Rethink Begging for Charity
A few years ago, David Batstone came to me with a fascinating idea – to remake the business model of philanthropy. David is one of the most inspirational leaders at the intersection of business and philanthropy. He is the founder of Not For Sale, a global non-profit organization dedicated to eliminating human trafficking, and he is also the founding partner of Just Business and Innovate for Good, a social impact venture capital fund. He is also a thought provoking professor in Entrepreneurship and Innovation at the University of San Francisco School of Management.
The basic issue: how do we channel the support for a worthwhile charitable goal – the elimination of human trafficking – through a for profit organization so that we can change the existing model of fundraising for non-profits that depend upon gifts from large donors? The existing paradigm of non-profit fundraising relies upon receiving grants from foundations or fundraising events such as charity dinners or mass mailings. In many cases, half or more of the money raised in fundraising events is spent on expenses for the fundraising.
We came up with the corporate structural model that funded REBBL an award winning organic herbal beverage company. First, we created a channel that would directly provide Not For Sale (the non-profit) with funding from REBBL through a royalty licensing agreement that requires REBBL to pay 2.5% of its revenues as licensing fee for use of the Not For Sale trademark and its goodwill. Second, to ensure that REBBL adhered to a social mission as well, REBBL agreed in its licensing agreement that its ingredients would be sourced in a manner free of products that involve slave or forced child labor. REBBL’s products would be dependent on several herbal products that historically involved slave or child labor. By requiring the products to be organically produced in an environmentally sustainable fashion whereby the producing farmer would be paid a fair price, REBBL changed the financial equation for the farmers to eliminate slave labor and the incentives for human trafficking. Also, by requiring that the products be produced in an environmentally sustainable fashion, REBBL plays its part in combatting climate change. Finally, REBBL through its mission and products, was designed to appeal to social impact investors which are becoming an increasingly important investment group. REBBL’s initial round of angel investors also agreed that if they received a return on their investment above a certain threshold, that they would donate 20% of their profits above that threshold to Not For Sale – in effect transforming the standard venture capital “carried interest” into a donation for the non-profit.
REBBL has been remarkably successful. It is now in 7,000 retail locations throughout the United States, including all Whole Foods locations. It has gone through two rounds of additional financing, raising over $30 million. But more importantly, it has contributed towards ending human slavery. Annually, REBBL now funds a large portion of Not For Sale’s annual budget. Because there are few costs associated with the royalty payments from REBBL, each dollar from REBBL is the equivalent of $1.50 to $2.00 raised through traditional fundraising techniques. As a result Not For Sale can devote nearly all of the funds received from REBBL towards programmatic activities.
I’ve also been gratified that the innovative nature of my work was recognized by the legal profession. The American Lawyer honored my firm with a Global Legal Award in 2013 as the Global Pro Bono Deal of the Year; and in that year, I appeared on the cover of the National Law Journal as a winner of the Pro Bono Hot List for my work with REBBL and Not For Sale.