Two social purpose business developers were profiled in the June 2009 Entrepreneur magazine. What got my attention was the decision to make these businesses for-profit.
The first business, a bicycle-sharing system, was created by a Drexel University student. According to the co-founder: they
"opted to incorporate CityRyde as a for-profit entity when it launched in 2007. You have to make green to go green. We knew we needed a model that allowed us to sustain the business while still helping us save the environment."
So why for-profit? Not so sure.
The second business is by a Harvard grad who launched a Facebook application named Causes (Exchange and Facebook) that enables users to create awareness of and donate to nonprofits, charities and even political causes.
"We thought hard about wheter to be a nonprofit or a for-profit, because we really started the company with social aims in mind. We decided on a C corp because ultimately we thought it would make us a more effective company if we could hire the best engineers, who typically want things like stock options. In addition to attracting high-quality employees, the for-profit structure helped the founders raise capital. People want to know that what they invest in is going to be sustained and is not going to need continuous infusions of cash."
I buy the logic for the decision to go for-profit, but I do wonder about prospective donor's interest in supporting a for-profit business while they are trying to support nonprofit organizations.
Anyway, some interesting learnings that highlight the pluses and minuses of being a nonprofit.
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