The Beyond Profit Story So Far

I attended a private gathering of about two dozen Fellows of the Royal Society of Arts in Manhattan on June 25, 2008. The RSA is a 255-year-old British social change organization. They tell me there are about 27,000 Fellows worldwide, with about 800 Fellows in the U.S.

The organizer asked Fellows to submit brief descriptions of problems they thought might make worthy RSA projects.

I wrote that funding early stage ventures was highly inefficient and difficult, but funding early stage social benefit ventures was even more difficult. It seemed to me that accelerating the successful growth of social benefit ventures ought to be a high priority in the venture field. I knew this from first-hand experience, having spent nearly two decades in traditional venture development and the last six years developing two social benefit ventures.

The Fellows thought this was a worthwhile problem. I was working full time on another project at the time so I was happy to have someone else take the lead, but no one stepped up. RSA leadership kept after me. Finally, I wrote a draft summary for a venture called Beyond Profit Social and Eco-Venture Capital. The original idea was that Beyond Profit was an angel fund whose mission would be to accelerate the successful growth of ventures with a mission beyond profit.

For nearly the entire year the idea was never far from my mind. All the while I wrestled with one very thorny fundamental issue  – How could a for-profit venture consulting and private equity fund be legally organized to accept investments from nonprofits, foundations and market rate investors?

The answer is an L3C. Chris Ballard and Tim Damschroder, attorneys at the Bodman law firm deserve the credit for bringing this new form of entity to my attention in May. You can learn more about L3C’s here. Beyond Profit Venture Partners L3C is a legal entity as of July 2, 2009, with an address in the Bay Area Hub in Berkeley and a simple site.

 

The Fledgling Fourth Sector

Beyond Profit’s social enterprise niche has a name – Who knew?  Chip Fleiss at Harvard’s Kennedy School wrote about  The Fourth Sector in the Financial Times. He defines it as “…a for-profit/non-profit or hybrid business, using private investment to work on common-good social problems.”

 

Beyond Profit Exists (but not yet as a site).

As of July 2, ’09 Beyond Profit Venture Partners L3C is a legal entity.

 

The Parallel Universe of Social Mission Business

Time was industrialists and capitalists made money in business and as they and their companies aged, these captains reflected on their rewards of status and their accumulated stacks of cash and decided there was still more to do to enhance their status, pleasure and power and remedy the ills of the world. Philanthropy was often their second act. Some transcended their commercial roots and created enduring legacies through foundations and charitable organizations bearing their names – Ford, Rockefeller, Guggenheim, Getty.

This make-it-then-give-it-away two-step model of success traces its roots to the beginning of industrialization in the middle 1700′s. Today the model of success is changing in a couple of ways, making exciting times for entrepreneurs.

We are minting more millionaires faster and younger now. You can start your second act in your twenties, thirties and forties, while planning to live well into your eighties. Enlightened self-interest still drives philanthropy, but there is more of it and its dimensions are expanding.

Many moguls and demi-moguls are still too young and ambitious to leave the business world altogether, so they continue building their careers through commercial investments at a time when the measure of commercial success is evolving from the single bottom line of profit to the triple-bottom line – social equity, environmental activism and economic profit.

Our collected values and vision are changing fast, spurred by global concerns about environmental degradation, social and economic inequalities. “Stop causing harm; change or wither and die” is the urgent message. It is not a stretch to imagine us looking back to see this period as the biggest step forward in culture and the fabric of commercial commerce since the Renaissance.

Where am I going with this? We know life is more consistently rewarding when as much time as possible is spent with those whose values, vision and interests align with your own. Entrepreneurialism is basically no different than any other social endeavor, so finding colleagues and co-workers knitted together by like-mindedness really helps the spirit, speeds the company-building process and helps ensure the wheels don’t come off the bus as the enterprise scales and grows in complexity.

Obviously not everyone hears and responds to change in the same way. It’s naive and fruitless to ask those in charge of the status quo to help change it. The arsenal of resistance behaviors are well-known and easily diagnosed – denial, passivity, blame-making, nay-saying, skepticism, discounting or outright ridicule, foot-dragging committees. Yuck.

So much is new, different and unsettled again, from choices of organization, governance, management, compensation and reward structures to intellectual property rights, communication systems and protocols, sources of supply, architecture and building systems, manufacturing and transportation.

The collection of newly minted enlightened capitalists and other forward-thinking supporters embraces change as liberating and energizing. These folks don’t necessarily have all the answers, but they have ideas and the persistence to stub their toes on new trails and keep walking. Kudos. Here are a few I’ve stumbled on.

B Corporation

The co-founders of the And1 basketball shoe company started this organization to promote the concept of ‘for benefit’ corporations. The basic idea is to make money and do good simultaneously (as opposed to sequentially, as noted above).

BSR | Business for Social Responsibility

…”helps its member companies integrate sustainability into business strategy and operations…”

Ceres

“Investors and Environmentalists for Sustainable Prosperity”

GRI

The Amsterdam-based global reporting initiative that sets standards by which organizations can measure and report their triple bottom line performance.

Social Investment Forum

Washington, D.C.-based organization “Advancing socially and environmentally responsible investing.”

Social Venture Network

San Francisco-based network of a who’s who of social mission company pioneers.

FSG Social Impact Advisors

The famous Michael Porter is a heavy-weight new contributor to the social mission business conversation.