Startups · Sustainability

Making a Start-Up a B-Corporation- Why Not?

W. Hoppe CEO at Sabreez, llc

September 20th, 2016

I'm launching a Clean-Tech Start-Up and strongly inclined to make it a B-Corporation.  The nature of our business operations fits well with the B-corporation model, so why not?
A great idea is 1% of the work. Execution is the other 99%. In this course, we’ll teach you how to conduct market analysis, create an MVP and pivot (if needed), launch your business, survey customers, iterate your product/service based on feedback, and gain traction quickly.

Melissa Skehan Passionate, Mission Driven, Strategy, Growth & Impact Leader - Founder, CEO, President, Executive Management

September 20th, 2016

I agree with the general comments above, but with a different spin.  My company was a B Corp (B Certified through B Lab, not in legal structure as a Benefit Corporation).  This is an important distinction.  At the time, I found the certification process rigorous but meaningful.  It provided important framework for an aspect of our business that was important to us (our team), to me as a founder, to our clients, to our investors etc.  I do think its important that this be true for you as you contemplate.  If you are doing it only to get the "badge", it could be a distraction.  That said, there are many benefits that can be explored. For example, I also found the community of fellow entrepreneurs, the quality of the talent pool (employees and professional services), the commitment of the investors etc to be top notch amongst this community and therefore a benefit.  If it makes sense for your business, I think its a worthy endeavor, and one that is increasingly becoming more recognizable and therefore important.  If you have to struggle to make it fit, its not likely right for you. 

Mitra Ardron CEO at Lumeter Networks

September 20th, 2016

There are multiple structures for companies that are trying to create imact, (B-corp, L3C etc) its complex and changing and I last looked at it in detail when we were creating ours 4 years ago. There are multiple issues to consider including whether you want to create the legal structure that allows you to consider other things than just making money, and whether that sends a positive or negative message to the kind of investors you are pitching to.

Apart from legal issues, there is also the certification, I'm not sure if the California Benefit Corporation still requires certification, but note that it can be expensive in both time and potentially money. Also ... for a startup the B-Lab certification is pretty much irrelevant as most of things that get you points are stuff that are either irrelevant (e.g. you get points for recycling all your organic waste even if you could fit it all in a yoghurt pot by the sink !) or stuff you shouldn't be wasting valuable management time on at such an early stage (e.g. a whistleblower policy) or stuff that just doesn't apply (e.g. providing childcare in an organization with no parents). Make sure to get some advice from STARTUP entrepreneurs who have gone down that route.

Joseph Wang Chief Science Officer at Bitquant Research Laboratories

September 21st, 2016

If you are the major shareholder or the key decision maker in a small company, just do the right thing and let the company be directed by your values.  Certifications tend to be bureaucratic exercises, and for a small company in which time is precious, bureaucratic exercises should be avoided.

Just telling people "Hi, my company is doing CRM to promote renewable energy" is enough to tell people that your company cares about the environment.  I don't see why anything else is necessary.

Jim Bowes Promoting and producing sustainable natural-media techniques

September 23rd, 2016

Being a B Corp has lots of advantages and as a start-up you can also benefit from reduced fees. But along with the long list of many benefits here is something that is often overlooked.
While taking the scan of your business there are loads of tips, helpful hints and documents that will add so much value to your business whether your decide to actually certify or not.
Things like creating process manuals for your staff, documenting procedures, planning for the future (why diversity in the workforce is a huge plus). I didn't think of these things when I started my business and I wish I had.
I would recommend to any start-up that is somewhat mission or purposed based just to take the scan and download the reams and reams of incredibly insightful and helpful documents.
Most of these things you will do as you grow but even knowing of them in the beginning while you are building the foundation to build your business on is well worth the few hours of taking the scan.
B Corp isn't really marketing the fact that as a resource for start-up, B Corp is amazing but again, it is an amazing resource and I think a missed opportunity for them. I thought I knew a lot about social entrepreneurship but once I took the scan (certification process) I learned where I could have been so much better. Even little things where you go "duh".
It is not a pass or fail process. It is a process that helps you improve until you can certify and then it is up to you whether you want to join the community and reap the benefits completely.
I love B Corp. In fact, had it been around when I started my business, my business would have thrived and been able to rise above the pretenders who in my opinion are mostly greenwashing as sustainability is not only about the products or services you offer but also how you operate your business.
And then last but not least protecting your vision from new partners, stakeholders and investors who you will take on and who will have their own opinions about this part of your business. Not everyone will have your values and principles.
There are some companies like Unilever whose management wants to be a B Corp (they are buying B Corps to add to their portfolio) but because of shareholders demands they are legally obligated to milk every cent of profit out of the company instead of positioning it for the future. Short term shareholder stupidity if you ask me as if they were allowed to Unilever would be an even greater company. Imagine not being allowed by law to be a responsible business. Who would have thought but yeah the old school is all about the single bottom line.
My two cents.

