New York's growing 'tech for good' community
Ventures that stress both social purpose and profit are benefiting from a growing ecosystem
By Anne Field, Crain's New York Business, August 7, 2018

When Andrew Hoppin and Christopher Sealey launched their blockchain startup this year, they weren't dreaming of becoming the next unicorn or earning gazillions trading cryptocurrencies. Instead, the co-founders—who had first worked together upgrading technology and communications systems for the state Senate—had a compelling social mission. They wanted their new company, CoverUs, to help make health care more affordable and efficient for ordinary people.

Their plan: Use blockchain technology to allow patients to reap financial benefits from their own health data rather than have it sold by brokers to third parties such as insurers, hospitals and academic researchers.

Blockchains, which are commonly described as digitized, publicly disclosed ledgers, contain batches of transactions, which are time-stamped, linked to other blocks and safe from being altered after the fact. The technology is well-suited for health care, the duo reasoned, because it could allow consumers to control which data they wish to share as well as facilitate efficient and easy-to-track micropayments.

"Our mission is to make a piece of the world work better for as many people as possible," said Hoppin, who serves as CEO. "We're inspired about what blockchain technology can do and how it can upend the power dynamics of complex systems."

Hoppin had started—and later sold—the company NuCivic, with systems for making government data more accessible to the public. Sealey, an expert in consumer engagement, helped found an economic think tank and focused on the inefficiencies and inequities of the U.S. health care system.

The partners, who plan their next moves from NewLab, a tech coworking space in the Brooklyn Navy Yard, hope to launch their first pilot in the fourth quarter of the year. So far they are still operating on the proceeds from the sale of NuCivic and raising $3 million in a seed round. They have no employees or revenue.

CoverUs is one of a growing number of New York–based enterprises for which technology empowers idealism. Like other socially conscious entrepreneurs, these "tech for good" startups aim to make both a profit and a difference—what's commonly called the double bottom line—by addressing a wide range of social goals. What's different today is that blockchain and other emerging technologies are making new solutions possible.

"We've seen an uptick in social ventures that use tech as an integral part of their business model in the New York City community," said Sandra Navalli, managing director of Columbia Business School's Tamer Center for Social Enterprise.

As a hub of diverse industries and nonprofits with a long tradition of philanthropy, New York is a natural fit for many of these ventures. And city-run programs, such as the nine-year-old NYC BigApps competition, which provides participants with access to municipal data sets to build tech products addressing civic issues, have contributed to the growth.

In fact, perhaps the most noteworthy feature of the tech-for-good world is its thriving universe of co-working spaces, meet-ups, hack-a-thons, like-minded professionals and startups. "We definitely see an ecosystem that's becoming more vibrant as more people recognize there's an opportunity to make a difference using technology," said Bill Cromie, director of emergent technology at Blue Ridge Labs@Robin Hood, a Brooklyn-based incubator aimed at addressing income inequality.

That ecosystem could soon get a big boost if the city approves a 21-story, $250 million project to be built in the former home of a P.C. Richard & Son store near Union Square. The goal is to create a tech hub for underserved communities with nonprofit Civic Hall as the anchor tenant. First proposed by the city's Economic Development Corp. and RAL Development Services three years ago, it's now in the approval process.

Meet-up metropolis
For entrepreneurs including Brett Whysel, a former investment banker and the founder of financial wellness startup Decision Fish, the city's many networking events provide an invaluable resource. His two-year-old company operates out of Impact Hub NYC, a coworking space for socially conscious ventures in Manhattan. He is beta-testing a platform intended to give middle-class users free financial planning and budgeting insights. People plug in their spending history and savings goals to develop a realistic plan. "It's for the rest of America that can't afford to buy this advice," said Whysel, who is self-funding the company.

Whysel attends at least two events a week, including a recent forum held by Ideas42, a nonprofit design and consulting firm where he learned about several tech enhancements that could help his users feel safer about the privacy of their data. He hired his chief technologist after meeting him at a NYC TechBreakfast in 2016.

Blue Ridge, an initiative of the Manhattan-based Robin Hood Foundation, accepts 15 to 18 would-be tech founders every year for a four-month summer program, providing free office space in its 6,000- square-foot location on Court Street in Brooklyn. Entrepreneurs develop ideas for startups focused on moving people out of poverty by consulting with community organizations funded by Robin Hood as well as a group of 800 low-income New Yorkers who are paid to participate. Among those social entrepreneurs is Avi Karnani, who started the company Thrive to help millennials make better financial decisions. He sold it to Lending Tree in 2009 for an undisclosed sum.

"I'm focused on creating sustainable financial products for everyday Americans," he said.

