Why My Company Has a Social Mission

By David Klein, Wharton alumnus, Co-founder and CEO of CommonBond

Editor’s note: This post was originally published on the Social Impact Initiative blog.

I sometimes get the question, “Why do you have a social mission?”

David Klein with members of the Wharton Social Venture Fund, spring 2014.
David Klein with members of the Wharton Social Venture Fund, spring 2014.

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Creating a New Food System

By Catherine Gonzalez W’16

Editor’s note: This post originally appeared on the Wharton Social Impact Initiative blog.

Wharton junior Catherine Gonzalez spent her summer working on growth and sales strategies for a local food hub with a mind for community impact. Wharton Social Impact Initiative provided her with funding and support through the Bendheim Fellows Social Impact Fund.

Photo credit: Aaron Guo W'17
Photo credit: Aaron Guo W’17

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Davis Smith: Making the World a Better Place, Through Entrepreneurship

Davis Smith - Cotopaxi headshotDavis Smith’s (WG’11/G’11) inspiration for becoming an entrepreneur was always to have a positive impact on the less fortunate. He founded Baby.com.br, Brazil’s leading baby care e-commerce site, while still a Wharton student. Then, in the fall of 2013, he chose to move on from Baby.com.br in order to pursue his dream. Read more Davis Smith: Making the World a Better Place, Through Entrepreneurship

Entrepreneurship: A Tool For Social Change

By Davis Smith, Wharton MBA’11, Arts & Sciences MA’11, serial entrepreneur, founder of Cotopaxi

When I was in undergrad, I read an article in the student newspaper that changed the trajectory of my life. The story told of a successful entrepreneur who sold his business and moved with his wife to the Philippines. They bought a large colonial mansion, but not for themselves. They ended up living in a small and simple apartment for the next three years and used the large home to give room and board to poor Filipinos to teach them how to start businesses. Every two months, they’d graduate a class and admit another 25 individuals. They were changing lives.

Edgar, on my last day in Cusco
Edgar, on my last day in Cusco

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Take Some Risks To Change The World

By Davis Smith, Wharton MBA’11, Arts & Sciences MA’11, co-founder of Baby.com.br and Dinda.com.br

In June 2013, I met with a group of Lauder students on a rooftop in Rio de Janeiro with a stunning view of Botafogo Bay and Sugar Loaf Mountain. After encouraging the students to look beyond traditional job opportunities and take risks that would allow them to “change the world,” one of the students asked me if I felt I had changed the world with my businesses that sold pool tables and baby products. The question was sincere, but it stung. Unbeknownst to him, I had been asking myself the same question in the previous months and had already decided I was going to make a change, but this student’s question increased my sense of urgency to take my own advice.

While I was at business school at Wharton, my cousin and I closed a $4.3 million round with a PowerPoint and a killer domain, nothing more. Brazil was hot, and we knew it. It wasn’t by coincidence that we chose Brazil or the baby market. We spent our first year in school coming up with 60 business ideas, which was facilitated by my involvement in the Venture Initiation Program. During the summer, I was fortunate enough to receive a Wharton Venture Award, which allowed us to rigorously research, vet and test our plans. By the end of the summer, we had narrowed the 60 to 1 and knew that we had a game-changing idea.

Just two years earlier, my friends, family and neighbors thought I was crazy. My cousin and I had started PoolTables.com out of undergrad, and had grown it into the largest retailer of pool tables in the US. When we told people we were going back to school, nobody understood. Life was good, but we believed MBAs would give us the knowledge and networks needed to build something truly meaningful. We sold our business, essentially burning the ships. It had seemed reckless, but now appeared brilliant.

Within eighteen months of the Baby.com.br launch, we had raised $40 million and built a business that had become a household name in Brazil, especially among young families. Our team consisted of one of Brazil’s biggest celebrities and many of the most seasoned e-commerce professionals in the country.

For all the company’s successes, it wasn’t always smooth sailing. We were battling fierce competitors, Brazil was incredibly difficult to navigate, margins were slim and our business was extremely capital intensive. Despite these challenges, we found ways to push the business forward. We launched Dinda.com.br and continued to see our businesses grow beyond what we’d ever hoped. It was every entrepreneur’s dream-come-true. However, after three years of working on the business, I unexpectedly began feeling it might be time for a change.

