Make a Stand, a Washington State Social Purpose Corporation, Rings Opening Bell for Twitter Stock Exchange and Raises Questions about “Hybrid” Entities
by Peter Smith
November 21, 2013
in Social Enterprise, Social Entrepreneur, social entrepreneurship, Social Purpose Corporation, Uncategorized
In honor of her use of social media to funnel more than $100,000 to nonprofits combating child slavery, 9-year-old Vivienne Harr rang the bell to open Twitter’s first day of trading on the NYSE. Vivienne decided that she would sell lemonade in an effort to combat this despicable practice. She was inspired by a picture of two young children, essentially slaves, carrying enormous stones down a steep mountain. Read more about her interesting story in the New York Times, here.
What’s even more interesting is that Vivienne’s father started a social purpose corporation around the business model: Make a Stand Inc. SPC. They have raised close to $1M in venture financing for the business.
The New York Times Article poses an interesting question: Why is Make a Stand a for-profit corporation and not a nonprofit organization? After all, the article points out, Newman’s Own raised over $370M as a nonprofit, so why should these owners combat this cause as a for-profit SPC? Without a celebrity face (until now) and movie star family wealth, it’s highly unlikely that Make a Stand would come close to Newman’s Own in scale and impact as a nonprofit. Vivienne and her father’s choice of the social purpose corporation is—with my admittedly limited understanding of their situation— a great fit for their social enterprise.
Several months ago I wrote about the factors I use to help entrepreneurs determine whether a for-profit, nonprofit, or “hybrid” entity makes the most sense for their business idea; the factors are mission, markets, capital, and control. Without going into too much detail (you’ll have to read those posts!), the idea is to run a client’s goals through those four factors. Vivienne’s goals are to create a sustainable organization to dominate the lemonade business and end child slavery. Starting a nonprofit comes with a significant limitation on operational control (tax-exempt organizations are heavily regulated), management must act as a fiduciary of the public’s money. Clearly this would be an issue for a social media savvy and innovative 9-year old entrepreneur. The capital necessary for bringing a nonprofit organization to scale is a significant issue without, as in the case of Newman’s Own, a cause celeb. There must be a reason to donate, a story. Arguably, Vivienne has a story that would generate charitable donations, but for how long would it be sustainable? The market factor weighs heavy in favor of a for-profit model for Make a Stand because not only does she have a tangible product to sell, lemonade, but she also has a business model that investors were willing to bet on.
The last factor is mission, and this seems to be the sticking point that the NY Times article and many others get hung up on with “hybrid” entities. Should Make a Stand be a ‘for profit’ enterprise, seeking to create a return for its investors, when it has a publicly stated mission to end child slavery. But you have to remember that the point isn’t about corporate structure, it’s about impact. Corporate structure is merely a tool an entrepreneur uses to further her goals. At the end of the day, Vivienne won’t measure her mission success by whether she started a nonprofit or a for-profit, she’ll measure it by whether there are less children carrying enormous rocks down a mountain side a result of her efforts.
Vivienne, you’re doing excellent work, keep it up!
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