A question we are often asked is:
Why is Real Time Farms a for-profit company instead of a non-profit? And as a for-profit, why are you taking donations as part of the SeedStarter campaign? We want to take the time to explain how we view ourselves as a for-profit social venture, and how SeedStarter fits into this.
A Social Venture
There is a growing awareness that applying the agility, ingenuity and high risk / high reward approach of a for-profit startup to a social problem is an effective alternative to non-profits. A recent article about Social Enterprise on greenmarketing.tv explains that whereas non-profits, “rely primarily on charitable contributions, public funding and foundation grants to support their programs and cover their administrative overhead”, social enterprises, “rely primarily on their earned income stream, and like any other company, if needed, it takes loans, invites capital investments, forms partnerships etc. in order to expand its business activities.” Simply put, if a social venture succeeds in developing a scalable business model that complements its social mission, it will not only be self sustaining in its efforts, but have the resources to do things that non-profits typically have a harder time doing, like pay competitive salaries for top talent.
But a for-profit social venture has more than one bottom line; it must have a clear social impact that it can be accountable to as much as its profits. This is why Michigan’s Social Venture Fund invests in, “sustainable, innovative, for-profit companies that place the generation of a significant social impact at the heart of their mission and way of doing business.”
Emerging Business Structures
In recognition of this middle ground between non-profits and for-profits, new legal structures are emerging including B-corporations and L3Cs (Low-Profit Limited Liability Corporations). Both recognize that applying the power of a for-profit model towards social impact is a powerful idea that merits new legal structures. The legal structures aim to make it easier for foundations and individuals to make donations or program related investments to a for-profit entity while being assured the for-profit sticks to its social mission. Given that the L3C model is available in Michigan, it is the closest fit for Real Time Farms, and we have considered converting from an LLC to an L3C. At this time however, L3C’s don’t have the legal teeth to afford us tangible benefit or accountability beyond making a declaration of our social mission, so changing our legal structure has not been at the top of our priority list.
How Real Time Farms Fits
Real Time Farms mission is to make food transparency easy, participatory and fun. Mark Bittman of the New York Times writes that we are experiencing an “increased awareness of industrially raised animals and over processed food and ultimately an interest in local ingredients, in vegetables, in sustainability, in human health…” and yet finding alternatives is difficult. By developing an easy to use guide that makes it easy to trace food back to its origins and learn about how it was grown or produced, we believe we will lead people to choices that are healthiest for themselves and our planet.
We have also developed a business model around providing tools to allow restaurants, caterers and food vendors to show how their menu items are sourced, linking each ingredient back to the farm it came from. By making it easy to plug into the growing guide, it is a win both for restaurateurs who need to convey the value added by their thoughtful sourcing and to consumers who would like to find a place to eat that meets their standards of food production. Restaurants pay a monthly subscription fee to be on Real Time Farms, and the revenue is used to sustain our efforts to continuously improve our food guide. If and when we grow our business to bring in substantial revenue, we’ll be able to grow our team, pay competitive salaries to top talent and recoup some of the costs we have put into starting our business.
We just explained how Social Enterprises are different from non-profits, and how Real Time Farms fits that model. So why are we taking donations as part of our SeedStarter fundraiser? If we are a for-profit, why not take on investments instead?
The main reason we created SeedStarter was to provide a simple way for people who believe that our success will be a good thing for food transparency to help us reach the point of financial sustainability. At that point, we will continue to grow our guide without needing any additional outside donations. Much like campaigns on KickStarter and similar sites, we are seeking a one time boost. By accepting donations of any amount, it is an easy no strings attached way to help us, and while a donation clearly does not yield any financial returns, we hope to provide significant returns on that investment in terms of improved food transparency and thus individual and environmental health.
We have no intention of regularly holding fundraisers once we are financially sustainable; our scalable business model will provide us the financial resources to continue to work on food transparency for years to come.
And while we have taken equity investment in the past, the complexity associated with offering equity to individuals who simply would like to give $20 to help us scale out this spring seems like overkill. That said, if you are someone who would like to make a significant investment in Real Time Farms, please do contact us.
Real Time Farms is a for-profit social enterprise that first and foremost aims to make food transparency easy while sustaining itself with scalable business models that will provide us the resources to have an ever growing impact. If you believe in our mission to improve food transparency, our SeedStarter program is an easy way to chip in to help us reach financial sustainability this spring.
Karl Rosaen, Founder, Real Time Farms