Once again, the comments of old began: You’re crazy to leave your company now! Just as before, people didn’t (don’t) understand the timing. I admit that stepping away was probably the hardest decision I’ve ever made. My decision to leave was based on two major factors that I couldn’t work around:

First, I was unhappy with our founding dynamics. My cousin and I had worked together for years, building some amazing businesses. There are partnerships that work well; in fact, ours had worked for a decade, but running a business as Co-CEOs was taxing. Ultimately, as many founding relationships do, our friendship began to sour. Trying to salvage our relationship became more important to me than power, control or money. I felt strongly that it was time for us to part ways as business partners.

Second, I wanted to make a bigger difference with my work. My reason for becoming an entrepreneur in the first place was to have a positive impact on the less fortunate. My co-founder, family and friends knew this. It has always been my life’s passion, largely driven by the fifteen years I’ve lived in the developing world (nearly half my life). Around this time, that desire to do good began to burn deeper than ever before.

Just four months after meeting with those Wharton students in Rio de Janeiro, I left my day-to-day role at Baby.com.br/Dinda.com.br and moved back to the US to begin my next adventure. Cotopaxi will be launching in Spring 2014.

1. Davis headshot - smilingBio: Davis Smith is a serial entrepreneur, a graduate of the Wharton School and Lauder Institute’s Class of 2011. He is the founder and CEO of Cotopaxi.

The Social Entrepreneur’s Playbook, Expanded

By Nadine Kavanaugh

Last July, our own Ian “Mac” MacMillan, Dhirubhai Ambani Professor of Innovation and Entrepreneurship, and Dr. James Thompson, Director of the Wharton Social Entrepreneurship Program, published an initial edition of The Social Entrepreneur’s Playbook. And then they did an amazing thing: they invited readers to join The Social Entrepreneur’s Advisory Group, to respond to what Mac and Jim had written. Hundreds of social entrepreneurs, from founders to CEOs to philanthropists, and from countries around the world, joined the group. (Read more about this process on our blog and from the Wharton Digital Press.)

Working with the Advisory Group, Mac and Jim revised and expanded their book to include even more real-world wisdom to help social entrepreneurs “pressure test, plan, launch, and scale your enterprise.”

TODAY, we are thrilled to announce the release of the expanded The Social Entrepreneur’s Playbook. Buy it here.

Social Entrepreneur's Handbook

Blurring the Line between For- and Nonprofit

By Chris Balme, Wharton and School of Arts & Sciences Undergraduate 2003; Co-founder and CEO, Spark

When I was starting out in the social innovation sector, there was a clear, defined line between the for-profit and nonprofit worlds. Back then, you chose sides; I went the nonprofit route.

Recently, though, that line has blurred. In conversations with dozens of new entrepreneurs over the past year, I’ve noticed that many of them start by identifying a problem they want to solve, and only then do they decide whether to take a for-profit or nonprofit approach.

What’s driving this shift? First, Millennials want a purpose-driven workplace, regardless of its for- or nonprofit status. Second, entrepreneurs are increasingly seizing the tools of for-profit financing to spur social change.

As a result, a whole crop of hybrid models has emerged in a grey zone between the for- and nonprofit sectors. The number of “B Corps” (Benefit Corporations), for-profits with externally audited double bottom lines, which commit to maximizing both profit and social return, is growing rapidly. Other structures, like L3C’s (Low Profit Limited Liability Corporations) are also springing up, with a goal of maximizing social impact above profit.

The shift isn’t just happening on the business side—leaders in the traditional nonprofit world are starting to pivot as well. Types of financing that have fueled for-profits for decades are becoming available for nonprofits, to great benefit. There’s a growing movement to use “Social Impact Bonds” to fund social change efforts through the money that governments save due to a company’s efforts. A nonprofit might suggest, for example, that it could reduce the percentage of inmates who return to prison from 70% to 35%, saving a huge amount on prison costs; it would get paid out of those savings.

