Financing tends to be on the top of the list of hurdles for sustainable companies looking to scale. A business does not survive on a mission alone, and in order to generate profits and revenue, it needs capital to operate. But for sustainable enterprises setting out to meet the triple bottle line (“Planet, People, Profit”) while minimizing impacts, attracting and raising funding can be a particularly challenging task.
As it is, genuinely committing to environmental stewardship by incorporating sustainability into business decisions largely goes against the grain in a market that still prioritizes short-term profits. Despite increasing public concern with issues such as climate change, plastic pollution and the changing priorities of the Environmental Protection Agency, sustainable ventures measured along this profitability metric may outwardly pose to investors a degree of risk. Striving to mitigate costs and reduce uncertainty, investors, like businesses, are presented with their prohibitive obstacles that boil down to a matter of economics.
When investors do show interest, there is the risk that their capital is conditional and contingent upon their ability to steer the ship. "Basically, when you take other people's money you owe them something. You either owe them money back or a business decision that is kind of no longer yours,” said Jason Fried, CEO of Basecamp. As they say, money is money, but some funding options can be limiting and may come with strings attached.
Up until recently, private companies (green or not) would raise capital by taking out a loan (also known as “debt financing,” which needs to be paid off with interest), “going public” through an IPO (Initial Public Offering) or accepting investments from wealthy (“accredited” and thus exempt from certain securities protections) investors. For sustainable, viable growth, I’d advise entrepreneurs and young businesses to consider the pros and cons of each when weighing options for equity with their companies.
Emerging Regenerative Finance Models
Join us as leaders from Ganaz, the International Living Future Institute and more share insights on alternative capital structures and financial instruments that seek to both maximize purpose and service the interests of all stakeholders, at SB'21 San Diego — October 18-21.
But the rise of social media and internet literacy sees us living in an increasingly connected world. With it, a new funding option has developed for small, sustainable businesses looking to raise capital: crowdfunding. Defined as the practice of funding a project or venture by raising many small amounts of money from a large number of people (aka a crowd), popular and well-known platforms for this model include IndieGoGo, Kickstarter and GoFundMe.
Powered by the internet connecting consumers to the things they care about, crowdfunding is used for causes and initiatives of all sizes, affording individuals and groups the flexibility to set the terms of their raise, retain control of their project, and open up to as many potential backers as possible.
One notable example of a recently successful crowdfunding campaign was held by GroBox One, the all-in-one, self-sustaining indoor hydroponics greenhouse setting out to make gardening accessible to anyone. Having met its goal more than seven times over, you can expect to see GroBox One in mainstream retailers by 2019 — right after the Kickstarter backers have received their products — bridging the gap between its goals and the marketplace while maintaining a clear vision.
Building on the freedom and flexibility offered by emerging crowdfunding options, President Obama in 2012 passed the JOBS Act, a piece of bipartisan legislation designed to support entrepreneurship by offering young, private businesses a way to crowdsource funds safely and effectively. A provision of the JOBS Act, called Regulation A, greatly expanded entrepreneurs’ access to capital, allowing them to crowdfund their capital raises and opened the door to non-accredited investors to participate in early-stage investments, subject to SEC review.
TerraCycle US Inc., the U.S. subsidiary of TerraCycle, Inc., just announced that its $25 million Regulation A offering has been qualified by the U.S. Securities and Exchange Commission (SEC), thereby allowing anyone the opportunity to invest in our U.S. business for the first time. Through the Regulation A offering, TerraCycle US Inc., known for “recycling the unrecyclable,” seeks to use the proceeds from the offering to acquire related companies, increase staff and grow its business. Interested investors are invited to visit www.OwnTerraCycle.com or the SEC website to view detailed information about the offering.
Whether it’s to bring a soiless indoor greenhouse to market, fund a mobile app that turns picking up litter into a game, or raise money for clean energy, crowdfunding is an accessible, sustainable avenue for green ventures to source capital, and consumers looking to invest in causes important to them. Doing the right thing needs to be profitable and scalable in order to affect change, and being aware of the options available is one of the first steps to achieving lift-off.