(How to) Do Good Well by leveraging hybrid sibling ventures (and avoiding kerfuffles like those at OpenAI)
“Never doubt that a small group of thoughtful, committed citizens can change the world; indeed, it's the only thing that ever has.” (Margaret Mead)
I’m so glad you’re here
Thanks to everyone who read about the key skills, mindsets, and competencies of changemakers (aka societal impact leaders) in August and optimizing our time, energy, and attention in May (and all of the past posts can be found here). While I’d intended for this to be a monthly-ish newsletter, it’s turning out to be more like quarterly. Apologies, things are bananas while I’m teaching and I’m doing my best to keep up.
Speaking of which, I’m pleased to share that for Spring (starting in January 2024) I’ve cooked up an entirely new course we’re calling “Launch Florida: Strategic Impact Consulting for Entrepreneurs & Changemakers” (in partnership with Quang Tran of Starter Space), it’s open to all UF students, both grad students & undergrads, so if you know any UF students who might be interested, we still have a few seats remaining and would love to have enough students to fill at least 15 teams, as we have that many founders eager to work with a student consulting team— to learn more about the 24 Impact Business Models and how their venture can optimize their impacts, and truly walk their talk around their values and manifest their mission. This class fulfills the “Practice Impact” requirement for UF Impact Scholars (for which we’re excited to soon announce a digital badge students can share on Linkedin or their resumes, etc.).
Along those same lines, if you’re an impact entrepreneur interested in perhaps working with a team of UF Student Consultants to help your impact venture shift to a Hybrid Venture Model and/or work on other projects related to optimizing your impact, we may have space for 1-2 additional businesses in our Spring 2024 cohort; there may also be opportunities for student organizations to work on special projects to be of help to your impact venture. If you’re interested (especially if your need is not urgent), please complete the form linked here by end of day on November 30th.
Though much has happened since I last shared in August, day to day things often feel the same. I turned 47 a few days before Thanksgiving and I continue to be astounded by how quickly time flies! I remain grateful to be permitted to work remotely and deeply appreciate kind folks who remember to reach out, as being homebound is no cake walk. This time of year always reminds me how lucky I am to be here, as I spent Fall 2015 fighting for my life while my right leg was consumed by Pyoderma Gangrenosa that had become infected with MRSA. In fact, it was this exact week in 2015, when the central line for IV antibiotics had been in for more than a month — and while my doctors were celebrating the fact I’d managed to see my 39th birthday, they were seriously talking amputation (thankfully that didn’t happen, nearly 8 months later my leg finally healed & the central line was removed from my chest). I’d not be here to share these words with you if it weren’t for the expert care of the team at UF Health and the kindness of my friends-like-family who carried me through. So, thank you for being here & reading along!
And with that, let’s dive in.
Hybrid Venture Models
As I prepare to teach Strategic Impact Consulting, I’m swimming in information related to Strategic Venture Plans, Impact Business Models, Hybrid Venture Models, Sustainable Funding Strategies, Impact Reports, etc. I’ve totally geeked out on Hybrids, especially “sibling” for-profit/non-profit ventures.
I imagine you might see the phrase “hybrid venture model” and your eyes may glaze over— not really knowing what it means and likely thinking “hybrid venture models” have nothing to do with your life… I hope you’ll indulge me with a few minutes to explain what they are and why they matter.
Nearly a year ago, just before cooking up the idea for the new “Launch Florida: Strategic Impact Consulting for Entrepreneurs & Changemakers” course, I attempted to create a “one pager” on Hybrid Venture Models. Well, one page quickly became ten 🙈 and despite my attempts to condense the information into a more concise format, I realize that because there is so little information about this important & impactful venture model, perhaps I should go with it.
Here, my friends, is the guide I cooked up about creating hybrid venture models (with a focus on “sibling” structures). I’ve been sitting on it, preparing to use the information there to help me to create slides for my Intro to Social Entrepreneurship classes next week, when we talk about Strategic Planning (things like: mission, structure, scale) just prior to hosting a panel of founders of hybrid ventures.
And then something super timely occurred making headline news: OpenAI (the venture behind ChatGPT) fired founder & CEO, Sam Altman a few days before Thanksgiving (Friday 11/17), and then rehired him five days later. The vast majority of people likely never considered OpenAI’s venture structure— until it was all over the news. Some of the best coverage I heard was this 30 min podcast from Today Explained.
