Tech Entrepreneurs Are Pledging To Give Their Money Away—But They’re Doing It All Wrong

By on July 8, 2015 in FAST COMPANY
FAST COMPANY / JULY 8, 2015

The Founders Pledge is old-school thinking about giving back, from people who should be on the cutting edge.

As a founder of an early stage company, with a lot of technical know-how and the potential for millions of dollars in earnings, there is an obvious pressure to put some of those skills and that money to use for more than just entrepreneurship. The Founders Pledge is a new system that tries to lock down a commitment to philanthropy from the people at the top of the booming tech economy.

Entrepreneurs that make the pledge commit to donate at least 2% of their personal proceeds to a social cause of their choice, following the sale or IPO of their company. This allows the entrepreneur to work towards the financial goals of the business now, and to give back to society later, after they achieve their ambitions. It’s a pre-planned philanthropy.

Philanthropy like this has been the historical approach to creating societal impact. Since the days of the Gilded Age industrialists, businessmen have been giving a portion of their personal earnings away to fund libraries, symphonies and orphanages. This historical approach to social good was articulated by Milton Friedman in a 1970 New York Times op-ed entitled “The Social Responsibility of Business is to Increase its Profits,” where he argues that business should be purely focused on maximizing profits and individuals, if they wish, may give some of their personal wealth away privately. Friedman advocates for a strict divide between profit and purpose, between making money and doing good. He argues that the company should focus on the former and individuals may focus on the latter. The Founders Pledge encompasses this Friedmanian approach.

Unfortunately, the pledge allows founders to feel a vague sense of doing good, without asking the particularly hard question about how they are creating the wealth in the first place. If the business is creating a negative impact on society, will giving 2% of the accumulated profits from that business be meaningful?

It’s not that giving to charity is a bad thing, but founders are uniquely positioned to do a better thing. Rather than giving back, they have the ability to build a better business. Rather than giving a small percentage of their profits to charity, they can use their business as a means of societal impact.

An emerging class of entrepreneurs is doing just that. They are taking a pledge to run their companies in a way that allows their customers, employees, community, environment as well as their investors to prosper. They are blending profit and purpose.

Method, featured in my book Profit & Purpose, is a great example business as a force for good. From the outset Method set out to build cleaning products that are all natural (no harmful chemicals), a bold move at the time. Over the years, they have invested heavily in employees and are known for their great culture. This year they just opened a new production facility in South Chicago, its first U.S. manufacturing plant.

This 150,000-square-foot production facility sets the bar for sustainable manufacturing facilities with on-site wind turbines, ground mounted solar panels and a commendable goal to become the first ever LEED Platinum certified production plant in the consumer packaged goods industry. In addition they are creating a 75,000-square-foot, rooftop greenhouse (the largest of its kind in the world), capable of producing 1 million pounds of fresh vegetables. Method’s facility will not only be good for the environment, but it will bring around 100 manufacturing jobs to South Chicago and provide the city with local produce.

Method’s founders Adam Lowry and Eric Ryan, did not make a pledge to do something good whenever they made it big. Instead they determined that their business—selling soap—was going to be a force for good in the world. They committed to the vision and stuck to it, even when it looked like it was going to fail. Because of that, they have helped transform an entire industry as well as revitalize U.S. manufacturing.

It’s time for founders to disrupt their approach to impact and shift paradigms from giving back to building better companies, from philanthropy to building better businesses.

The Founders Pledge, which encourages profit then purpose, financial success as a prerequisite to create a positive impact, is old wine in new wineskins. Or perhaps, more appropriately, it’s outdated software running on new hardware. The startup community does not need to copy and paste the same approach to social impact as the industrial age tycoons or large corporations. What we need is to write a new base code. With the talent and innovation in the startup community, we can do better.

Click here to read the original story in Fast Company.

BAIN’S 50% STAKE IN TOMS SHOES SHOWS FAITH IN SOCIALLY-MINDED BUSINESS

By on September 14, 2014 in The Guardian
Tom's Kyle Westaway
THE GUARDIAN / SEPTEMBER 14, 2014

The ethical shoe company is valued at $625m despite selling a relatively dull product and giving half its stock away – does Bain’s investment recognize that purpose can drive profits?

Last week, the private equity firm took a 50% stake in Toms, a socially-conscious footwear company valued at $625m (£377m). Toms pioneered the “buy one give one” model of conscious commerce. They give a pair of shoes to a child in need for every pair they sell.

Toms will use this capital to expand more rapidly than it otherwise would be able to on its own. Bain will bring operational expertise including a new CEO to oversee the expansion and leverage its experience growing retail brands such as Canada Goose, Michaels and Dunkin’ Brands.

So, has Toms sold out? With Bain Capital in control of half the company and running the management team, will Toms be able to stay committed to its one-for-one model? Blake Mycoskie, founder and chief shoe giver of Toms, thinks so. He said, “We need a strategic partner who shares our bold vision for the future and can help us realise it. We’re thrilled that Bain Capital is fully aligned with our commitment to One for One, and clearly they have the expertise to help us improve our business and further expand the scale of our mission.”

