There are enterprising not-for-profits, and there are companies with strong social missions. In the middle, there are a ton of entrepreneurial types who really aren't sure which model they should follow.
Kirsten Dickerson, pictured above with artisans in Cambodia, has been there. Her company, Raven + Lily, employs artisans in the developing world to make gifts, jewelry, and clothing that Raven + Lily then sells online and at two Austin storefronts. Raven + Lily began as a not-for-profit, but as Dickerson fine-tuned her model she realized that essentially, she was selling things and creating jobs--two things that signaled she should be a for-profit. She's currently projecting more than $3 million in sales this year. Here are six questions, taken from my conversation with Dickerson, that should help social entrepreneurs decide how they can best accomplish their goals:
1. How confident are you that this will work?
A not-for-profit gives you more room for trial-and-error, and to figure out if your idea has legs. Yes, it takes work to get grants and other foundation money, and of course you need to spend responsibly. But at least with some sources of foundation money, there is at least the expectation that you'll have to spend some time and money experimenting.
2. Have you considered a B-Corp?
This is the solution that Dickerson herself eventually landed on. A B Corporation, which stands for Benefit Corporation, is a company whose articles of incorporation include its social mission. Well-known B Corps include Warby Parker, Ben & Jerry's, and Patagonia.
If you choose a B Corp structure, it'll be understood that your company has other goals that are every bit as important as returning money to shareholders. Getting certified as a B Corp is a big deal, and not something you can do overnight. It's worth taking a hard look at the requirements early on, so that you can aim toward certification as your company takes shape.
3. Do you need to be selling stuff?
For many social entrepreneurs, this turns out to be the litmus test. If your business depends on selling things, you're probably a for-profit. "As a not-for-profit, selling can be a portion of your income, but not all of it," says Dickerson. "My goal was to provide dignity and sustainable jobs for these women. I realized this had to be a business -- I'm creating jobs."
4. Is there an accelerator that can help?
Dickerson began Raven + Lily as a nonprofit, she says, mostly because that was the world she was familiar with. While making her living as a stylist for music videos, she'd served as a director for several not-for-profits. When she realized that Raven + Lily would be best-served by becoming a for-profit, she really didn't know how to talk about it to make it sound like a business. But she did know a lot about partnerships, and about using the skills of women in the developing world to make things that could be sold in the U.S.
She applied and got into an Austin accelerator called SKU that basically helped her wrap her head around the business world. "I didn't know how to hire and fundraise," she says. "I knew how to get donations." Now, two of the ten mentors she worked with at SKU are investors in Raven + Lily.
5. Can you still get foundation support?
Most foundations, of course, only give money to non-profits. But an increasing number are structuring themselves so that they can also invest in social businesses. It's worth finding out if any of your potential sources of grant money as a not-for-profit might also be eligible to invest if your project becomes for-profit.
Of course, you can't pitch foundations and other so-called impact investors the same way you pitch traditional investors. "I have two pitch deks," says Dickerson. "The impact investors want to see, more tangibly, the good that we do. We are a B Corp and part of the Fair Trade Federation. Both those things involve an incredible amount of paperwork. We have all the information, but most investors find it overwhelming."
Raven + Lily's more traditional investors, she says, "are very supportive of the triple bottom line, but at the end of the day they want to see those financials."
6. Have you thought carefully about the one-for-one model?
While she's seen it work in some cases, Dickerson is not a big fan of most manifestations of the one-for-one model, where, for every product a company sells, it gives away one of its products to someone in need. "If you sell something and give back, it's more allied with traditional charity giving," she says. "It's not actually empowering. A lot comes from good intention, but a better intention is to thoughtfully produce something and then donate from that." In some cases, she says, the sudden donation of large quantities of goods has taken jobs away from people in local communities who were trying to make a living making and selling those goods.
If you're in fashion ...
Dickerson recommends every social entrepreneur in the fashion space see The True Cost, a documentary that details the impact of the fashion industry on people and the planet. "It's a very well-done documentary that really shows what's going on in fashion and why it needs to change," says Dickerson. She also recommends the book Slow Fashion, by the founder of PeopleTree, the first clothing company to receive Fair Trade certification.