Premature incorporation: Don’t let it happen to you

By Kevin Starr 

I’m spending an inordinate amount of time these days talking social entrepreneurs out of launching for-profits. Many drank deeply of the impact-investing Kool-Aid, and came away believing that going for-profit is the only way to drive financial and operational discipline, that it will give them immediate access to much more capital, and that they will find the holy grail of sustainability while the deluded do-gooders who went nonprofit are still grubbing around in the bushes for donations.

It’s mostly bullshit.

Instead, a typical scenario goes like this: Social entrepreneur has cool idea. Social entrepreneur launches for-profit venture with own/friends’/family’s dough, maybe even gets a chunk or two of seed funding. Hard work ensues. Money runs out. Venture is nowhere near ready for real investment. Venture goes off a cliff.