In 2014 Karnani met his business partner Paul Barnes-Hoggett at Blue Ridge, where they were both fellows. During their tenure, they interviewed about 150 people, including hourly workers, counselors and employers, about how to make commuting to work, school or day care easier and cheaper. Based on their research, the partners launched This Is Alice, a 12-employee company whose platform helps hourly workers sign up for and receive pretax benefits, such as commuting discounts and day care subsidies. "I knew about the technology and read all the research," Karnani said, "but I hadn't spent time in places, like Brownsville, where people lived and worked."

While many tech-for-good startups utilize familiar platforms, such as GPS and smartphones, increasingly companies including CoverUs are turning to more emergent technologies.

Blockchain startups, for example, are seeing a growing roster of resources to draw from. In May the city's Economic Development Corp. co-sponsored Blockchain Week, a series of events and conferences. CoverUs got its start last year at a hack-a-thon run by the Blockchain for Social Impact Coalition, an arm of ConsenSys, a tech-consulting firm that helps clients develop blockchain systems. CoverUs also recently took part in a five-week startup incubator dubbed Startup Boost NY, which is co-sponsored by Crypto NYC, a nonprofit offering both coworking space and a support community for blockchain startups.

In CoverUs' first phase, consumers will be paid by insurers, government agencies and others to fill out surveys about their health, Hoppin said. Eventually the company plans to establish a marketplace where consumers will securely control the sale of their data. They'll most likely be able to use those proceeds—perhaps as much as $2,000 per year—to pay for their out-of-pocket health costs as well as other expenses.

Like CoverUs, many tech-for-good startups target larger organizations as their primary customers rather than the individuals they ultimately want to help. This Is Alice, for example, markets to employers, which then offer its services as a benefit. Companies pay This Is Alice half of what they save on payroll taxes as a result of their employees putting more of their pretax income into flexible spending accounts and other programs.

The platform is now available in "most major cities" with "hundreds of employer customers," said Karnani, who declined to share his company's revenue figures. His local customers include Brooklyn Roasting Co., One Girl Cookies and healthcare.com.

Lessons learned
But that B-to-B approach can mean slower growth for some tech-for-good startups, a lesson the founders of six-year-old Kinvolved learned the hard way. Alexandra Meis, previously a program manager at a hospital in the South Bronx, where she worked with parents of children with special needs, and Miriam Altman, a former high school teacher, met as students at NYU's Robert F. Wagner Graduate School of Public Service.

After completing their degrees, the two women resolved to form a company that could improve communication between parents and schools as well as reduce absenteeism. Their five-employee startup offers an app to help teachers communicate with parents about students missing days and other problems. Realizing that the human touch is as important as the technology, the company has introduced in-person coaching for teachers and a summit with workshops for parents and educators.

"Tech alone is not going to solve our country's deepest-rooted issues," Meis said.

The co-founders initially decided against selling the app directly to teachers, even though they thought that would have been a quick method for acquiring new customers. Instead, they figured the best way to ensure the platform's place as a permanent fixture was to sell the app directly to schools and districts, charging them a licensing fee to use the software.

During their first fundraising efforts about five years ago, however, they found that many investors balked at their business model. But they have persevered, trusting that patience will pay off.

"We realize that lasting change is not going to happen overnight," Meis said. The company has succeeded in raising several rounds of funding, but she declined to disclose how much.

Finding investors is a challenge, but some female founders who aim to create a for-profit tech-for-good venture report another difficulty: Potential funders often suggest they form a nonprofit instead.

"We've found women would share their ideas with their network, and then as soon as they revealed it was for-profit, people would back away," said Natalia Oberti Noguera, founder and CEO of Manhattan-based Pipeline Angels, a funding network for female investors interested in early stage, women-run ventures. "But when guys talked about that, they wouldn't get the same reaction."

For social investors, funding tech-for-good startups provides a way to support causes they believe in while earning a return on their investment. Liz Luckett founded Brooklyn's The Social Entrepreneurs' Fund in 2012 to back startups in health, finance and social services that focus on low-income households. So far the fund has supported 13 companies, with a typical investment of $1 million. After its third fundraising round is completed, it plans to invest $2 million to $4 million in the next group of social enterprises.

"This is a way to fund companies with scalable business models so they don't have to go with hat in hand constantly asking for money from donors," Luckett said.

But raising capital isn't the end of the battle for a social entrepreneur. Once a business model proves successful, the next big hurdle is figuring out how to scale up the operation for maximum impact in order to accomplish its mission and generate a profit to make it self-sustaining.

Hoppin of CoverUs is realistic about how long it could take for his company to reach critical mass so that it can really make a difference for both consumers and health care providers.

"We're trying to overturn a massive industry," he said. "I regard this as my life's work."

A version of this article appears in the August 6, 2018, print issue of Crain's New York Business.