People often ask us why we decided to structure HandUp as a for-profit organization, and we want to take a moment to share our reasoning here.
When we first started thinking about incorporating HandUp, it wasn’t clear which path to take. Traditionally, people think of using the nonprofit structure for social good organizations. Both my co-founder Zac and I had previously worked at for-profits with social missions, both in the health and education technology space. We were familiar with using the for-profit model to get tech startups off the ground, while the process for nonprofits was much less clear.
Nonprofit early stage funding is more limited and restrictive, not allowing for the same flexibility to expand rapidly and iterate based on product feedback that most tech startups benefit from. On the other hand, for-profit startups often have highly scalable business models and more early stage funding options like incubators and angel investors. We wanted this flexibility to grow without being locked into one direction.
During this time we also watched an inspiring TED talk by Harvard business school professor Michael Porter that helped us make our decision. In his talk, Porter makes the case for the role of business in solving our social problems. He points out the stark reality that after decades of awareness and hard work, we haven’t made much progress with nonprofit and government entities alone.
Why? The fundamental problem he points out is that these entities can’t scale. They can show benefits and results, but can’t make large-scale impact without more resources. And where can we find these resources in society? We can find them in business. When business solves problems at a profit it creates wealth, and that wealth allows solutions to scale. If a profit can be created by solving a problem successfully, then it becomes self-sustaining.
Conventional wisdom says there is a trade off between social performance and economic performance. But Porter points out that, beyond the very short run, business actually profits from solving social problems, creating “shared value.” This shared value is created when we successfully achieve social value and economic value at the same time. When we can find solutions that do both, generate wealth and successfully solve social problems, then we can actually address our social problems at massive scale.
This ability to reach the scale of a for-profit was appealing to us, but we also wanted to make sure that our social mission stayed intact as we grew, even to a very large size. To do this we looked into a number of hybrid structures that combine elements of both nonprofits and for-profits. After much research and thought, we incorporated HandUp as a Delaware public benefit corporation, a new legal entity that allows for both a high growth business model and a legally binding social mission.
Part of our decision to become a public benefit corporation was the clear message it sends to our partners, our members, our investors, and the public at-large. With it we say that HandUp’s social mission is part of the legal foundation upon which our entire company stands. It also joins us to a global movement that challenges business to reconsider its role in civic responsibility, and one that seeks to change what it means for a corporation to be considered successful.
Traditional models put shareholder returns as the sole definition of business success, but today, responsible companies can consider a double bottom line; one that measures fiscal performance, along with positive social impact. The double bottom line moves the conversation from ‘profit or impact’ to ‘profit and impact.’
We launched HandUp because we believe that new solutions to poverty are within our reach. By combining the values of a social enterprise with the power of the for-profit business model, we strive to achieve both -- and use technology and business as a force for social good.