Social Enterprises - Legal Structures

My last social entrepreneurship class was GREAT! Greenblatt basically ran his Structure Lab (part of Criterion Ventures) seminar in class talking about the different legal structures and options social entrepreneurs have when they start their enterprises.

We talked about a number of very cool things, but I'm going to focus this post on the White Dog Cafe.

All entrepreneurs have to have an exit strategy. Even if your exit strategy is death you need to plan for it. We've all heard of the Ben&Jerry story where Unilever's hostile takeover left the owners unable to protect their social mission. How do you avoid that?

Well there aren't many options - but Judy Wicks, the owner of White Dog Cafe, has gifted us all with her brilliant solution. She basically incorporated 2 companies. The first owned all the intellectual property, logo, brand, trademark and the other the physical assets of the company - the kitchen, tables, inventory etc. When it came time to sell she wanted to make sure that the social mission of the White Dog remained in tact and wasn't abused by the new owners. So she basically held on to the brand and sold the rest of the company and the new owners could then license the White Dog Cafe brand from the entity she held. Of course this lowered the value of the company she sold, but she was able to ensure the mission wasn't diluted. If someone wanted to use the White Dog logo, they had to use sustainable produce and be involved in the community - all the values that Judy cherished.

It seems so simple to do, but until Judy no one had designed such a structure.

Now if Ben&Jerry would have kept control of the brand and logo but sold shares of the asset holding company instead they would never have been strong armed by Unilever. But they probably wouldn't have raised as much capital in their IPO either.

There's always trade-offs to be made.