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Interview with John Montgomery, Attorney, Consciousness-based Leadership Advocate, Author

Listen to the Interview

 

Meet John

John Montgomery

This episode of The Innov8social Podcast features an interview with John Montgomery, a longtime voice and leader in the movement to re-think legal  structures and leadership frameworks for companies seeking to create impact and profit.

John has deep experience in the field. He is a Silicon Valley corporate attorney, has co-chaired the legal working group behind California’s benefit corporation law (passed in 2011),  and is the author of the book Great from the Start : How Conscious Companies Attract Success.

And John is also a bit of a serial entrepreneur. He co-founded the law firm Montgomery & Hansen, as well as technology incubator, Startworks, and health company Chrysallis among other initiatives.

John is someone who I have looked up to since starting Innov8social as a blog a few years ago. His commitment to a holistic approach to consciousness-based leadership is evident in every interaction, and tends to inspire those he meets.

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More About John

 

 

More About His Book, Great from the Start

 

  • Website: http://www.greatfromthestart.com/
  • Value proposition: “Great from the Start not only prepares entrepreneurs for success in the prevailing economic Great From the Startparadigm where the corporation exists solely to maximize profits for shareholders as well as such business classics as Built to Last, The Art of the Start and The Lean Startup, but also shows you how to design your business for success in the emerging economic paradigm in which corporations exist to optimize both good and profit.”
  • Free excerpt downloads – including introduction, bibliography, and more

 

More About Startworks

 

  • Website: http://startworks.biz
  • Value proposition: “Startworks’ first project was Great from the Start, then in 2014 Startworks began producing consciousness based educational programs through its affiliate, The Global Consciousness Institute.  These programs are designed to help leaders optimize their effectiveness and lead from the heart.”
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5 Things Every Founder Should Know About Social Entrepreneurship

As a new mentor at the Sustainability Innovation Lab at GSVlabs,I recently had the opportunity to speak there on a topic I am often asked about, namely—what are the essential things that founders should know about social entrepreneurship.

From the engaging follow-up questions and spirited conversation during the presentation, I thought it might be useful to share the slides and key learnings here too.

 

5 Things Every Founder Should Know About Social Entrepreneurship, GSVLabs, July 2015

1. There are legal structures for social entrepreneurship.

This topic was one of the inspirations of founding Innov8social—i.e. to follow the progress and explore the potential of various legal structures including benefit corporations, social purpose corporations, limited low-profit liability companies (L3C’s), and various combinations thereof. These legal structures are intended to form companies founded on principles of creating impact as well as generating profit. These new structures serve to expand the ‘bottom line’ focus of a company to a double or triple bottom line (i.e. people, planet, profits)  and in doing so, expand the stakeholders to which a company owes a legal duty from shareholders to stakeholders such as the environment and community as well.

2. There are business models for social entrepreneurship.

We often say that a legal structure is a “glove” meant to fit the business goals and model of a venture. With that in mind, founders should know that business models are emerging to serve social impact ventures. Models such as buy one give one, or 1%-1%-1%, or dedicating a percentage of revenue to non-profit/policy entities, or pay-what-you-can models are gaining ground as ways to easily explain and account for impact and profit.

3. There are  funding options for social entrepreneurship.

Traditional funding options such as loans, grants, and venture capital can be applicable to social enterprises; however, sometimes the dual goals of impact and profit can make these hard sells for social ventures. There is also a growing body of funding options that can serve social entrepreneurs well—these include impact investors (who actively seek a return on impact and profit on their investments), Program-Related Investments (“PRI’s”) powered by foundations, and the use of crowdfunding (both donation-based and investment-based) to validate and fund social impact companies.

4. Social entrepreneurship isn’t just a way of doing business — it is also a mindset.

Since countries such as the US do not legally define social enterprise per se, that term along with social entrepreneurship and social innovation are often used to describe various legal structures and business models (for-profit and nonprofit). With this broad application, social entrepreneurship signifies a mindset as much as a specific type of venture. In fact, social entrepreneurs are often described as those seeking business-minded solutions to the world’s most pressing problems. They employ methodologies of entrepreneurship and ‘lean’ approach to startups in building revenue models and impact potential. This mindset is a way to problem-solve and calls on the problem-solver to consider and account for multiple end goals, and to do so with accountability and transparency.