Those are nice sentimental words, but is it really in Bain Capital’s interest to retain the social mission of Toms? Isn’t their purpose at odds with making profit?

Traditional business thinking dictates that profit and purpose are at odds with each other, that doing good will cost the company money. Toms stands as a counterintuitive example of purpose actually driving profit. The company has sold and given away 20m shoes. With its least expensive shoe selling for $54, the company has generated over a billion dollars of sales.

Increasingly, consumers would rather do good with their purchases than give to charity. A recent survey from marketing company Good Must Grow indicates that for the second year in a row, 30% of US consumers plan to increase their purchases towards socially responsible companies in the coming year. Meanwhile, only 18% plan to increase charitable giving in 2014, a decline from 21% in 2013. A recent Nielson study also shows that consumers place a premium value on these products; 55% of global consumers are willing to pay more for products from companies that are committed to positive social and/or environmental impact.

Additionally, millennials – Toms’ target demographic – particularly want their purchases to have purpose. According to the 2013 Cone Communications CSR Study, 72% of millennials believe that they can make a positive social and environmental impact through their purchases and 51% check the packaging to ensure social and environmental impact. However, only 31% of millennials will conduct further research on the impact claims of a company they are buying from.

The “one-for-one” model is perfectly crafted for a millennial consumer who wants to feel good about their purchases but needs a clear, simple and tangible means of understanding the social purpose of the company through point-of-purchase marketing.

Though a new CEO will take the reins of day-to-day operations, Mycoskie, who still holds a 50% stake in the company, does not plan to abandon his post anytime soon. Instead, his focus will shift to expanding new categories.

So far Toms has expanded beyond shoes into sunglasses in 2011 (for every pair purchased, Toms will help give sight to a person in need), and to coffee in 2014 (for each bag of coffee beans sold a person will get clean water for a week, and for every cup of coffee sold someone gets water for day.)

A quick glance at the domains and the trademarks owned by Toms gives some indication of the vast array of products and services Mycoskie is considering including such as tea, cocoa, luggage, hotel services, news services, wearable technology, ticketing, credit cards, student loans, bicycles, water and wine. One of their trademarks is “You drink, we dig”, which might hint at a partnership with Charity: Water, with whom they have collaborated in the past on both special edition shoes and sunglasses.

The question remains whether Toms can translate the success it has had with shoes into other categories. Given its success at selling a relatively boring canvas shoe, it stands a good chance of infusing purpose into other boring products like credit cards and student loans thereby grabbing the millennial wallet-share.

Perhaps Bain Capital will retain the social mission at Toms precisely because that is what will drive higher profits. “As a firm and as individuals, we are strongly aligned with the principles of the One for One movement and its contribution to the global community,” said Ryan Cotton, a principal at Bain Capital.

Should they have taken a risk on a millennial consumer motivated by purpose to drive profit for years to come? Well, if the shoe fits, wear it.

Kyle Westaway is the author of the upcoming book Profit & Purpose and founding partner of Westaway Law. You can follow him on twitter @kylewestaway

click here to view the original story.

KENYANS FEARFUL, DEFIANT AS NAIROBI MALL ATTACK APPEARS TO WIND DOWN

By on September 24, 2013 in TIME
Time / September 24, 2013

As the standoff at an upscale Nairobi mall between Islamist terrorists and the Kenyan security forces appears to come to a close, the people of the city are trying to make sense of what has happened and are adjusting to a new sense of insecurity.

At Junction, a shopping center ten minutes from the Westgate Mall, the scene of the attack that has left at least 62 people dead, management has increased security measures. Shoppers must now pass through two separate checkpoints, each with metal detectors and staff checking bags. Many shopping centers remained closed, preferring to take a wait-and-see approach to the situation.

The Westgate branch of Artcaffe, an Israeli-owned restaurant catering to the expat community, was allegedly targeted in the attack. At the Junction branch of the restaurant the crowds are thin. On Monday, Natalie Houben sat discussing her own stories from the weekend with a friend. Houben is the owner of a company that runs mobile money kiosks in numerous grocery stores around the city. Some of her employees who worked at Westgate found themselves on the front line of the attack, but survived unharmed.

Houben’s voice trembled as she recalled her tearful reunion with those staff members on Sunday afternoon. On Monday she visited her other stores across Nairobi to comfort and support her staff. She was unable to reach some staff, but the staff that arrived on the job on Monday “have a sense of fear,” Houben says.

At each shopping center Houben visited she went out of her way to dine or sip a cup of coffee at a branch of Artcaffe to show her support and defiance. Many Kenyans fear that these upscale shopping centers could be the target of a follow-up attack. But Houben believes by keeping her business open and supporting businesses in the shopping centers, she is standing up against terrorist attacks. “We will not bow to terror,” she says.

Across town in Eastleigh, a predominantly ethnically Somali neighborhood, there is a cautious calm. Somalis in Kenya have been increasingly marginalized in Kenya, especially since 2011 when Kenya joined the battle to root out the Somali militant group al-Shabab, which has claimed responsibility for the Westgate attack. Kenya’s military involvement in combating al-Shabab in Somalia has made Kenya a priority target for the Islamists.

