Sustainability: What it really means for your social start-up

At some point in recent days, we have all seen or heard something to do with sustainability. While some shudder at the mere utterance of this now ‘buzzword’ it is still a driving force in the business world today. According to indeed.com job postings with the keyword sustainability have quadrupled over the period 2009-2011; and an astounding 88% of executives and managers see it as being an integral part of their strategy for the future. For the new entrepreneur navigating this new and constantly evolving playing field can be daunting, but if you are serious about tackling many of the social problems facing the world today, here is what you need to consider.

1. The Network is Growing Daily: Every business person knows the importance of networking. For those with driven ventures, a growing network means access to individuals, funding, and most importantly partnerships that can help take your start-up to the next level. For instance, consider organizations such as the Social Venture Network which connects businesses with a growing community of innovative business leaders and social entrepreneurs to help improve and expand your impact.

2. There are Countless Opportunities: Starting a social venture opens the doors for entrepreneurs to not only tackle pressing social issues but it can also provide opportunities for one to visit new places, learn about new cultures, and most importantly, make money. Opportunities for social ventures abound not only in the financial industry (for those interested in impact investing and micro-financing) but in fields such as marketing and consulting. This is especially evident with the emergence of concepts such as ‘green marketing’ and ‘environmental consulting’.

3. There is no ‘Triple Bottom Line’: Experts in the field of sustainability hate this term, as it implies that there can be trade-offs between the social, environmental, and economic factors addressed by a business. True proponents of sustainability know that the real focus should be on the integration of these three factors. What does this mean for your venture? Simple, make each factor an integral part of your business model. By doing this you will not only have a social venture capable of addressing serious issues, but you will also communicate to investors and other stakeholders the seriousness of your intent.

4. No ‘Greenwashing’: Greenwashing is the intentional act of misleading consumers regarding your company/product’s environmental and social practices, achievements, or goals. Social entrepreneurs should always keep in mind that they are constantly under the watchful eyes of stakeholders bent on weeding out those businesses that are not true to their word. In moving your social venture forward, make sure that you do not commit any of the 7 sins of ‘greenwashing’. Firms found guilty of any one of these sins often find themselves quickly out of the market and on their way to oblivion.

The factors outlined above should provide you with an understanding of the dedication needed to see a social venture through from the start-up phase to success. Feel free to sound off below about your social idea or venture and what sustainability means to you.

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To ‘B’ or Not to ‘B’: The Benefit Corporation Movement

 

As an entrepreneur about to launch a new venture, you will often hear mentors and advisors comment on the importance of choosing the right type of business entity. From limited liability companies, to C-Corps an entrepreneur can be faced with many choices. Add a social agenda and things can get tricky. Traditionally, entrepreneurs that had socially driven mindsets were often given two choices: head up or start a not-for-profit. The good news is that this is no longer the case. Today, the socially driven entrepreneur has the option of starting a Benefit Corporation (B-Corp for short). Benefit corporations are essentially businesses with social causes built into their for-profit business models. In other words entrepreneurs can commit their ventures to addressing specific public/social causes. B-Corp legislation has already been passed in a number of states including California, New York, New Jersey, Maryland, Virginia, and several others. For a quick guide to becoming a B-Corp in your state of choice check out the Legal Roadmap provided by the non-profit behind the B-Corp movement B Lab. If you’re still not sure whether a B-Corp is right for you, then consider the following reasons for using this new type of business entity:

Scale: Because benefit corporations have a for-profit business model they are much more capable of scaling up. Scaling up of a business is of huge importance not only to investors but to a venture looking to achieve sustainable growth.

Capital: Again the added perk of having a for-profit business model allows this type of business entity to easily attract investment capital from a wide range of sources including the new impact investing. Impact Investing according to this US News article refers to investments that fall in the middle of Philanthropy and Socially Responsible Investing. The for-profit model seemingly acts as a magnet for investors who are worried about their returns. Another added benefit is that in some cases the B-Corp can even raise money through donations – the only restriction being that the grantees must be 501c3 non-profits. Start-up ventures operating within capital intensive industries and featuring socially driven business models will feel right at home with this type of corporation.