5. You are NOT alone! There are resources, tools, and communities to help you reach your profit and impact goals.

If there is one thing to emphasize, it is that social entrepreneurs (and those aspiring to be) are NOT alone! Being an entrepreneur is challenging, add the additional goal of creating impact— and the path to success can feel distant and even lonely. However, there is an ever-strengthening ecosystem of support emerging and evolving to better meet the needs and challenges of social entrepreneurs.

A few leading resources for social innovation and social entrepreneurship:

Resources we have compiled and are building:

 

Here are Prezi slides from the talk



Law Creates Impact as Mirror and Mast

Supreme Court Legalizes Same-Sex Marriage

June 26th 2015 marked a momentous day for law in the United States. The nation joined twenty others in the world to legally recognize same-sex marriage, or more specifically, oppose the denial of same-sex marriage under the Fourteenth Amendment of the US Constitution. The famed Equal Protection Clause of that amendment guarantees that “no state shall deny to any person within its jurisdiction “the equal protection of the laws.”

Final paragraph of Justice Kennedy's majority opinionlegalizing same-sex marriage

Final paragraph of Justice Kennedy’s majority opinionlegalizing same-sex marriage

The journey for marriage equality can easily be traced back decades, and perhaps longer. In fact, in the early 1970’s then-students Richard Baker and James McConnell used the the legal system to dispute the denial of a marriage license in Minnesota because both spouses-to-be were both men. The case there actually did reach the inboxes of Supreme Court Justices via appeal, but at that time the Justices chose not hear the case for lack of a substantial federal question. (Note: denial of a ‘writ of certiorari’, i.e. Supreme Court’s deference to pass on a case, is overwhelmingly common—and they are known to hear upwards of 100 cases, of over 7000 petitioned each year)

Fast forward nearly a half-century, and the Supreme Court not only agreed to hear the landmark case of Obergefell v. Hodges, but indeed the Justices overturned and created law with their opinion. Where 37 US states have passed some form of marriage equality act, the single decision of the Supreme Court on a summer day at the end of June 2015, powerfully set precedence that supersedes state law on the subject.

By the numbers, there are reportedly well over 250,000 married same-sex couples in the United States.

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CA’s Flexible Purpose Corporation Renamed to Social Purpose Corporation

fresh carrot juiceBrand new name, same great taste.That’s right, three years after “flexible purpose corporations” rolled out in California, they officially have a new moniker. Effective this month, FPC’s are now “social purpose corporations” (“SPC’s”).As you may recall, two bills were passed in 2011 creating for-profit legal entities in California that also aimed to create positive impact. One was the benefit corporation legislation, and the other was the flexible purpose corporation.

FPC’s were passed as part of legislation called the “Corporate Flexibility Act.” That bill was amended and approved by Governor Jerry Brown in October 2014, and became effect at the start of the new year.

 

How many FPC’s incorporated in California?

According to the language in the amendment, 62 FPC’s have been formed since the new legal form became effective on January 1, 2012.

Ways “Social Purpose Corporations” in California differ from previously called “Flexible Purpose Corporations”

 
  • New name. The name has been changed. In some ways the updated name may make the focus on impact more clear, both to companies considering the name change as well as their potential customers and funders.
  • Directors are now required to take company mission into account in decision-making. In its previous form, a company’s directors were permitted to take a company’s ‘special purpose’ or mission into consideration. In the amended language directors of a SPC are “required to consider and exercise discretion to further the corporation’s special “social purpose.””
  • Provides dissenters’ rights to SPC shareholders converting to another form or in the case of merger with a non-SPC.
  • Makes it easier for out-of-state companies to reincorporate as an SPC in California.

Were the changes opposed?

As legislation often has opposition, this amendment did too. It was opposed by the California Association of Nonprofits and former member of working group that proposed the original FPC legislation, opposed the new name.

CA SPC’s and DE PBC’s look like siblings, with CA Benefit Corps a close cousin

With all of the changes, and widespread passage of benefit corporation legislation across the country (i.e. as of January 2015, 27 jurisdictions have passed a form of benefit corporation) it bears mention to note that each state passes its own bill. I.e. benefit corporations or social purpose corporations aren’t “franchised” to look and sound exactly the same as in other states. The provisions depend a great deal on the state’s business and economic landscape and interest in social impact.

