Document Actions
Case Study: A Hybrid Model for PlayRugby
Hosted by Mark Griffin (February 2008)
Play Rugby was established in 2003 by National Rugby Team Member Mark Griffin. As a non-profit corporation, the NPO’s philosophy is to “develop youth through rugby.” The NPO’s curriculum-based youth development program is branded “Play Rugby USA” and has reached 4,000 children in the last three years.
Now looking as national expansion and with the endorsement of the National Governing Body, Play Rugby is contemplating the most effective structure to provide the foundation for long-term, scaleable growth, including the launch of profit-making Play Sports.
The Program
• Mission: Strengthen youth character, conditioning and academic commitment, by integrating the values of rugby into a distinct and inclusive team sports experience.
• Vision: To become the premier youth rugby program in North America.
The Program includes
• Brand/logo/TM and associated assets (curriculum, equipment, etc)
• Physical delivery of fee-based services to schools and community based organizations (note - organizations pay, not participating students).
Funding & Investment
• The NPO’s operational budget is minimal ($170K in 2007): Fundraising 1/3 / Program Services 2/3
Expansion Plans
• Transfer of program (or rights) to Play Sports
• Play Sports to grow the program entrepreneurially through establishing network of licensed affiliates and employees
• NPO to focus on Fundraising for Program Evaluation, R&D and Promotional campaigns
Proposed Structure
• Two legally separate companies, no shared ownership, limited governance overlap (Mark Griffin only member on both Boards)
• Transfer of Program through long-term licensing of associated assets to Play Sports in return for % revenue back to NPO
• 5 New Board Members (identified) at NPO to drive forward fundraising & related activities
• Capital Campaign at Play Sports to raise capital for Program growth
Integral to the success of this structure is the Founder’s role in both Companies.
Questions
1. Can the Founder chair the non-profit board while acting as CEO for Play Sports? How should this work (salary, protections, etc.)?
2. How should the program be transferred to Play Sports -- license/purchase/other?
3. What factors should the companies consider in the sharing of certain joint resources (such as employees, office & equipment) during the initial growth stages?
4. Can the non-profit outsource delivery of grant-funded programs to Play Sports? What’s the best method?
Help Mark Griffin find the best hybrid structure. Join him in the conversation.
Capital Partnership
Hi Chris,
Thanks, interesting. All business assets are still currently owned by Play Rugby, Inc (the 501c3 approved NPO) so that's a good start. The For Profit LLC that has been set up named Play Sports USA, LLC currently has no members other than myself (100%) but it will be seeing Capital members soon to raise capital for growth.
Under this Capital Partnership model, I assume the challenge is getting the right membership agreements, allowing the Founder and NPO's Board to effectively govern with operating members getting the day to day work done.
Would revenues continue to flow through the NPO or can some be carved out into the LLC?
Capital Partnership
The way I see it, the revenues flow through the (we call it "tax transparent" I think you call it "pass through") LLC to the different stakeholders.
x% goes to the Capital Members for the use of their Capital - for as long as it is used - eg they get 10% of revenues for the use of $1m and 5% of revenues for the use of $500k, or whatever. You could build in a repurchase agreement for these "Equity Shares" at (say) a multiple of gross revenues.
y% goes to the Operating Members
and the balance may go to the Not for Profit.
It's entirely configurable. The LLC agreement is pretty flexible, as I understand it. For a UK LLP there isn't even a requirment for a written agreement at all, not that I recommend doing without.
Italy Play rugby
Hi Mark i'm the manager of Fondazione Laureus Italia. Fondazione Laureus is a nonprofit organization which operates in Italy since 2005 aiming to promote sport practice as a way to help overcome youth social diseases, and everything that provokes exclusion. The Foundation is part of a network made up of ten similar organizations spread into 4 different continents, all linked to the Laureus Sport for Good Foundation, based in London. Last year we started in Naples with a program focused on rugby. we work with schools of low income communities and juvenile prisons promoting rugby and its values with a team managed by coaches and professional psychologists. this year we will lunch another program in Milan. our goal is to made up a scaleable model and replicate it in other areas. I'd like very much to know more about your experience, sharing our knowledge. best regards Marco Pipparelli
this is the moment
Now, here, this moment - this is where SocialEdge goes from a resource to a community for me, where Marco, with a rugby for youth project in Napoli, connects with Mark, with a rugby for youth program in the US, and, well as the old saying goes, "one and one makes eleven."
This is the moment I'd like to revisit in six months or a year, these are the people I'd hope will somehow strengthen each other's programs, building an arch, spanning a distance, squaring or cubing their joint impact!
Wowsah! This feels good.
Alternative Structure - "Capital Partnership"
Transfer the intellectual property etc and all business assets into the "Not for Profit" entity or otherwise keep them in trust.
The individual "trustee" or the corporate "Not for profit" is then the "Custodian" member of a PlayRugby LLC.
The other LLC Members are then:
(a) "Capital" members: (i) a syndicate/club of Equity growth investors. They receive PROPORTIONAL shares in the GROSS (or net of certain costs, but not management) revenues of PlayRugby - if there are any; (ii) the Founder - in relation to the value of the program/concept/IP etc transferred to the custodian;
(b) Operating Members: (i) the Founder - as "Managing Partner"; (ii) other partners aka staff (who could be guaranteed a basic level of drawings).
The Capital and Operating Member stakeholder groups simply agree proportional shares.
Everyone is now "on the same side" with an interest in working together to maximise revenues.
The LLC agreement sets out the relationship between the stakeholder groups. Each stakeholder group may have its own constitution/ sub agreement/ "club rules" in relation to matters that concern only them.
The Founder has certain veto rights of governance exercised through membership of the Custodian (or else he IS the Custodian personally).
In this model the LLC doesn't actually own or do anything, or even employ anyone, but instead serves as a framework within which the individuals involved "self organise".