A Network of Perks: We use the phrase a network of perks because members of the B-Corp network are good to each other – offering discounted products and services to other companies in their network. According to an Inc.com article mainstream companies are beginning to take notice. For instance, Intuit offers QuickBooks for free to B-Corps, and Salesforce.com offers them a non-profit discount. Do not expect major tax incentives, however, as most B-Corps pay the standard corporate income tax.

It has been found that this model works best when the business has more than one social impact. Also, pursuing a B-Corp status helps to quantify your social impact – something which is vital to obtaining impact investor support. However, despite the benefits offered by this type of entity, there are some concerns. Before jumping aboard the B-Corp bandwagon aspiring entrepreneurs should be sure to consider the following:

Answering the Tough Questions: In addition to the legal requirements there are over 220 questions that must be answered before a company can achieve a certified B-Corp status. Since 2007, over 900 companies have failed to make the cut. Those that do make it must also amend their company bylaws and pay annual fees ranging from $500 to $25,000 depending on the size of the business. For more info on this performance assessment and achieving certified B-Corp status check out B Labs’ ‘How to Become a B?’ found here.

Random Checkups and Re-Certification: With B-Corps being held to higher standards of purpose, accountability, and transparency it is expected that constant verification of those standards would be necessary. As such certified B-Corps are subjected to random third-party checks to verify performance results. Another cause for concern with B-Corp certification is that companies are only certified for two years and must constantly recertify themselves as standards evolve for this new type of entity.

Market Scrutiny: Undertaking a social agenda is no easy task and the increasing number of green and socially-conscious customers and competitors only makes things worse. As the market becomes flooded with new ventures promoting various social and environmental causes, consumers and stakeholders are becoming very good at identifying and punishing those firms that are not true to their word and cause.

Even with the support of a for-profit business model entrepreneurs must be ready to face difficult challenges and make difficult decisions when operating this new type of business entity. Like its big brother the S-Corp, legislation surrounding the operation of this type of entity is still evolving. The good thing is that the relatively new nature of B-Corps means that the new businesses undertaking this model can play a huge role in establishing best practices for others to follow in the future.

For additional B-Corp tips be sure to check out this article, and for examples of certified B Corporations check out the Inc. 5000 list found here. Also feel free to sound off below on whether or not you think a B-Corp is right for you.

Start-Up Dilemma: What to Consider Before Launching a New Venture

Launching a new venture presents a host of challenges to entrepreneurs – from drafting agreements to creating prototypes and writing code. In the hustle and bustle of starting a business, it is wise that entrepreneurs take a step back and ask themselves: ‘where’ is the best place to establish this venture? It is important to identify the state or location that best matches your new venture and provides you with the most advantages not just in the short-term but in the long-term as well. With so many possibilities to choose from, how does one decide? The following list highlights some points that you should consider before proceeding down the path to registration. 

 Costs Up Front: As expected, the cost of registering a business (excluding name registration, IP protection, copyrights, etc.) varies across states. These filing fees range from a low of $50 to over $600 depending on the state. There are even additional costs such as California’s roughly $800 franchise fee which is due 75 days after formation. Some of these costs may seem trivial compared to the other costs you might face such as patenting costs. It is important to remember that investors tend to look at such things as your spending habits, and may even question your choice in paying high registration fees when there are certainly low-cost alternatives available – make sure you have some justification for your choice. 

Taxes: Tax considerations often play a major role in deciding where to establish your new business. Most entrepreneurs look to Delaware for registering new ventures as a result of their favorable tax rates for various forms of businesses. However, while Delaware serves as a good default, as an entrepreneur you should check out other alternatives before making your decision since other states offer various incentives newly established businesses. Take New York State for instance: according to an article released this summer, the state recently implemented legislation designed to spur growth in the Solar PV industry. You can also check the recent state tax index publoshed by the Tax Foundation for more insight.