That being said, it is interesting that Delaware public benefit corporations (benefit corporation legislation was passed in 2013) is actually more similar to California social purpose corporations than to California benefit corporations. The California benefit corporation has a higher bar for social impact measurement and reporting, among other differences, and more closely resembles the benefit corporation model legislation.

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Interview with B Lab Co-Founder Jay Coen Gilbert [AUDIO]

Sometimes to understand a river’s path, it helps to go to its source. As a co-founder of B Lab, Jay Coen Gilbert is one of the original architects of B Lab which has facilitated the B/benefit corporation movement that has been gaining traction across the nation (including legislation passed in 19 states!) and globe.

About B Lab

B Lab is the 501(c)(3) non-profit engine behind the benefit corporation and B corporation certification movement—designed to foster business that serves the community and environment in addition to pursuing profit. Founded in 2006, B Lab took the idea B Labof impact-driven business out of abstraction and thrust into a working reality. One of its first major acts for the organization was drafting the B Impact Assessment—a tool that lets organizations and companies evaluate their impact. Another milestone was the approval of the first B Lab certification in 2007—which has paved the way to today’s 800 certified B corporations spanning 27 countries and 60 industries.

On a personal note, following the B/benefit corporation movement in 2011 was the early subject of Innov8Social’s exploration of social innovation. I had the pleasure of meeting Jay along with fellow co-founder Andrew Kassoy following the passage of AB 361—California’s benefit corporation legislation.

Meet Jay

Talk shop with Jay for a few minutes and you will note that his stance on sustainable business is firmly rooted in pragmatism as Jay Coen Gilbertwell as possibility. His early career as an entrepreneur informs his approach to impact-driven business. Jay co-founded AND 1 an athletic footwear and apparel company which was later sold for $250M.

He has become one of the key spokesperson for the movement—-authoring articles on Huffington Post, Stanford Social Innovation Review, and speaking at TED talks.

By the time most people learn about a movement for change—it usually has already been long in the works—and it is its sheer momentum that draws new supporters.  In talking to Jay, I wanted to learn more about the genesis of the idea that has turned into a movement as well as the path ahead involving adoption. He highlighted a key impetus for B Lab as the golden rule of doing unto others as they would have them do unto you—and applying that to business.

 

Listen to the Interview

 

Additional Reading

Every 500 Years or So by Jay Coen Gilbert [Stanford Social Innovation Review]
Jay Coen Gilbert on Huffington PostJay Coen Gilbert on ForbesJay Coen Gilbert on Sustainable BrandsBenefit Corporation Info CenterDo-Gooder: Jay Coen Gilbert, Co-Founder, B Lab [Social Good Network]
Q&A with Jay Coen Gilbert, Co-Founder of B Lab [Philadelphia Generocity]

Benefit Corporation legislation passes in Delaware!

Delaware is known for having corporation-friendly tax law and developed case law, making it a favorite for entrepreneurs and investors. As of this week, it may become a hotspot for social enterprise as well.

On July 17th 2013, Delaware officially passed benefit corporation legislation—a momentous landmark for the benefit corporation movement.
Here are a few facts about the new benefit corporation law in Delaware:
  • After passing through state house and senate, the bill was signed into law by Delaware Governor Jack Markell
  • Delaware is the 19th state pass benefit corporation legislation
  • The bill was introduced as Senate Bill #47 & passed unanimously through state assembly and house votes
  • The bill goes in to effect August 1, 2013
  • Delaware is home to over 1 million public corporations
  • 50% of companies and over 60% of Fortune 500 corporations are registered in Delaware
  • The states that have passed benefit corporation law now:
    Delaware, California, New York, Rhode Island, Massachusetts, Pennsylvania, Vermont, New Jersey, Maryland, Virginia, Washington DC, South Carolina, Illinois, Arkansas, Louisiana, Colorado, Oregon, Nevada, Arizona, and Hawaii
Below are posts and articles about the new law:
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Interview: Jonathan Storper, Partner at Hanson Bridgett LLP and Involved in Passage of CA Benefit Corporation Legislation

Meet Jonathan Storper, Attorney in Sustainability

Innov8Social had the chance to speak with Jonathan Storper, a Partner at the well-established law firm Hanson Bridgett and lead attorney of the firm’s Sustainable Business Practice. Jonathan was instrumental in drafting and supporting the benefit Jonathan Storpercorporation legislation in California through all stages of its development and passage.

