Social Entrepreneurship · Sustainability

Solving social problems through entrepreneurship

Amareux (Amie) SU Labs Startup Accelerator Program Manager

July 14th, 2014

During my undergrad at Hamilton College, I came across this TedTalk 'How Big Brands Can Help Save Biodiversity"

And while it seems economically feasible for large brands with capital to adopt new behavior, I was curious to know how the revenue model is different or the same in a 'hybrid business' where the social mission is as important as maximizing profit from the very start. 

Dhairya Pujara Founder CEO Ycenter USA/India/Kenya

July 15th, 2014

Hi Amie,

I like Jason Clay's TED talk. Recently, I worked with a company in Philadelphia that was about making money and doing good. The two models that we discussed were - Having a typical revenue model as a for-profit company may have. But what changes for a social mission company in this case is what you do with this profit. You can invest the surplus back in the communities to return a social value of return SROI rather than taking huge bonuses or dividends for your stake holders. 

It is also important to have the right people on the board who would appreciate this model and are not looking to make 100x return as they would in a typical hot tech startup. For that you have "impact investors" /foundational grants for for-profit and social impact companies as opposed to typical Angels and VCs.  In other cases, if your service/product that can cater to millions of people - for example - a chlorine tablet that can provide clean water - 2 cents only. You can have a smaller margin and a large volume business to have enough profit returns. 

You can also directly tap into large companies and using their existing platforms/infrastructure.technologies to create something to create an impact and a profit. Another vague example - While Nike maybe solely be in the business of making footwear and making a lot of money by selling it. If you are a startup company whose mission is to provide comfort shoe sole for malnutrition children that have difficulty in walking, you can potentially reach out to companies like Nike and their CSR programs and/or social impact division (a lot of companies have it these days e.g. Google.Org, JP Morgan's Tech for Social Good). You can make profits by keeping your infrastructure overhead low and making profit and impact at the same time. Of course, you get a brand leverage as well. 

I am not sure if I answered your question clearly. 

Todd Ellermann Experienced I.T. Leader, CTO, and Creative Entrepreneur

July 15th, 2014

I think the notion of a for profit social mission is intellectually dishonest, inefficient, and a fad.  To be clear, I think that companies act in their own self interest and doing good things socially is often in their own self interest, but a company's mission is to make profit.   If you want to be intellectually honest, make a great product or service, sell it for maximum profit, and then use a charitable foundation or separate and distinct organization with its own decision making structure to maximize the expenditure of those profits.  If you are an entrepreneur your first mission is to make your company/product successful, layering a second orthogonal goal into the mix is a recipe for failure.   

BTW you are welcome to be a "hybrid" company from a marketing perspective, just don't for a minute be fooled by your own marketing or that of others out there.  Successful companies have ONE mission, making a return on the risk capital invested.  Stop wasting your time thinking about how your going to help others with money you haven't earned.   

To be clear I am all for using some of your profits to have a social impact, and doing bad things to the environment, ecosystem, people generally is bad for a companies self interest. In the age of cell phones and the Internet, transparency will kill those companies who are behaving poorly, eventually. 

One more thought... Companies have been operating under the model using profits for good as a percentage of profit for some time.  My earliest exposure to this was Hughes Aircraft/Medical back in the 1980's.  Ben & Jerry's were some of the first to "transparently" explicitly share their profit sharing model as part of their marketing message.  This set us on the path we are on today, but by no means were they the first to use their profit for good.

Neal Bram

July 15th, 2014

There is good reason to be skeptical and challenge the honesty of for profit social mission.  However, as I'm doing it, I believe it is possible.  The key is to make sure all of the motivators and decision criteria are properly aligned and clearly communicated.  In my case the achievement of the social mission is the driver of the revenue.  If we don't achieve our social mission we don't make any money.  Likewise any revenue or raised capital spent growing the business all increases the success of our social mission.  The business can't do one without the other.

Amareux (Amie) SU Labs Startup Accelerator Program Manager

July 16th, 2014

Hi, here are some summarizing thoughts:

Caution is warranted for any company claiming to do something regardless if its a 'hybrid' business or not. However, I would be hesitant to consider the increasing 'conscious market' just a fad. Sure, there will be those who will convince themselves with their own marketing schemes, but as Todd said the age of transparency will soon expose them. Businesses like Ben & Jerry's and Patagonia are looking at certifications like B-Corp to legitimize and start weeding out the fakes, while establishing standards.

Todd is right,  business for society's benefit isn't a new idea, it dates back to Adam Smith in the 1700s "economics is a tool not to be divorced from the issues related to how it can serve society." I think to a certain extent B-Labs are empowering these companies to continue diverging from typical corporate behavior and setting new behavioral standards within profitable reason. 

My question was not whether or not its possible; I wanted to know if the revenue structure was different, and as Dhairya described there are three typical routes 
1. is having a dual purpose where profit is funneled back to the mission 
2. there's the intertwined model where the success of the product itself is both profit maximizing and producing social good and 
3. intrapreneurship, where you innovate within a resource rich entity. 

Neal described the idea I had in mind where profit and mission align to form "ONE" profitable mission. For example, starting a solar technology company in the emerging markets can be a viable profit maximizing venture that produces renewable energy. I would assume then that the revenue model is the same as if the company decided to produce gumballs, right?