OpenAI was founded as a nonprofit 501(c)3 organization in 2015, in 2019 they announced (according to their website): “a new for-profit subsidiary would be formed, capable of issuing equity to raise capital and hire world class talent, but still at the direction of the Nonprofit. Employees working on for-profit initiatives were transitioned over to the new subsidiary. The for-profit would be legally bound to pursue the Nonprofit’s mission, and carry out that mission by engaging in research, development, commercialization and other core operations. Throughout, OpenAI’s guiding principles of safety and broad benefit would be central to its approach. The for-profit’s equity structure would have caps that limit the maximum financial returns to investors and employees to incentivize them to research, develop, and deploy AGI in a way that balances commerciality with safety and sustainability, rather than focusing on pure profit-maximization. The Nonprofit would govern and oversee all such activities through its board in addition to its own operations. It would also continue to undertake a wide range of charitable initiatives, such as sponsoring a comprehensive basic income study, supporting economic impact research, and experimenting with education-centered programs like OpenAI Scholars.”
In short, the Nonprofit board of the OpenAI was tasked with running the entire operation — the initiatives of the for-profit subsidiary (the folks powering OpenAI’s ChatGPT platform) as well as adhering to the nonprofit organization’s goals (admittedly I just asked ChatGPT-4, “what are the goals of OpenAI’s nonprofit organization?” and received the reply, “nonprofit aims to ensure artificial general intelligence (AGI) benefits all of humanity, prioritizes long-term safety, provides technical leadership, and adopts a cooperative orientation”). Though the two entities were designed to work together, clearly conflict ensued… this is a good illustration of one of the reasons why I’m not a fan of the parent-subsidiary model (I’ll explain more below).
What are Hybrid Sibling Ventures:
“Hybrid Ventures” is a phrase employed to refer to a variety of organizational models and structures. For the purposes of this explanation, I’ll be using the term “hybrid” to refer specifically to an operational structure involving a for-profit company and a nonprofit organization that both serve a similar impact purpose. The nonprofit will have access to grants & donations and the for-profit (depending on how it’s structured) may be able to take on investors, so there’s access to more sources of funding.
Typically there are two structures for these kinds of hybrid ventures: the relationship between the for-profit and nonprofit entities can either take on a parent-subsidiary or sibling model.
In a parent-subsidiary model, the nonprofit acts as the parent organization, and the for-profit serves as a subsidiary fully owned by the nonprofit. In order to do this, your nonprofit would have to qualify as a “public charity,” which means that it has to receive most of its funding from public sources to satisfy IRS’s public-support regulatory requirements.
An example of a parent-subsidiary model is Benetech, they have a wholly owned for-profit subsidiary, under a 501(c)(3) parent, as explained here. The board chair shared, “This was handy to shift a bunch of UBI income out of our (c)(3) and into a for-profit. The taxes are the same either way, but the nonprofit doesn’t risk its status by having too much UBI (we had more than a million dollars of consulting income the first year of the for-profit sub).”
Personally, I’m not a fan of the parent-subsidy model as I think it’s more complicated (in terms of legal & IRS requirements, like UBIT & self-dealing) to navigate than a sibling model (as evidenced by OpenAI’s recent struggles). I respect those ventures for whom it works well, like Benetech, but when advising founders interested in hybrid models, my advice is usually to choose a sibling structure.
Why Hybrid Sibling Ventures matter:
Under the sibling model, the nonprofit and for-profit operate as entirely separate entities. Under both the parent-subsidiary and the sibling structures, money can flow from the for-profit to the nonprofit, but not from the nonprofit to the for-profit. Your for-profit entity can donate money to your nonprofit and potentially yield tax benefits. However, because all assets of a nonprofit must be permanently dedicated to charitable causes, you cannot transfer funds from your nonprofit to your for-profit.
One of the biggest advantages of hybrid models is that your for-profit and nonprofit entities can work synergistically to maximize impact. There is also no limit on revenue-generating activities as long as these activities are carried out under the for-profit entity (where nonprofits face concerns with UBIT). And as mentioned above, sibling structures offer the benefits of both for-profit businesses (investors & revenue generation) and of nonprofit organizations (being eligible for grants and being able to offer tax benefits for philanthropic donors).
What are your favorite hybrid ventures?