To provide a little background, Jonathan has been a prominent voice and early champion of creating a new legal structure that recognizes impact-oriented goals in addition to profit.

Storper has been synonymous with the benefit corporation movement from its nascent stage. If you have been keeping up with Innov8Social since its start in May 2011 you may have read recaps and posts about events such as the Sustainable Enterprise ConferenceSan Jose Green Business Academy, and SOCAP11—events at which Jonathan presented or spoke about the topic. The support extended to his firm, Hanson Bridgett, which has been frequently listed in support of the legislation.

Read the Interview

Q1 | Innov8Social:  How do you define social innovation?


A1 | Jonathan Storper, Partner at Hanson Bridgett LLP:   I define it as any new venture or action that attempts to improve the human condition. Social innovation harnesses the creativity of humans to improve the human condition in some way.

Q2 | Innov8Social:  Was AB 361 (California’s benefit corporation legislation) the first piece of legislation you helped to write? What was your experience in drafting it?


A2 | Jonathan Storper:   The benefit corporation legislation, passed in October 2011 was not the first legislative effort I was involved with. The first was AB 2944 in 2008, which was a precursor to benefit corporation legislation.

That bill proposed that companies could consider multiple stakeholders (including interests of employees, the community, and the environment) when assessing the best interest of the corporation. It passed through the California State Assembly and State Senate but was ultimately vetoed by Governor Schwarzenegger.

I found it interesting to see how the legislature works, how support and opposition for legislation works, and how coalitions work.  It was wonderful to work on enacting policy. And, I saw first-hand that passing legislation is an iterative process.

The first bill, AB 2944, was essentially a constituency statute, as 31 other states have. The bill had significant opposition of a committee from the State Bar.

Hanson Bridget is a founding B corp member and was in contact with the B Lab family early in the process. The idea for the new legislation came from a conversation with B Lab.  In thinking about proposing new legislation, I wanted to be sure the new form was one that social entrepreneurs wanted, not something only attorneys wanted.

For AB 361, the team drafting the legislation was more ready and more aware of support and opposition. I learned from the prior experience that projects like these take longer than you think and really require coalition-building. I knew it would be vital to build a constituency and have a broad coalition even before working on the legislation, so we created a legal working group to draft and develop the legislation and process.

I am much more satisfied with what [the 2011 legislation] evolved to [from the 2008 version]. It is broader than a constituency statute and provides for accountability, transparency, consumer protection, and shareholder rights. Legislation is iterative and even the current benefit corporation may also need to evolve and change in the future.


Q3 | Innov8Social:  Would it still be useful to have a constituency statute in CA?


A3 | Jonathan Storper:   Having a constituency statute would be great because it would encourage boards to do more for social and environmental issues.

However, there is no assessment or reporting required with a constituency statute. Considering that new legislation such as the benefit corporation requires transparency, it may be more protective than a constituency statute. I’m not sure that a constituency statute for California is as necessary now.

Q4 | Innov8Social:  What advice do you have for social innovation-minded attorneys interested in policy and legislation work?


A4 | Jonathan Storper:    Don’t get discouraged. It may take longer than you think—but a few really dedicated people can make a difference, still. A few people and a few good ideas are able to harness exponential power of really good people, companies, and associations. Being involved in the process has renewed my faith in the legislature.

If you choose to work for a firm, find one that encourages pro bono work. I am grateful to be part of a firm that supports pro bono work. Being so involved with the legislation has also been helpful to the firm. I have incorporated a number of benefit corporations, in fact–just one earlier today.Q5 | Innov8Social:  How has the passage of benefit corporation legislation and flexible purpose corporation affected your legal practice?


A5 | Jonathan Storper:   It has been interesting. I always tell people who are interested in converting or starting a social enterprise about the usual customary forms as well as flexible purpose corporation and benefit corporation. About 2/3 or 75% of social enterprises that have chosen one of the two new structures has elected to to structure as a benefit corporations. The choice to do so is more aligned with the already-existing mission/practice of the business.

