devil is in the details (and there are a lot of painful details). A good attorney (we used Liles Law in Durham, NC) will keep you sane and sorted on timeline, documents, and logistics. 

“Throughout the process, we were curious about why there were so few alternative models for exit in the impact sector, which, like the traditional tech sector, remains obsessed with scale.”

Throughout the process, we were curious about why there were so few alternative models for exit in the impact sector, which, like the traditional tech sector, remains obsessed with scale. We were also dismayed to see how many startups were simply shutting down despite showing real promise to scale their solutions.

We started thinking about what could help foster more M&A in the impact space and sketching out some ideas that, while by no means perfect or exhaustive, could at least help impact companies with promising models find alternatives to closing. Here are a few:

1. An online marketplace for buying, selling, and merging impact businesses: we shared NeedsList on a few marketplaces for traditional startups looking to sell, but it felt like trying to put a round peg in a square hole – there just wasn’t alignment with what most buyers were searching for.

2. A social impact search fund for would-be impact founders wanting to buy established, mission-driven organizations.

3. Exit to community: This model involves transitioning a company's ownership to its community of stakeholders, which can include users, employees, customers, or other relevant parties who have a vested interest in the business's success. The Exit to Community Case Studies and Strategies website has a number of successful examples.

4. Align impact investing networks with exits: the impact acquisition space would benefit tremendously from the creation of networks of impact investors and brokers who are specifically interested in funding M&A in the impact space. This could facilitate access to capital and partnerships. Eventually, there would need to be a platform for sharing best practices, deal flow, and market intelligence specific to impact-oriented M&As.

5. Develop financial incentives to make mergers more attractive: Startups often shut down because they don’t have the cash to cover legal fees. Providing tailored financial incentives, such as grants, low-interest loans, or funds specifically for merger activities, could help cover the costs associated with merging operations, such as due diligence, legal fees, and integration processes. Tax breaks or other fiscal incentives could also benefit companies interested in merging. 

Our experience exiting NeedsList through acquisition by a like-minded company highlights a viable pathway to scale in the social impact space. By sharing our journey, we hope to encourage the development of a more robust ecosystem for impact-oriented exits. 

When social startups are laid to rest, we lose not only impact,  but also tremendous knowledge, solutions, and data. Finding ways to support acquisition will ultimately lead to a more sustainable and impactful social sector. NeedsList's story may be a "unicorn" for now, but we believe in the potential for a herd of impactful businesses to achieve scale through strategic exits.

Amanda Levinson and Natasha Freidus are cofounders of NeedsList, which exited to Armillaria in early 2024.

Amanda Levinson is a serial social entrepreneur, impact strategist, and integrative wellness facilitator. As  cofounder of NeedsList, she co-led the company from concept through acquisition. She now works with innovative organizations and leaders seeking to repair broken systems and change the status quo. You can find her on LinkedIn and on her website.

Natasha Freidus is a serial social entrepreneur and trailblazer re-imagining the future of tech for good. She is the co-founder of Equity Cubed, bringing fractional executive talent with unique social impact expertise to support purpose-driven startups. Previously, Tasha was the co-founder and CEO of NeedsList, a tech company powering new models of humanitarian action and crisis response (acquired, 2023). You can find her on LinkedIn.