In November 2012, al-Shabab militants bombed a Nairobi bus, killing nine people. Immediately afterward, outraged Kenyans targeted the Somali community in Eastleigh, rioting in the streets, chanting “Somalis must go,” hurling rocks and smashing windows. But so far there appear to have been no such attacks on Somalis in revenge for the Westgate attack. “There are no signs of backlash or retaliation. Eastleigh is peaceful. It’s business as usual,” says a Somali-Kenyan shop assistant named Molid Apeulkaeir Guled.

Politicians and religious leaders are urging unity. On Monday evening members of Nairobi’s Somali community brought drinks and refreshments to the Kenyan soldiers near Westgate Mall. “We are all affected, we are all Kenyans,” says Houben. “The spirit is so strong in this country. I wish it felt like this every day in Nairobi.”

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DAY FOUR OF ATTACK ON WESTGATE MALL, AND THE FIGHTING CONTINUES

By on September 24, 2013 in QUARTZ
quartz / September 24, 2013

NAIROBI—The front page of The Standard, a Nairobi newspaper, today read “The Final Assault.” For Kenyans that assault, bringing an end to ordeal at the Westgate mall that began on Saturday (Sept. 21), cannot come too soon. But it seems to be more of a slow, methodical process than a flash-bang operation.

A spokesman for the Kenyan Defense Forces claims they have “full control” of the mall. However, prolonged gunfire and explosions can be heard outside the building where they are still battling “one or two” militants, according to security forces involved in the operation. Heavily armed troops with dogs continue to shuffle in and out of the embattled building as smoke continues to billow and helicopters circle overhead. Reports are slowly starting to leak out that the attackers, members of the Islamic militant group al-Shabaab, include American and British citizens.

 

According to the Kenyan foreign minister, Amina Mohamed, “From the information that we have, two or three Americans (were involved) and I think, so far, I have heard of one Brit… a woman… and I think she has done this many times before.” The description of the British woman is causing some speculation—though no official confirmation—that she may be Samantha Lewthwaite, the widow of Germaine Lindsay, a British suicide bomber who killed 26 other people in an attack on the London Underground in 2005.
While the battle between the Kenyan forces and al-Shabaab rages inside the mall, it has also flared up on Twitter, with each side offering conflicting reports on the situation.

 

The highly coordinated terrorist attack began on Saturday afternoon, when a team of 10-20, some wearing balaclavas and scarves, some in plain clothes, all heavily armed, took the building by force from two separate entrances simultaneously. The gunmen approached the building lobbing explosives on to crowded restaurant patios and opening fire indiscriminately.

At this point there are over 70 confirmed victims, including three members of the Kenya Defense Forces, and over 200 injured. Those numbers may yet grow further as the final assault concludes.

EYEWITNESSES AT KENYAN MALL ATTACK: “I WAS SURE THEY WERE GOING TO COME IN AT ANY MOMENT.”

By on September 24, 2013 in QUARTZ, WRITING
QUartz / september 22, 2013

NAIROBI—A rumor was spreading that the shooters would spare the lives of Muslims. Eran Ochayon, like most people at the mall, wasn’t Muslim. His friend, hiding elsewhere in the complex, sent him a text message. It was the shahada, an Islamic creed typically recited at daily prayers.

Ochayon, a Jewish businessman from Israel, scrawled the Arabic prayer on his hand in Latin script: ”I bear witness that there is none worthy of worship except God, and Muhammad is his servant and messenger.” He repeated the line to himself as he hid inside a bank at the Westgate mall, where he was taking out money when the attack began.

The gunmen are believed to be connected to Somali militant group al Shabaab, which is tied to al Qaeda. Al Shabaab said it was taking revenge for Kenyan military action in Somalia. On Twitter the group said, “Only Kuffar were singled out for this attack,” using the derogatory term for non-Muslims.

Ochayon hid in the bank for four and a half hours as the militants made their way through the mall. “I was very sure they were going to come in any moment,” he said at a nearby community center after police evacuated him.

Chrispinus Maloba saw at least 10 shooters. They were wearing balaclavas, ski masks covering all of their heads but their eyes.

One of them—he had a scarf tied around his head—fired an assault rifle into the store where Maloba is employed as a security guard. The man was shooting indiscriminately but didn’t hit anyone.

“Downstairs, there was so much shooting that we thought it was bomb blasts,” Maloba said.

“I dived on the floor when I heard the bullets,” recalled Rachel Otieno, the hostess at Urban Gourmet Burgers. “I stayed down and crawled. The guy behind me was running and was shot. I don’t know if he died or what happened to him.”

Kenyan president Uhuru Kenyatta said at least 39 people were killed in the attack and more than 150 injured. He said that close relatives of his were among the dead.

“We shall hunt down the perpetrators wherever they run to,” Kenyatta said on TV. “We shall get them, and we shall punish them for this heinous crime.”

Kyle Westaway reported from Nairobi and Zachary M. Seward from New York.

click here to view the original story.

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