Funding Social Enterprises - The Social IPO

Do Something, a non-profit that promotes and funds teenage volunteerism, announced a social IPO last week.  They plan to raise $8 million by offering 80 "units" to the public for $100,000 each. 

The units give the investor a perpetual interest in Do Something and the right to join quarterly "shareholder" calls and attend their annual meeting.   

There is no opportunity for financial returns - this is a charitable donation.   But Do Something does promise investors a "significant social return on investment (SROI)."

While really just a clever PR move (don't get me wrong here, I like clever PR moves), Do Something's IPO highlights the shift that has been happening in non-profit funding.  Non-profits are increasingly moving away from ongoing, short-term fund raising. Instead they are following a venture capital model and raising enough money to fund several years of operations. 

Like traditional VC backed start-ups, these non-profits use the money to scale their businesses.  But instead of financial returns and liquidity events, these firms and the social entrepreneurs that run them look to create what the Skoll Foundation calls equilibrium change, which is a large scale, positive social impact. 

A lot of other non-profits have done similar things over the last few years.  DonorsChoose, for example, raised $11 million in social venture funding in 2007.  And as the Economist points out in their article on Do Something's IPO, a similar notion called "joint-stock philanthropy" boomed in 18th century England.

There are over 1.4 million non-profits in the U.S.  The vast majority of these are small businesses and almost all need external funding to accomplish their mission.  Funding innovations like social IPOs and social venture capital help this important and vibrant sector of the U.S. economy add social value.   

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