Growth: While it is tempting to think of growth in terms of sales/revenues, at this point you should think of growth in terms of your number of employees. Depending on the nature of your new venture you might wish to locate near invaluable sources of human capital. This may be one of the reasons that so many tech start-ups choose Silicon Valley to launce their businesses – there is always someone who knows how to write code nearby. Also, when thinking about growth  Terry Brown, Executive Director of the Falcone Center for Entrepreneurship,  says attention should be paid to your access to capital markets, since your ability to meet with and engage financiers conveniently can significantly affect your new ventures growth. 

Access to Suppliers/Natural Resources/Technology: Depending on the nature of your new venture, it would be wise to consider what key inputs would be needed and how to best source those inputs. For instance, if your new venture involves a manufacturing process using lots of water, it may not be wise to set up operation in New Mexico or another overly dry location. It is for this same reason that we have seen many start-ups remaining close to colleges and universities that are pioneering new technologies so that they can not only be involved in the development, but gain an unfair advantage over competitors since they are more familiar with the technology and its applications. The same may hold true for suppliers, since it may be more costly for you to have materials shipped to one state versus another.

Not only can these considerations help develop advantages that can be beneficial in the future but they also help highlight important legal and operational aspects of the business that may have been overlooked. As such, it is important for aspiring entrepreneurs to not only consider these factors but discuss them in depth with legal mentors and advisors as well.

Top 5 Growth Industries for New Ventures

While many are still debating the ripple effect of the recent economic downturn, and whether or not those economies affected are improving. One thing is for certain – the importance of entrepreneurs and new ventures will be key in helping many of these economies recover. For the astute entrepreneur, opportunities for new ventures abound in industries earmarked as showing major growth in the next five years. According to IBISWorld data, these industries are projected as having healthy 5-year growth rates and low capital intensity. For those of you new to the business world, low capital intensity refers to businesses that invest a large portion of capital on labor as opposed to expensive equipment. The following five industries, in no particular order, represent those with the highest projected growth rates. For the full list of industries including photography and IT consulting be sure to check out the Inc.com article here.

1. Artificial Grass/Turf Installation (5-Year Projected Growth: 12.3%)

While skeptics may refer to this industry as glorified gardening, there is still good reason to enter this $649 million industry. Especially since technological advancements have made these products/services more appealing to sports venues looking to cut down on costs.

2. Digital Forensics (5-Year Projected Growth: 13.7%)

According to the article launching a business in this $9 billion dollar industry requires minimal capital. Also, with mobile and cloud computing gaining a foothold in many large businesses and industries worldwide, companies that are well versed in verifying, mapping, and most importantly, recovering data can expect continued surges in demand for their services.

3. Relaxation Drinks (5-Year Projected Growth: 24.8%)

Yes, the market isn’t for sports and energy drinks anymore. As busier work and home schedules clog the lives of consumers many are turning to the aid of drinks designed to induce relaxation and sleep. Famous brands have emerged in the industry including Syracuse University’s very own Dream Water. For the enterprising entrepreneur seeking to introduce his/her own formula be ready to contend with the over 400 brands in the market. Also, while FDA approval is not necessary to sell your product, it makes good business sense to have that stamp of approval.

4. Green/Sustainable Building Construction (5-Year Projected Growth: 23%)

Federal incentive programs such as LEED certification have created immense demand for construction companies specializing in green and sustainable buildings. This demand has even spawned the introduction of new products and services that mimic nature (Biomimicry). Perhaps you’ve heard about buildings with self-cooling mechanisms? Chances are those buildings were designed with a termite nest in mind. While the expiration of stimulus funding is expected to reduce the number of public projects, demand from the private sector is sure to be on the rise.

5. Environmental Consulting (5-Year Projected Growth: 23%)

As more and more businesses scramble to comply with current and incumbent environmental regulations, there will be a wealth of opportunity for new ventures in this $21 billion industry. Keep in mind, however, that the need is not only for complying with regulations but for green marketing and packaging as well. This industry may be well-suited for the entrepreneur craving travel and diversity since environmental consulting is a major concern for multinational organizations operating all over the world.