Blue Sky Companies with Unusual Capital Sources
Blue Sky companies tweak existing for-profit business models to maximize their social impact. Some of them find non-traditional capital sources, taking advantage of new rules around crowd source funding, public benefit corporation options and other legal options. Hybrids of for-profit businesses and non-profits abound. Here are some examples.
Rooster Soup Co.in Philadelphia was created in 2014 when Broad Street Ministry and Federal Donuts partnered with more than 1,500 supporters to crowdfund a restaurant that would convert unused food into meals and services for people who need it most. Every week, Federal Donuts turns 500 pounds of spare chicken parts into the broth. Through its Hospitality Collaborative, Broad Street Ministry served more than 76,000 meals in 2016. But it is NOT a soup kitchen, founders assert. Guests are seated by a host and eat a three-course meal served by a volunteer waitstaff and prepared by a professional chef and kitchen crew.
Vula Mobile’s founder Dr William Mapham leveraged a foundation grant and prize money to create an app for healthworkers – particularly those in remote rural areas – connect patients with specialist care. He conceived the idea while working in an eye clinic in Swaziland. Dr. Mapham got a flash grant from the Shuttleworth Foundation, and some prototype design work from Flow Interactive (now part of Deloitte Digital). He also won the SAB Foundation Social Innovation Award in 2013. The app was initially only for ophthalmology referrals, but with the help of specialist donations, Vula added cardiology, orthopaedics and burns in April 2016.
Ecovative Designs, which sells mushroom based packaging, received government funding for its initial research and development. Via the Small Business Innovation Research (SBIR) program, Ecovative received Federal funding from the National Science Foundation (NSF -$2.3 million), the US Department of Agriculture (USDA-$780,000), and the Environmental Protection Agency (EPA-$740,000). Ecovative also has received government support from New York State.
Finnegan’s, a Minnesota-based for-profit beer company, gives 100% of its profits to its own 401-3(c) charitable arm to address hunger. It started in 2000 as an S-Corp, then became a Benefit Corporation when Minnesota created the legal status in 2015. They articulate their mission this way: “We believe in barstool philanthropy.” Turning beer into food for the hungry. Sixteen years after its founding, the company and donors to their community fund have given $1.2 million to hunger programs.
Peace Coffee in Minneapolis was founded as a for-profit company in 1996 by the Institute for Agriculture and Trade Policy, a think-tank focused on creating fair food, farm and trade policies around the world. The idea came from Mexican coffee producers who were looking for new markets for their organic and a partnership with Nobel Peace Prize laureate Rigoberta Menchu. The first operations were set up in the IATP basement. In 2013, Peace Coffee became Minnesota’s first Public Benefit Corporation.