I have been approached about new legal structures by companies such as an ad agency, music company, consumer product company, science fiction publisher, and education providers.

I have been asked to make presentations about the new structures, and found that I really enjoy the opportunity to speak and write about this topic.

Q6 | Innov8Social:  How do you see social enterprises measuring impact?

A6 | Jonathan Storper:   This is one of the biggest challenges for social enterprise. There are a number of different standard-setting organizations. This is unfortunate but is how our economy works.

It will take awhile for there to be a uniform way to measure impact, but will be valuable.

Q7 | Innov8Social:  What is next for you and Hanson Bridgett in terms of projects related to sustainability and social entrepreneurship…in 2013 and beyond?


A7 | Jonathan Storper:   A lot of attorneys interested in the area branch out and use their knowledge in sustainability to do different things. One of my Partners participates in Global Social Venture Competition at Haas.

My next goal is to come up with a best practices guide for benefit corporation in collaboration with UCLA’s School of Public Policy. I am interested in providing guidance on how a Board of Directors would approach a multi-stakeholder model.  We hope to provide guidance on how the Board can create an organization using assets that are tangible and intangible that help solve the human condition.

Webinar Recap: Ashoka Workshop on Hybrid Legal Structures by Morrison & Foerster, Jones Day, and Adler & Colvin

On Tuesday, January 29th 2013 Ashoka Legal brought together a few top law firms specializing in social enterprise law and hybrid structures. The session was created to be an open discussion and training on some of latest trends, tools, and resources for setting up nonprofits, for-profits, hybrids, and new corporate structures.
Hybrid Structures Webinar: Nonprofits, For-profits, and New Corporate Forms
The event, held at the Morrison & Foerster offices in San Francisco, was live-streamed online. The presenters’ list included:

Watch the Webinar

For social innovation attorneys, law students, and social entrepreneurs seeking to research legal entity options, formation, and restructuring—this webinar is an excellent tool to begin unpacking the many options available. And, the experience is made more meaningful as it is guided by attorneys at the forefront of the social enterprise legal space.
If you missed the the live webinar or live session, Morrison & Foerster is making the archived webinar available for viewing until April 2013.

Legal Structures

The speakers spoke in detail about legal structures that have been covered on Innov8Social, weaving in practical experience, policy history, and examples into their assessment of how each structure may benefit a social enterprise or non-profit.
Legal structures for social enterprise law covered in the webinar
Hybrid legal structures
  • For-profit subsidiary of a nonprofit
  • Nonprofit under control of for-profit
  • Sibling relationship of for-profit and nonprofit
  • Independent, but aligned entities
Other tools that can create value, and enable entities to remain mission-driven 
  • Licensing
  • Trademark
  • Integrated reporting: to integrate social, environmental impact alongside financials

Infographic: 2012 Sees Doubling of States that Passed Benefit Corporation Legislation

It seems like just yesterday there were  6 states that had passed benefit corporation legislation. That was over a year ago. In that time, B Lab and B Corp have successfully supported the passage of benefit corporation legislation in 12 states.Here’s an infographic from the B Corporation website that shows a map of the states that have passed benefit legislation, and states that are working on it. You can also view the B Corporation 2012 Annual Report, but note that it doesn’t reflect states that recently passed legislation.The Annual Report notes that over 500 companies have been certified as B corps, and the community is growing. (Note: B Corp is different from benefit corporation—though both distinctions indicate a commitment to creating a positive impact on society and the environment.)

http://www.bcorporation.net/what-are-b-corps/legislation

The 12 states that have passed benefit corporation legislation are:

  1. Maryland passed SB690/HB1009 in April 2010.
  2. Vermont passed S.263 in May 2010.
  3. Virginia passed HB2358 in March 2011.
  4. New Jersey passed S2170 in March 2011.
  5. Hawaii passed SB298 in July 2011.
  6. California passed AB361 in October 2011.
  7. New York passed A4692-a and S79-a in December 2011.
  8. Louisiana passed HB1178 in May 2012.
  9. South Carolina passed HB4766 in June 2012.
  10. Massachusetts passed H4352 in July 2012.
  11. Illinois passed SB2897 in August 2012.
  12. Pennsylvania passed HB1616 in October 2012.
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(B)enefit Corporation West Coast Forum Connects Sustainable Business with Academia in SF

(B)enefit Corporation West Coast Forum

On April 27, 2012 San Francisco University and B Lab hosted the (B)enefit Corporations West Coast Forum. It was a day of seminars, talks, and networking intended to connect academia with social entrepreneurs, and to provide an overview of the benefit corporation movement.

