August 27, 2009

Socially-minded venture entrepreneurs want a new kind of company. Choose for-profit, and you are unable to receive grants from foundations looking to fund the very social benefit you are aiming to provide. Choose not-for-profit, and you kill the entrepreneurial spirit, as you are limited from offering stock options, owning the company, or rewarding top employees when the organization is successful.

What is a burgeoning social innovator to do? Established social entrepreneurs are starting to demand a new type of company structure, for-profit with the benefits provided to charitable organizations. Andreas Heinecke, founder of Dialogue in the Dark, and the first Senior Fellow at Ashoka, argues for a hybrid organization. “What I’m looking for is some way to combine the best parts of both for-profit and non-profit groups.”  Dialogue in the Dark employs blind guides to lead sighted visitors through awareness workshops, and has been presented in over 30 countries. Structured as a for-profit, the company cannot receive grants from foundations who would normally donate to this specific social need.

Clay Christiansen, author of Innovators Dilemma, argued that the Obama administration’s Social Innovation Fund be opened up to benefit for-profit companies as well as charities. “We urge the White House to embrace this perspective and use its convening power to lift up social innovation without regard to tax status,” Christinasen penned in the Huffington Post. Dan Pallotta who writes a blog on non-profits for Harvard Business takes it a step further, stating that the tax code should be amended to address this challenge. “Give consumers tax-deductibility on products and services they buy from for-profit companies whose work have embedded social good. This would break the 501 (c) 3 monopoly on "charity" and allow a host of financially incentivized, for-profit players to enter the game.”

What do you think? Should socially innovative for-profit companies be given tax benefits? Should Obama’s Social Innovation Fund be extended to for-profit companies? And, should consumers be rewarded for purchasing socially good products and services?

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