Someone once told me that entrepreneurs see everything around them as a resource for their mission. That’s true whether you’re creating a nonprofit or a for-profit. And that shared resourcefulness is just the start. Just as nonprofits are borrowing business tools to finance their work, for-profits are acting like nonprofits in the ways they attract top talent by creating mission-driven cultures. The line between the two worlds will continue to blur. And from where I stand, that increasingly blurred zone isn’t a bleak no-man’s land—it’s a bright, promising space, full of potential for fresh ideas, new collaborations, and major social impact.

 

Bio: Chris Balme is the Co-Founder and CEO of Spark, a national nonprofit working to raise high school graduation rates. Chris is a graduate of the University of Pennsylvania and the Wharton School of Business, and has been honored with the Ashoka Fellowship and the Draper Richard Kaplan Fellowship for social entrepreneurs.

Balancing Social Mission And Financial Success

By Betty Hsu, Wharton MBA 2014; Co-Founder, ProfessorWord

Author Thomas Friedman once described social entrepreneurs as people who attempt to “combine a business school brain with a social worker’s heart.”[i] Substitute “educator” for “social worker” and that pretty much describes me – both in terms of why I decided to attend Wharton after years of working in urban education reform and why I decided to co-found an edtech start-up called ProfessorWord.

In talking to other social entrepreneurs, I’ve heard endlessly debated the question of how to balance the social vs. enterprise aspects of the venture. For example – do you focus on advancing your social mission or achieving financial success? If you favor the latter over the former, can you still call yourself a social entrepreneur or are you “selling out” in some way?

ProfessorWord was fortunate enough to be accepted into the 2013 GoodCompany Ventures program this summer, a 12-week accelerator that helps social entrepreneurs wrestle with these very issues, and we’ve learned a few important lessons:

  1. Achieving social impact and financial success can never be mutually exclusive. An un-scalable social enterprise won’t help many people, while a failed social enterprise will help no one. The primary goal of any social enterprise has to be on developing a business model that can bring about the desired social goals with a reasonable path to financial success. For a social enterprise to be successful, this can’t be an either/or question.
  2. Understand that short-term trade-offs may be needed, but your long-term vision remains. For many social enterprises, the key to success has been to launch in markets that offer less social impact but deeper pockets. This allows the venture to test the concept and to subsidize future service to the target market. While the social worker in you may balk at this, the business school brain will remind you that short-term trade-offs are often needed to achieve your long-term vision.
  3. Carefully consider your company’s status – for-profit, B corp, non-profit, etc. Social enterprises come in many forms. Selecting the right entity is a strategic decision that impacts your future development, financing strategy, and much more. Do your research before you decide.

It can be easy for an aspiring social entrepreneur to get caught up in how to create social value rather than profits, but doing so can be a great disservice to your venture. I’ve learned that my “educator’s heart” and passion for helping students learn vocabulary is necessary but not sufficient to launching a successful edtech start-up. It’s time that I give my “business school brain” a more prominent role, and I would strongly encourage other aspiring social entrepreneurs to do the same.

 

BettyHsuBio: Betty has worked as a school district consultant, an education market researcher, and an English teacher. She holds a B.A. in Economics from Harvard College, an Ed.M. in Education Policy and Management from the Harvard Graduate School of Education, and is currently an M.B.A. student at the Wharton School of the University of Pennsylvania. ProfessorWord offers an easier and more effective way to learn vocabulary in context while you read online. Visit us at http://www.professorword.com/ to try our free tools and to follow our development.

Delayed Gratification: Building A Product-Based Business For The Third World

By Samuel Reeves, Wharton Undergraduate 2005; Co-founder, Humanistic Robotics

I co-founded Humanistic Robotics, Inc. (HRI) in 2004 while I was a student at Penn and taking great classes like Ian MacMillan’s Societal Wealth Venturing (MGMT 212). In contrast to some of the more famous stories of dorm room entrepreneurs whose ventures grow so fast they have to drop out of college, mine has taken its time. Fortunately, we’ve survived the valley of death that many companies fall victims to between invention and adoption, (fingers crossed) and have some great things on the horizon.

