Wednesday, May 11, 2011

The Hybrid of Business and Philanthropy

Now there are more and more businesses in their own right that have sprung up out of the need for funding a specific non-profit which Inc.Com  recently defined as a "hybrid social venture business model." I used to walk by thrift shops like Goodwill and others like it that support their non-profit, without my giving much thought to the business model and how well it works. These types of businesses, like the Goodwill Stores which are part of the autonomous non-profit entity,Goodwill Industries, are as hybrid sounding an entity as possible, in my mind.

Inc.Com also used another classic example, Mozilla Firefox, which was created to help fund the Mozilla Foundation, as well as some more examples of recent hybrid startups of this type, Story Pirates and Parent Earth. These hybrids are truly that in that they take a variety of organizational structures, some legally more linked to the non-profit than others.

We have featured several of these "hybrids" here too, such as: the SF clothing store, A Miner Miracle, that supports the non-profit of the same name -and the gift card company, Charity Choice Gift Card, that supports the Special Kids Fund.  rightly describes the many challenges that these hybrids face mainly separating the financial and tax structures.

What we have seen in these hybrid social ventures is that there are many other challenges, the biggest one being that the business must be in the business of making profits first. This means that they must meet the payroll, pay the vendors, meet their rent, manage their employees, market their service or product and many other aspects of starting and running good business. Hopefully what is left over from their revenues then goes to the charity.

There are rewards too, as the article pointed out: "You can have cake and save whales."The most important one being that the business has been started with a purpose and those working at the company have meaning built into the job description.

But that comes with a caveat, I think, You have to make the cake and sell it first.

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