The first Berkeley “Social Enterprise Law Symposium”
took place in the first week of April 2014. The Boalt Social Enterprise Group
(a student organization of UC Berkeley School of Law) and the Impact Law Forum
hosted the insightful event to take a closer look at financing & exits for social enterprises. The event comprised of two panel discussions and surveyed the finance and legal structures for social enterprises from startup stages to scale– focusing more on scalable social enterprises backed by foundation or grant funding.Scroll down below for links to watch videos of the sessions
.From the perspective of covering social enterprise law in various posts on Innov8Social about the introduction and passage of benefit corporation legislation in California
; hybrid corporate forms including L3C
, CA flexible purpose corporation
, and others; the merit of tandem structures
(i.e. for-profit + nonprofit combinations); potential of crowdfunding for equity
; and impact financing
possibilities and constraints—-the panel talks validated some overall trends that have been emerging and brought to light interesting nuances by active legal practitioners in the space, social entrepreneurs, funders, returns-focused venture capital, and policy experts.
Below is a photo essay from the talk, along with a few notes about notable quotes and points raised. You can also read literature handed out at the Symposium on the Impact Law Forum website.
Attorney Gene Takagi also posted about about the session in his blog post, “Financing Social Enterprises: From Start-up Through Exit”.
The panel talks afforded legal practitioners continuing legal education credit and brought together a diverse group of individuals engaged or curious about the social enterprise space.
Panel 1: Early Stage Financing and Mission Preservation
Panel 1 included (from the left): Rick Moss (Founder and Managing Director of Better Ventures); Ayesha Wagle (President of KOMAZA, a social enterprise); Will Fitzpatrick (General Counsel and Secretary of the Board of Omidyar Network); and Susan Mac Cormac (Partner at Morrison & Foerester’s Clean Technology Group & PRivate Equity and Venture Investment Practice, and Co-Chair of the Working Group for the Flexible Purpose Corporation). The panel discussion was moderated by Berkeley law student, Jen Barnette (extreme right)
To put the social enterprise sector into context, Susan Mac Cormac (center) noted that social enterprises represent less than 1% of the total capital market. She also framed the stage of development and reporting of the infrastructure for social enterprises, in her reflection that “if hybrid structures are in the the ‘1st grade’ of development, impact measurement is in ‘kindergarten.'”
In addressing his perspective on hybrid legal structures, Will Fitzpatrick (left in photo) of Omidyar referenced a quote by famous Silicon Valley venture capitalist Marc Andreesen, likening hybrid structures to a “houseboat” because, in Andreesen’s view, “they are neither a good house, nor a good boat.” He also emphasized the weight Omidyar Network places on the scalability of the social enterprises and nonprofits it funds and supports.
Moderator Jen Barnette (right) covered questions surround legal structure options as well as ways social enterprises can avoid “mission drift” and the impact of legal structures and channels of funding.
Ayesha Wagle (right) discussed the emerging view of social enterprises as a new asset class in investing. She also reflected on social enterprises pursuing funding, noting the importance of choosing funding types wisely, based on risk tolerance and ability to bear debt or give equity.
Rick Moss (left) brought up an interesting point that his venture fund prefers social enterprises to come in for funding with no legal form rather than an overly-complex of “bad” legal structure.
Panel 2: Exits
Panel 2 included (from the left) Mark Perutz (partner at DBL Investors & Board member of Revolution Foods); Kendall Baker (CFO at Revolution Foods); Jan Piotrowski (Head of Venture Coverage at Credit Suisse); and Eric Talley (Berkeley Law professor and co-director of Berkeley Center for Law, Business, and the Economy). The panel was moderated by Berkeley JD/MBA candidate, Libby Hadzima.
Jan Piotrowski (left) noted that while we haven’t seen big exits in the social enterprise space yet, the time is coming.
Moderator Libby Hadzima (right) posed questions framing typical exits for social enterprises, what venture capital firms seek when engaging with social enterprises, and ways social enterprises can pursue mission even in exit scenarios.
Mark Perutz (left) emphasized that DBL Investors seeks big returns so as to be making “absolutely no sacrifice on financial return” when investing in social enterprises.
Kendall Baker (right) shared Revolution Foods’ mission to become the first mission-based company to go public and expounded on the “halo effect” of health/wellness companies trading higher than companies not dedicated to those goals in similarly situated companies in their class. (i.e. Annie’s brand).
After the panel discussions, speakers and attendees gathered on the patio—continuing conversations and sharing insights from diverse perspectives and experiences in the social enterprise space.
Watch the Videos
PANEL 1: EARLY-STAGE FINANCING & MISSION PRESERVATION
PANEL 2: EXIT