While at Penn, I got caught up in the idea of doing well and doing good by using business school frameworks like Ian MacMillan’s Discovery Driven Planning to make a difference in the world. My business partner just got back from the Balkans, where he saw the landmine problem firsthand, and sketched out an idea for a small robot that would detonate mines by applying pressure to the ground. We hatched the concept of HRI as a technology company that would tackle the world’s nasty problems, the first being landmines. Even now, when we’re much more commercially focused by necessity, our original orientation towards our mission, “making the world safer with engineering and design,” still stands out in the way we talk about ourselves and develop product.

We set out to make an impact on the landmine problem by first learning about what exactly was keeping it from going away. All I knew at the time was that Princess Diana was involved in the issue, so I called her NGO and asked them why they couldn’t go faster. After a short education and a little head scratching, they passed me off to some folks in Geneva that ran a think tank doing exactly what I was doing – trying to figure out new ways to solve the problem. After a few months of conversations, they decided a new study had to be done…and who better to do it than the guys asking the questions already? They hired my partner and I for a summer-long study of demining operations worldwide, with plans to send us to Afghanistan, Thailand, Bosnia, Croatia, a few of the Ministries of Defense, and back to Geneva. They apologized that they could only pay me the equivalent of about four times what I would have made in a New York finance internship, and I decided that I had to come clean that I was a college student, not the older entrepreneur with whom they thought they were working.

After spending the summer in Afghanistan, I graduated Penn with the best customer research I could have done, and seed money in the form of profits from the consulting work. We poured the cash into prototypes, engineers, lawyers, and trips to convince people to give us more money. By 2006, we were about to run out of money, and we had seen how hard it was to raise capital as entrepreneurial neophytes for a physical product that would take teams of engineers and an assembly line to produce, for a problem that only exists on the other side of the world. Fortunately, we met some folks in the US Army that thought our ideas were smart, and they had some cash lying around to try new things. After years of avoiding the military side of the landmine issue in favor of the humanitarian crowd, we quickly realized that all money was green and became a defense contractor. Over the next few years, our Army funding, team, floor space, and technology all flourished.

It took about six years to finish our first product – a mine roller – which is an attachment to a vehicle or robot that puts pressure on the ground to trigger landmines and improvised explosive devices (IED’s). Unfortunately, the threat of these munitions is growing as conflicts continue to bubble up in regions with poor governance and anemic economic opportunity, but we’re trying our best to help.  In our first big deployment, the UN bought several containers of the product for use in South Sudan, and we traveled to Juba, the capital, in December 2012 to oversee deployment of our rollers. Along the road to finishing the roller product, we developed some innovative robotic technologies for safe remote control of big machinery. The original purpose of the robotic technology was landmine clearance, but we see a lot of opportunities to provide innovative remote products in domestic industries like healthcare, firefighting, construction, and manufacturing. As we expand into these industries that are a bit less dangerous and more domestic, we still look for opportunities to mix our mission with our profit. These are all areas where our products can help save lives.

In reflecting on the road to fielding product, I’m struck by how we complicated our task, just by our choice of industry. We chose to develop a product for a niche market that only exists in the most chaotic countries, with a technology that required massive front-end engineering and testing, whose export is controlled by the US State Department, with a purchasing process that is influenced by a global cadre of characters with incentives that are not always aligned, with usage scenarios that are sometimes classified, and if you’re lucky, the ship with your product on it doesn’t get taken over by pirates. But now that the product is in the field and we get the chance to think about how to expand our impact, the end result is extraordinarily satisfying.

There are a lot of innovative thinkers out there coming up with new ways to improve societies in war-torn and under-developed countries – the world needs this more than ever. For them I hope this serves as a motivator, as well as a cautionary tale…you can make the impact you seek, but don’t think it’s going to be easy.

 

Samuel HeadshotBio: Samuel Reeves is Co-Founder and President of Humanistic Robotics, Inc. Samuel got his start in the landmine clearance field as a researcher for the Geneva International Centre for Humanitarian Demining, a multilateral think-tank that is a leading innovator on the global landmine issue. Previously, Samuel worked at the Wharton Small Business Development Center (SBDC), was an active member of the Wharton Venture Initiation Program (VIP), and won the PennVention competition. Samuel has also held positions at financial firms Apex Capital Corp and Texas Pacific Group (now TPG Capital). Samuel Reeves earned a B.S. in Economics with concentrations in Finance and Management from the Wharton School of the University of Pennsylvania.