I was shocked and deeply moved when I heard the news this morning - Bain Capital is purchasing 50 percent of TOMS, the One For One shoe, eyewear, and fashion company that for eight years has been giving products to kids in need for every product a person buys. The TOMS business model was revolutionary at the time of its inception, and helped inspire an entire army of companies that have built social good into the core of their business model. But it's not just the fact that TOMS received an investment from Mitt Romney's Bain Capital that was so important - it's the fact that Bain's investment now values TOMS, a social enterprise, at $625 million dollars.
The United States has not yet seen a billion dollar social enterprise (though France's Groupe SOS is now a billion dollar social enterprise). TOMS is now almost two thirds of the way there already. For a moment, just imagine the kind of amazing social impact a company can achieve when operating at a billion dollar level:
• A billion dollar consumer products company takes on Unilever and Johnson & Johnson, giving product away One for One, or giving a substantial percentage of profits (say 40%) to charities seeking to end poverty - thus, using the engine of business to sustainably generate meaningful social good
• A billion dollar nonprofit that generates capital through business activities in order to fund world-changing social impact projects, leveraging the market to bring money to deeply needed social crises
• A billion dollar online payment platform makes transaction costs free for charities, saving them 3% on every credit card donation, thus putting billions of dollars more into field work that changes the world every year
• A billion dollar supermarket chain decides to leverage its excess inventory to feed the hungry nationwide at scale
• A billion dollar housing company builds homes around the country to put all 58,000 homeless veterans into shelters to keep them dry and warm
• A billion dollar corporation serves poor and underserved markets in the developing world, providing needed products in the areas of clean water, sanitation, education, and infrastructure at scale in order to profoundly improve quality of life for the world's poorest
The possibilities are endless. Humanity is at its infancy in terms of leveraging business to generate significant and meaningful social impact. As we've seen with companies like TOMS, Roozt, Warby Parker, and Indego Africa, people will pay for products with social good attached. The data has shown that 94% of people would switch brands if, all things being equal, one brand supported a social cause. 94%. And now, the money is beginning to catch up with consumer mindset.
The social capital movement has been growing and maturing for some time. Social Capital Markets, a conference in the Bay Area led by Kevin Jones, has been for years demonstrating to investors that there is much money to be made in investing in businesses with social purpose.
According to Jones:
"Tom's is a company that shows you can make money investing in companies with a mission baked in. Changing demand from a more conscious breed of consumer is expanding the possibilities of more companies like this. I am seeing some of the biggest opportunities in financial inclusion; smart phones and big data mean you can make a lot of money reducing the cost of being poor."
While incredibly supportive of the social enterprise movement, Kevin Jones cautioned that TOMS may have to take care to ensure that this infusion of mainstream capital doesn't dilute its social impact.
Continuing the narrative of mainstream interest in social enterprise, Investment bank JP Morgan has already declared that social enterprise investing could lead to a $667 billion profit opportunity, and "impact investors" have already put over $4 billion of their own money in the game this year alone.
But never before has such a significant investment been made in a social enterprise. Bain Capital's 9 figure investment in TOMS signals not only to the social enterprise world, but also to the broader investment community, that there is a profound and significant opportunity to turn social good into financial wealth. TOMS founder Blake Mycoskie now must ensure that his business maintains its focus on its social mission, perhaps even expanding it, as Bain Capital - an organization known for ruthless cost cutting - begins to contribute to the TOMS business model.
It is indeed possible to do well by doing good. To make money while making meaning. Etc. Cliches aside, Bain Capital's investment in TOMS is a necessary step in the continuing march to mainstream acceptance of social enterprise by investors. Consumers have already chosen in droves, and now that investors are catching up, it is exciting to consider the billion dollar social enterprises that can emerge on the scene and change the world at scale. Perhaps you, dear reader, will found one of them.