Spotlight on a Successful Social Enterprise: Equal Exchange


From the Equal Exchange YouTube channel

Financial Success and Core Values
One of my favorite examples of an organization that has been able to raise millions of dollars of capital while staying in control and true to its values is Equal Exchange.

Despite posting enviable growth, this company has successfully retained its mission to create mutually beneficial relationships between farmers and consumers and support worker democracy and fair trade throughout the world.

Try some of Equal Exchange’s teas, coffees, chocolates, and fruit. You’ll be hard pressed to find goods of this quality anywhere else, and you’ll feel awesome that what you’re consuming is good for you and good for the world.

So what’s their secret?
How has Equal Exchange been able to grow and thrive for over 25 years while maintaining its mission and values?

Equal Exchange stipulates from the outset that investors have no voting rights. Investors are sufficiently confident in the worker-owners of the company to steward its resources. And investors have never been disappointed – they have received generous dividends every year, resulting in a return that exceeds a comparable investment in the S&P 500.

Notably, Equal Exchange’s structure prevents any investor or owner from profiting from the sale of the company.

Equal Exchange’s structure and investor agreements ensure that only values-aligned investors will be interested. The controls placed shareholder participation have never proven a hurdle to gaining investment. Demand exceeds supply every time. Equal Exchange offers its preferred stock.

Values-Driven Business
Equal Exchange is not successful in spite of its commitment to its mission but because of it. A majority of investors and consumers want to do business with values-driven companies and Equal Exchange meets that demand.

There is plenty of room for more companies to do the same!

Interested in learning more? Get in touch!

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What is a Social Enterprise?

What is a Social Enterprise?

CORE Foods team

A social enterprise is a business (for-profit or nonprofit) that, in addition to striving to be profitable, takes actions that in some way make the world a better place. Such actions could include paying a living wage, using environmentally friendly practices, supporting improvements in the business’s community, and so on.

I often refer to such businesses as socially responsible, heart-centered, or mission-driven enterprises. In fact, if you read my blog posts or get to know me to any degree, you’ll often hear me use the terms interchangeably.

While it may seem like a delicate balance to pursue profit while also contributing to a better world, plenty of organizations have been successful in pursuing this business model. And so can you! In fact, evidence exists to support the notion that socially responsible businesses can actually be more profitable than businesses focused solely on profit.

Structurally, as I mentioned, social enterprises can be organized as for-profit or non-profit companies. Depending on the country or locality in which they are established and the preferences of their founders, they may choose to organize themselves as co-operatives, traditional corporations, limited liability companies, benefit corporations, community interest companies, or charitable organizations, to name just a few possibilities. Some create “hybrids,” combinations of two or more entities that work together to achieve the business’ goals.

These days, because of growing public outrage over socially irresponsible companies, many businesses say they are socially responsible. But are they really?

The truth is, many companies add socially responsible activities to their operations because they perceive that, by doing so, they will make their overall conduct more palatable to consumers. In other words, social responsibility does not drive the mission of these organizations. Such activities are added as icing on a cake to make it sweeter to the consumer. From a terminology standpoint, such companies are not social enterprises but merely organizations that operate various “corporate social responsibility” programs.

True social enterprises place mission at the center of everything they do. Many codify their missions into their charter documents. When they raise money from investors, they ensure, through properly drafted agreements, that the investors will not interfere with the long-term pursuit of the company’s mission.

There are infinite ways in which social enterprises can be structured and investor agreements drafted. And there are many wonderful examples of companies that have designed very creative structures to ensure long-term fidelity to mission, even after bringing on investors. Here are a few great examples:

It is a great time to be a social entrepreneur!

Many organizations have already led the way, and you can stand on their shoulders.

Interested in learning more? Get in touch!

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How Not to Get Fired from the Business You Created, Part Two

How Not to Get Fired from the Business You Created, Part Two

(Click here to read: HOW NOT TO GET FIRED FROM THE BUSINESS YOU CREATED, PART ONE)

Let’s summarize what you learned in Part One of this series.
First: any business founder who brings in professional investors like venture capitalists, could be setting themselves up to be fired from their own business.

Second: there are ways to structure your relationship with investors that ensure you cannot be fired.

I have worked with many clients over the years to design their offering to investors so that they could stay in control of their own companies.  Some “experts” will tell you that if you sell equity, you are automatically going to be giving up control.  This is not true!  Equity can be structured in an infinite number of ways.  There is nothing inherent in an equity investment that requires you to give up control of your company.

One of my favorite examples of a successful business that has raised millions of dollars from investors but has given up ZERO control is Equal Exchange.

Equal Exchange offers investors preferred stock with no voting rights.  Thus even though investors own a majority of the stock, the management (elected by the workers) stay in control.

Other companies, like CORE Foods, choose not to offer equity to investors and raise money in the form of debt.

Knowing what to offer to investors is one of the most important keys to a successful capital raise.  And by success, I mean not just raising the amount you want to raise, but also being able to continue to run your business the way you see fit even after you raise money.  Take the time to understand all of the options and choose the one that fits best with your vision and goals.  That way, you can make sure that you don’t sow the seeds of your own firing by bringing on investors.

Interested in learning more? Get in touch!

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How NOT to get fired from the business you created – Part One

How NOT to get fired from the business you created – Part One

If it happened to Steve Jobs, it can happen to you.

Or David Neeleman, who founded Jet Blue. Or Jerry Yang at Yahoo. Etsy’s Rob Kalin or Chesapeake Energy’s Aubrey McClendon.

Many company founders find themselves with a pink slip in their hands after bringing on investors if those investors have sufficient control to engineer leadership changes.

Here’s the bottom line: it doesn’t matter how much blood, sweat, and tears you’ve put into your business. Bringing in outside investors and giving them control makes you vulnerable to termination.

The bad news is that “founder firings” happen all the time.

Rather than being naive and hoping it won’t happen to you, it’s important to do one of the following: (1) choose your investors carefully if they are going to have the power to fire you OR (2) structure your investors’ participation in a way that makes it impossible for them to fire you.

Of course, the second option is the ONLY way to be 100% certain that you won’t be fired from your own company. Some investors insist on control in exchange for their investment, but many others do not. Think about what kind of relationship you want to have with your investors before you start raising money. Know in advance what control if any you are willing to give up.

Interested in learning more? Get in touch!

If you are interested in working together, send us an inquiry and we will get back to you as soon as we can!

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What would you like to see changed in the laws governing capital raising?

What would you like to see changed in the laws governing capital raising?

I’m excited to announce that I’ve been appointed to the Securities and Exchange Commission Advisory Committee on Small and Emerging Companies, thanks to a recommendation from American Sustainable Business Council.

The purpose of the Committee is to provide advice to the SEC regarding its rule making and policies related to facilitating small business capital formation while promoting investor protection.

If there is anything that has been driving you crazy about the laws governing capital raising or you have suggestions for innovative ways to support small businesses in the capital raising process, please let me know!

Interested in learning more? Get in touch!

If you are interested in working together, send us an inquiry and we will get back to you as soon as we can!

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As a thank you for subscribing to our email newsletter, you will receive a free copy of my ebook entitled Get the Right Money from the Right Investors.

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