In recent years, there has been a surge of “new kind of” companies entering the marketplace. Social entrepreneurs launch these companies with lofty visions of creating positive change while making money. They offer a win-win for everyone, by focusing on the triple bottom line – people, planet, and profits.
I am huge supporter of this these “new kind of” companies. I think the only way to create an economically sustainable company is to create an environmentally and socially sustainable one. You can only exploit people and the environment for so long before you run out of those resources.
However, in recent weeks, I have started to question whether anyone has truly created one of these “new kind of” companies, including myself with Atayne. I am in no way questioning people’s vision or intentions. But I do strongly question if the structure of our financial system allows people to truly redesign the way they establish their company.
If someone is going to create a “new kind of” company, they need to start from the very beginning. This includes redesigning the typical corporate mission and vision, company values, management team, product design/service offering, etc. In most cases, tremendous thought is given to these areas and a lot of innovative work has been done. Unfortunately, one very important area has been neglected – company funding.
As these “new kind of” companies have entered the marketplace, we have also seen the growth of organizations that are dedicated to investing in them. There are now a handful of environmental and social focused angel, venture, and private equity funds. Investors’ Circle is one of the most well known offering “patient capital for a sustainable future.” Resources like Investors’ Circle are critical to help social entrepreneurs. But I believe we need more innovation in this space.
As an entrepreneur, I am seeking more innovative funding strategies for the development of Atayne. Here is my thought: how can you apply a micro-loan strategy like Kiva or grassroots campaign strategy like Obama to engage the masses (and not the monarchs) in funding a company? How can you raise $25 from 10,000 people instead of $25,000 from 10 people? They both lead to $250,000, but there is a key difference that Abraham Lincoln would describe as “of the people, by the people, for the people.”
In theory, it seems simple. Create a campaign to raise $250,000 in equity investments from 10,000 people. But this is where it gets complicated and our current financial and regulatory system in the U.S. gets in the way. Unless the person qualifies as an accredited investor (makes over $200k a year or has a net worth of over $1M), that $25 investment must be a registered security. Unfortunately, the regulations and compliance of registering this type of security would be so overwhelming for a start-up or small venture that this strategy becomes infeasible.
What this means is that potential small investors are prevented from getting involved in start-ups, even if the investment is as little as $25. Why? “The system” acting as patriarch wants to protect people from the companies offering these investments. Some degree of protection is good. However, the assumption is that people who make under $200,000 a year or have a net worth under $1,000,000 are not smart enough to make a decision to protect themselves. So how democratic is our company financing system?
If you have some ideas on how to democratize the funding of companies like Atayne, I would love to hear your thoughts.