One of the interesting panel discussions featured three social entrepreneurs who actively pursue triple bottom line results in their companies. It was moderated by San Francisco-based B Lab Director of Business Development, Dermot Hikisch.

Here is a rundown of the speakers and a few of their key points.

Mike Hannigan, President of Give Something Back

Give Something Back (GSB) is the largest business to business office supplier in California, and has been running for around 20 years. What makes the business socially entrepreneurial is that the company pays competitive wages, but invests 100% of its profits to community non-profits.

Hannigan reiterated that the community was the key stakeholder in his company, which is a registered B corporation. (Note: a point of confusion is b corporation v. benefit corporation. They aren’t the same thing! Learn about the differences here). He noted that when the company was launched two decades ago, it represented a new and novel way of doing businesses, but that he is noticing more and more new companies being started with social mission in mind.

Benefit corporation symposium 3He also underscored the concept that his business has been successful because, at its core, it has a strong business model and can beat out its competition. In fulfilling the company’s vision to support the community and environment, employees receive competitive wages and full health benefits.

Hannigan outlined the democratic process the company engages in to decide on where to redistribute profits within the community. GSB polls their 10,000+ customers and clients to decide on the causes and organizations to support.

Kirsten Saenz Tobey, Founder and CEO of Revolution Foods

If the audience wasn’t already wowed by the history, and operations of Give Something Back—Kirsten Saenz Toby’s story about how and why she started Revolution Foods surely inspired the room.

Tobey started the company six years ago after to change the way kids eat at school and with the vision of fundamentally changing the relationship between food and kids.

She outlined her company’s founding value with simplicity: food should be real. Tobey and her team found ways to replace processed foods (with numerous additives and preservatives, high salt content, and too many grams of sugar) with healthy, nourishing alternatives. And they found ways to mass produce and deliver these healthy meals to local schools on a daily basis.

Tobey also spoke about honoring and respecting the workforce, and shared that in addition to providing full health benefits, her business model makes each employee part-owner of the company.

As they say, the proof is in the pudding, or in this case maybe in the fruit and yogurt parfait. The company has grown fast, very fast. Revolution Foods has gone from preparing and delivering 500 meals per day in 2006 to 120,000 meals per day in 2011. And, it is expanding to eight different regions across the country.


Revolution Foods certified as a b corporation (not the same as a benefit corporation) in 2011. Tobey spoke about the certification process, saying that it was valuable in outlining a roadmap for how her company wanted to grow, expand, and operate. She mentioned that as a social entrepreneur, she has often found it her role to educate potential investors about what b corporations are and what the triple bottom line entails.

In answering an audience question about the future of Revolution Foods, she didn’t rule out an exit strategy such as an intial public offering (IPO) or acquisition by a larger company.

Vincent Siciliano, President and CEO of New Resource Bank

Turning to a banking state of mind, the third panelist Vincent Siciliano of New Resource Bank opened his presentation by asking if we knew where our money “spends the night.” He spoke about his company’s goal of ensuring that every dollar of depositor’s funding is invested in building a sustainable community.

Founded in 2006, New Resource Bank has aimed to bring new resources and create new opportunities for sustainable business. Siciliano mentioned that the bank became a certified B Corporation in 2010.

He expanded on the ways his bank evaluates impact for its stakeholders, mentioning a client sustainability assessment that identifies learners, achievers, leaders, and champions in sustainability. New Resource Bank actively practices slow banking because it does not consciously seek an exit strategy, but instead focuses on long term growth and reach, franchising, and creating lasting economic impact in communities.

Answering questions from the audience, Siciliano mentioned foundations as an emerging source of funding social entrepreneurs, in addition to VC funding and crowd sourced funding. For example, Kellogg Foundation became an equity investor in Revolution Foods.

When asked about the academic community’s role in the (b)enefit corporation movement, Siciliano reiterated the need for impact metrics to support data-driven decision-making.