Business for good, or only for good money?

A business that runs solely to generate a needed product or service for clients while compensating employees fairly and investing in modest growth? C'mon.

Why not?

It is about initial investment capital, really. To start a business needs seed money, and the model today is to “borrow” money from investors and then promise to give them a financial rate of return on that long term loan as the business grows.

But there are new philanthropic investors out there like Jeff Skoll, and new giving mechanisms like community foundations and donor advised funds. It is no longer impossible to "sell" a business model to an investor that doesn’t give them a financial return on investment, but rather gives them the social change that they want to see.

True, in order to get an investor for a social business, the business model must be sound, the entrepreneur has to be trustworthy and capable, and it isn’t simply a matter of asking for money from the world’s rich to invest in a good cause…it takes perseverance and a good deal of strategic thinking.

That sounds like the necessary preconditions for ANY business.

In Dan Pallotta’s excellent new blog, he indicates that early in their careers, young people face a choice: work for good, or work for good money. He notes that this paradigm is changing and Nell Edginton’s related blog commentary also notes the possibility that “despite lower salaries Generation Y is entering the nonprofit sector in higher numbers than previous generations.”

So, to summarize, we no longer have the best and the brightest of the new employment pool avoiding working in the social sector. We no longer have rigid barriers to accessing venture capital for social businesses. We no longer have the choice to ignore the desperate needs in our society—our global society—from poverty, to environmental degradation, to health care disasters (HIV, flu epidemics) to basics like access to clean water or protection of fundamental human rights.

Businesses have germinated with a lot less reason.

Oh, right, the only reason to start a business is to make money. Indeed, some bright commercial mind will design, market and produce garlic peelers, nose hair clippers, or cabbage patch dolls if money can be made.

The key point here is that historically business success is measured in LOTS of money, both for the senior staff and the initial investors.

However, it is possible to generate a business model that creates enough revenue to pay staff, overhead and suppliers that generates a social benefit rather than 100,000 new widgets and a $0.31 per quarter stock dividend.

This might sound like a charitable model, but notably, charities do not get the same sort of latitude enjoyed by commercial businesses. Charities do not typically have robust advertising and marketing budgets, nor salaries commensurate with market value, nor the ability to investment in multi-year projects without disbursement quotas, and they suffer from extreme risk aversion.

Charities, then, are not the best foundation for social business. They have too many constraints placed on them by law or by convention. But a not-for-profit company doesn’t necessary have to be a charity. It is a business. It operates in the business world. Investments, not donations.

The good news is that the day of the social business has arrived. It appears that there is a new hunger amongst qualified staff and investors; they want to see their efforts and money lead to LOTS of improvements in society rather than accumulation of wealth.

Why, then, are not-for-profit businesses so rare?

In a decade, I believe they won’t be.