Starting a Mission Focused Enterprise

Between two worlds.

Starting a ‘mission’ focused enterprise — sometimes referred to as a social enterprise — is tough. My co-founders and I are starting ALEX, a marketplace where leaders can purchase higher education courses one at a time, across institutions. Our mission is to increase access to higher education. As a startup living in between the traditional for-profit and non-profit space, there are a few key decisions that have led to unique challenges in filing, finding funding, and identifying talent.

Filing

We are filing as a Public Benefit Corporation — an entity that legally serves ‘shareholders’ as well as ‘stakeholders’.

Why did we choose this status? Well, when we told a well known edtech investors in Boston that we were not going to file as a ‘non-profit,’ the next 15 seconds of their response included the companies University of Phoenix and Trump University. Needless to say, the negative feelings towards for-profit companies in the education space is deep rooted.

On the other hand, the non-profit structure does not allow for impact investors to own equity in your venture. It is easier to obtain ‘growth’ capital as a for-profit (more on this in my former blog post, Doing Good by Doing Business). We wanted to make sure that we are competitive and could grow to better serve our mission, but wanted to indicate to investors the importance of our mission.

We have a similar business model to Airbnb where we connect learners (individuals) with the excess capacity in schools (similar to the excess capacity in people’s houses).

Compared to existing companies, we have more for-profit ‘sister’ companies than non-profit. Our dynamic places us as a traditionally for-profit model in a non-profit space. Which complicates our next challenge…

Funding

After reading Venture Deals and working at Gotham Ventures, a venture capital firm in NYC, I have a clear understanding of different types of investors and when each is appropriate. VCs typically invest when a high-growth startup is proven and ready to grow. Angels are willing to put money in early and potentially settle for smaller returns, but typically do not provide the same support network and structure as VCs. There are also family offices, pension funds, and strategic investors who provide larger amounts of fund for more mature companies. Typically, VC funding is less ‘patient’ than angel funding, but that ultimately depends on the investor. This means that they are not paying for you to test and learn, but to spend that money growing the business to ‘create value’.

Based on where we are currently, we are not yet ready for VCs, but we are ready for certain angel investors and incubators

Right now, we are applying to a number of competitions and incubators to secure early funding through our pilot. We are also speaking to angels for early investment. If you know any please email us (hello@anyoneslearning.com).

Employers that want incremental job-training may be an early source of seed capital to bridge us through our testing before we are ready to scale. Also, foundations are a potential funding partner, not to fund operating expenses, but to help provide early students with tuition assistance.

The best funding source of all is ‘customers’. We are preparing to pilot with a company this summer and obtain early revenue to prove our model.

As we move forward, we have investigated several potential investors that may align with our venture: Expa, Kapor Capital, Reach Capital, NEA, Mark Cuban, Boston Harbor Angels, GSV Capital, IFC, Laureate, Learn Capital, KPCB

Talent

While we, the founders of ALEX, have the 4 startup skill sets integrated into our founding team, looking for talent with a passion to re-imagine the future of education is a challenge, as I believe that beyond skills, passion is core to finding the right people.

In my last startup, we made talent concessions that were detrimental. We brought on a designer that was amazing, but was not passionate about the mission of our startup. While he was great to work with, when we were working late into the night or strapped for cash, he would do what needed to be done but he would not push the ‘extra mile’ because to him, it was ‘work’ and not love. In the end, for that and other more complex reasons, our team ended up disbanding.

As we work on ALEX today, I look for people that not only have the right skills, but have a passion for re-imagining the future of education. Also, they need to show a sense of ‘hustle’. As we prepare for the summer, we will be welcoming a few fellows to ALEX for the summer. Excited for what comes next!