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One Founder’s Experience Answering the Question: How Do I Structure My Cause?

Kenton Lee October 8, 2019
Photo courtesy of Because International

“Should we blow this up and change everything?”

That was the question my best friend and I asked ourselves in the summer of 2017 — even though we were leading a fairly successful social enterprise that had positive momentum, funding, and impact. Everything was going well. But we still were contemplating a complete overhaul.

How did we get to this point?

I had founded a small nonprofit called Because International in 2009 and spent six years trying to design our first innovative social impact product — an adjustable shoe for kids who don’t have consistent access to footwear. We finally did it with The Shoe That Grows, a shoe that could grow five sizes and last for years. It was always meant to be a small organization (a hobby, really) that I ran out of my house. But then in Spring 2015, we accidentally went viral and took off overnight.

Photo courtesy of Because International

My aforementioned best friend Andrew Kroes quit his corporate job to help me run Because International, and we were immediately thrown into the whirlwind of trying to start a full-fledged organization. We originally structured our cause as a 501(c)3 nonprofit headquartered in our hometown of Nampa, Idaho. We had thousands of amazing donors who supported our work with our shoes. And we also sold our shoes to distribution partners (churches, schools, nonprofits, etc.) who connected them to the kids they worked with around the world.

And then we started to have people ask if they could buy our growing shoes for their kids or themselves here in the US — something we never anticipated. We didn’t even have that option available on our website. We had no idea how much we would even charge for a commercial pair of our shoes.

What should we do with this?

Andrew and I began talking about it (in the small windows where we could find a time amidst the tornado of startup tasks we had swirling around us). What if we tried to capitalize on any commercial interest for our shoes?  Is it just a little bit of interest? Or could this be the tip of the iceberg? This could potentially be a huge opportunity to sell commercial shoes and fund our cause through the profits.

But then, besides the programmatic elements we needed to consider, we started to think about the legal and structural ramifications of commercial sales. Can we do commercial sales as a nonprofit? Would we need to pay unrelated business income tax? How much of our revenue can be through commercial sales before the IRS says we are no longer operating as a nonprofit? What if we changed our structure to a for-profit corporation?

This thought process led us to consider the brand and relationships that we had cultivated. Thousands of people supported our cause because of the compassionate spirit behind it. Would our donors be upset if we started selling our shoes commercially? What if we changed our structure entirely? How would they respond?

We loved where Because International was going. We loved the work that we were doing. And we had traction and support from amazing people around the country and the world. But we also had an eye to the future. Could this be a really big opportunity? How could we maximize every aspect of the interest in The Shoe That Grows — both charitable and commercial?

That is why we asked ourselves: “Should we blow this up and change everything?”

Ultimately, our answer was no. Because International remains a nonprofit organization. We love the work we do with our supporters and partners, and we knew that someday we wanted to work with more products than just our shoes. It was important to us to maintain the same charitable spirit from our origin story and allow ourselves room to expand beyond The Shoe That Grows.

In fact, we started a small incubator in January 2019 to work with diamond-in-the-rough entrepreneurs who are in the earliest stages of their ideas for products that can make a difference. This would have seemed to be an awkward move if we were a commercial shoe company. But it fits perfectly within our mission for Because International — to leverage innovative small products to fight poverty.

Photo courtesy of GroFive

Yet we did not just leave the commercial opportunity on the table. In January 2018, we filed paperwork for a separate commercial company in Idaho. The company is called GroFive, and we are registered as a Benefit Corporation (and we are slowly working on the gigantic application to be an official B Corp).

We launched with a successful Kickstarter campaign in Summer 2018, and now GroFive is off and running with commercial sales of our growing shoes called Expandals. We love inviting people who purchase Expandals into the greater mission of Because International. Also, GroFive donates 6.5 percent of annual revenue back to the nonprofit.

So what should you do with your cause? How should you structure it? If you have already started, should you blow it up and change everything? I don’t know. But I know that it is a conversation worth having before you get started, if you are struggling, or even if you are doing great.

Social Entrepreneurship / Stakeholder Capitalism
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