Richard Reed

September 20th, 2016

I highly recommend contacting John Montgomery if you want to discuss the merits of a B corp. He is becoming a though leader in the space as he has practiced corporate law in SV for 20+ years and is now a big advocate of B corps. Here is his site: http://mh-llp.com/our-people/john-montgomery

Mitra Ardron CEO at Lumeter Networks

September 21st, 2016

Heath - I'm just as much a supporter of social enterprise as you are Heath, I started my first one in 1985 when all the social enterprises in London could meet in one room (and frequently did)- and its still going, 30 years later.

Assuming your company is as committed to its mission as to financial return then there are really two things here,
a) Corporate legal structure
b) Certification.

There are valid reasons to pick a Benefit corp or L3C structure to encapsulate your values in the structure, there are also good reasons not to as Joseph Wang said, we got similar advice when creating my current social venture 4 years ago, that the structure would make it harder to get investment than a Delaware C. I'm not sure if that is still the case or not.

On the certification process, yes I've been though the first part of the B-Lab certification, and the related GIIN process. Like *all* the other startups in our cohort who had to go through it we found the process irrelevant to companies of our size, and FAR more time-consuming than it was supposed to be. Note - we *all* got good scores, but none of us felt the scores reflected anything about our companies. The check-the-boxes form of it valued how we did things, but not what our mission was, and gave equal points no matter how much impact that item had on your company - (I gave examples above).   B-Lab Certification may be relevant for larger companies, but for a startup it really says nothing about you in my opinion.

Heath Shackleford Founder/Kick Starter at Good.Must.Grow.

September 21st, 2016

Mitra, lots of excellent points. Thank you for being a pioneer in this space. I will only suggest that more often I am seeing skeptical consumers who want to know there's more to back up your "do good" speak, and a certification such as B Corp is a meaningful way to back it up (even if your good score is easy to get to initially). I also see it as a way to firmly commit your organization to the mission at hand. Much easier to drift once you start growing if you don't have an anchor. To your point, I do think it's getting easier to raise capital for a structure like this. And in time, it will be an advantage for raising capital. The market is catching on quickly. 

Michelle Hoexum principal at propeller

September 20th, 2016

I would agree with Melissa. Certification is different than how you are incorporated. If you truly want to be focused on the triple bottom line of people, profit, planet the BCorp certification process is an excellent framework for creating this culture. There is also a quick assessment to highlight areas that might be a challenge. Do you have a Local First chapter near you? They are excellent resources. Feel free to contact me directly if you would like to discuss more in detail. 

Heath Shackleford Founder/Kick Starter at Good.Must.Grow.

September 21st, 2016

Not a question of corporate structure as much as a question of culture and mission. If you are a B Corp, you will see inherent value in it. If at your core, you are not a mission driven organization, then yes it's just marketing and networking. 99% of organizations who go for a B Corp certification or a legal Benefit Corporation structure are committed to doing business a different way. It's no longer new. It's what's next. Consumers are demanding more transparency, better treatment of workers, better care for the environment and more social impact from the brands they prefer to support. It's a sea change. And it's happening at a faster clip each year.

Joseph Wang Chief Science Officer at Bitquant Research Laboratories

September 21st, 2016

It's generally a bad idea to do anything new and original when it comes to corporate structures.  If you have a standard garden variety corporate structure then when you have to do something with it, you use the standard operating procedure to deal with it.  If you are doing something new and original you might have to do something weird and expensive when something comes up.

I see no possible benefit other than marketing and networking, and there are easier and better ways of doing marketing and networking than to mess with corporate structures.