A hybrid strategy for tough times

 This ais not a great time to start a new organization, but if you approach it as a hybrid with an eventual sustainable revenue stream, you might be able to leverage hybrid's advantages and convince investors of your idea: The advantages are:

•         Better financial stability – control your destiny

•         Freedom from funding constraints  - no tied grants

•         Ability to plow profits back into the mission

•         Ability to pay real salaries and benefits

•         Ability to access private capital – much more plentiful than grants

•         Never have to beg for money (well, almost never)

Of course there are drawbacks to trying to start a social hybrid:

•         Competition is not in most NPO leaders' blood and it may not be in yours

•         Skill sets and mindsets are very different - you must think like a business leader, not a Executive Director

•         You have to pay taxes on for-profit income and investors cannot take a tax deduction

•          Your mission can push aside your business and eventually you can go out of business

•         Non-hybrids can enter the same business and underprice and outcompete you because they don't have a mission to support

That being said, there are models you can use, such as the LLC, the  B-Corp and the new L3C legal model.  However, since hybrids often cannot offer ROI (return on investment)  sufficient for most investors in these models, you may need grant money to get started. The L3c model allows for some private capital, some grants and some patient capital from social investors who can take a lower profit margin or PRI funds from foundations.

Once you make the decision on which model to use, here are some actions to take to get started:

•         Do due diligence.  Undertake careful research to determine:

–        What business will you be in (very, very important!)

–        Who is your market

–        Where will your capital come from

–        How will you operate

–        Why is a hybrid better than a socially responsible company or an NPO

•         Talk to your potential donors and investors to see if they agree and will support you

•         Pick the best legal and understand the law governing the model you choose

       •         Work out the operationnal details and write a business plan

•         Raise money

Since the last step is easier said than done, here are some resourses:

•         Social Investment Forum http://www.socialinvest.org/

•         Good money Directory http://www.goodmoney.com/directry.htm

•         Community Re-investment Fund

http://www.crfusa.com/socialinvestors/Pages/ListofSocialInvestors.aspx

Innovation Exchange   http://innovation-exchange.org/about/social-investors/

•         SVN – Social Venture Network

•        Investors Circle

•         Calvert Foundation  

•         Skoll Foundation (yes, that's us)

•         friends and family funds

•         corporations that may have aninterest in your proudct or service - you cn ask for start-up money or exit money

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