Here are some examples of hybrid ventures that may be familiar:
Starbucks + Starbucks Foundation
Home Depot + The Home Depot Foundation
National Geographic + National Geographic Society
Certified B Corporations:
Ben & Jerry’s + Ben & Jerry’s Foundation
Greyston Bakery + Greyston Bakery Foundation
Climate First Bank + Climate First Foundation
BLISS Health + BLISS Health Cares
Sense of Scale + We are Neutral
Café Campesino and Sweetwater Organic Coffee + Cooperative Coffees
Locally:
Coastal Resilience Solutions + Ocean Rescue Alliance
Frogsong Organics + Free Mulch
Sun Country Sports Center + Sunny Cares Foundation
What are some of the hybrid ventures you support and/or find inspiring & impactful? I’d love to hear.
Resources for more info:
If you’d like to learn more about Hybrid Venture Models, here’s the 10-page-one-pager I cooked up: https://www.dogoodwellconsulting.com/hybrid-venture-models
If I’ve piqued your interest in Certified B Corporations, I created another way-too-long “one-pager” about them here: https://bit.ly/dogoodwell-have-you-considered-bcorp
If you’re interested in working with a team of UF students in Fall 2024 (beginning in mid August) to help you complete the B Impact Assessment and work towards becoming a certified B Corporation, please complete the application form for “Prospective Company Partners” linked on this page (priority is given to members of Florida for Good): http://go.ufl.edu/businessforgoodlab
If you’re eager to become a certified B Corporation and are hoping to submit before the transition to the new Version 7 of the Standards and new B Impact Assessment platform, good news! B Lab recently announced the current Standards & BIA will remain active through the end of 2024. More information about the timeline and the new Standards are here:
https://www.bcorporation.net/en-us/standards/performance-requirements and
I might have forgotten to mention (in past posts) that in June I was honored to be among the first cohort of B Lab Trained B Consultants: https://usca.bcorporation.net/b-consultants-directory. If you’re in need of with working towards becoming a certified B Corp (or curious to learn more about what the process entails), please don’t hesitate to give me a shout, I’m happy to do my best to be of help.
If you missed my post on Do Good Well by Avoiding Greenwashing & Goodwashing, you can find it here: https://dogoodwell.substack.com/p/how-to-do-good-well-by-avoiding-greenwashing
Thank you for reading along. Feel free to reach out if you have questions, comments, or concerns; I’m happy to do my best to be of help. And if this wasn’t your cup of tea, I hope you’ll offer me the grace of sticking around for a few more posts before you decide whether or not to remain subscribed. I’d love to hear what resonated with you (so I can do more of that in future posts), or you can simply tap the heart below with your quick vote of encouragement, as a nudge for me to keep the posts coming. Next time I’ll likely share about Impact Business Models.
With gratitude & excitement,
:)
Kristin
p.s. #1: If you’d like to learn more about what I mean by “creating strategic impact,” give me a shout and I’ll gladly share with you a quick Guide to Planning Your Impact Strategy that I’m cooking up.
p.s. #2: As mentioned, each post ends with a pair of gifs (sometimes they take a few moments to load, thanks for your patience), one that shows me falling, followed by a gif of me flying. Learning to fly on my mat (first by falling countless times) has helped me navigate falling, failing, and challenging situations off of my mat— practicing courage, kindness, gratitude, hope, grace, and joy with myself and others.
In this month’s share, I’m attempting a “flying pigeon” (Eka Pada Galavasana in Sanskrit). I first learned this pose from a visiting teacher around 18 years ago. I was in a place in my practice where crow was one of the few arm balances I could do, and I was really loving jumping back from crow— as it felt like flying for a split second. The teacher, Meghan, often had us practice with our mats all facing each other, in a circle, which resulted in my feeling like I was performing in a fishtank— the stakes were higher— I dreaded falling (and even worse: flailing then falling). Somehow I stuck flying pigeon on my first attempt. There was something about the bone-on-bone alignment of shin atop my elbows. Sticking it really did feel like *flying* and it’s just as fun for me, now, as it was then.
I also really loved teaching this pose (between late summer 2017 when I completed yoga teacher training and March 2020 when I became homebound). It’s easier than it looks (as it’s more about balancing bone-on-bone than it is about strength), at the same time, it’s deceptively difficult (as it takes quite a bit of hip flexibility in order to be able to extend one’s shine parallel atop bent elbows). If you’re wanting to try, I recommend doing hip openers first (like firelogs pose aka Agnistambhasana).
p.s. #3: As mentioned last time, my dear longtime friend and editor extraordinaire, Amy has edited *almost* everything of importance I’ve ever written. She was enjoying Thanksgiving with her family, so I waited until the last minute to bug her about this post 😬. I take full responsibility for the mess here 🙈. Hopefully my next post will be much tidier thanks to Amy’s amazingness.