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Purpose-Driven Companies

I picked up Behind the Cloud by Marc Benioff after meeting with Larry Brilliant at Skoll Global Threats Fund. We were talking about the humanitarian and environmental utility of Planet Labs’ data and product: namely, how do you structure a company that has great public benefit as well as commercial utility?  This post is a summary of the book he recommended in this context, and the points that stood out for me around creating a purpose-driven company. I do recommend this as a quick-read business book; skip the movies on the next SF to DC plane trip and pick this up instead!

Summary:

  • 10 year reflection of building Salesforce.com (note: 1999-2009 and was written before for the financial woes of 2009 set in)
  • Marc seems to be a great leader, as evidenced by his ability to see cloud computing coming and its new business models for enterprise clients, sticking to his business vision in hard times, and creating a thriving culture and multi-billion dollar company
  • Marc is clearly a good salesman, so read for his anecdotes about marketing and PR stunts, leaking internal memos to the press, maintaining close relationships with the press, using each employee as an extension of marketing and sales for the organization, and being aggressive with the competition
  • On the financing side, Marc was in a good place to raise money non-traditionally; he put in $6M of his own money and had many corporate colleagues able to put in additional million-dollar checks.  He avoided the traditional VC route, mainly due to inability to agree on valuation, and this is something that many entrepreneurs don’t have the luxury to do.
  • Marc started both salesforce.com (the for-profit) and salesforce.org  (the non-profit) from the very beginning.  He also adopted a 1-1-1 model for doing good: 1% of equity, product, and employee time from the dot-com goes toward the .org at all times.  Marc does point out that all of this is good business as well – it helps to recruit a younger workforce, retain top talent, builds your brand and be a differentiator amongst his competitors for key clients.  Not only is it the right thing to do, it is also good business.

On doing good, there are many instructive lessons for the entrepreneur with the 1-1-1 model as pioneered by Salesforce.com.  For the equity-side, he started his non-profit from the beginning and that makes great sense.  The longer you wait to give out equity, the more stakeholders need to be involved in the decision.  If you are just getting started, I would suggest that you earmark a % of the company in common class to your future .org.  Do consult your lawyer on the matter, but allocate founder shares and/or early employee shares before you seek investors. If done correctly, you may be able to avoid formally starting the .org by instead signing a promissory note to avoid the 100+ hours of filling out the 1023 before the complete operational understanding of the .org is known.  If you already have investors, then before your next round (and when you have built credibility and momentum for a growing business) go to the major investors, state your vision, and invite them to come along.  Form the .org before your next investment round, give them some of your employee shares, and make it a fait accompli for the next round of investors.

For the 1% product and 1% of employee time (I have also heard people use 1% of profits go to the .org), this is a bit more complicated.  This is great in times of boom, and shareholders won’t be making a fuss, but in hard times they will be sure to voice their concern.  This means that the .org is beholden to the quarterly ebbs and flows of the .com and makes the .org staff uncertain about their operating budget, which affects their ability to invest in longer-term projects and achieve their charitable mission.

Instead, I would suggest that you do a contract between the .org and the .com. A very instructive one was done between Alexa Internet and the Internet Archive, written by Brewster Khale in 1997.  In this contract, the Internet Archive received Alexa data and can use it for scholarly and historic research after a 180 day embargo period.  Even with the sale of Alexa to Amazon.com in 1999, Jeff Bezos honored the contract, which has allowed Archive.org to endure, and continue to achieve its mission.

For example, a carefully crafted contract between the .org and the .com of a given organization (written, as Marc would say, with a ‘light and love’ contract (see his global chapter)), could give the .org independence and access to the company’s data and/or product for specific market segments.  The .org can be given exclusive rights to non-profit markets with the .com’s products.  The .org could choose to give their product out for free up to a certain number of licenses, and then charge a massive discount compared to the .com pricing.  This still generates revenue for the .org which allows it to attract its own employees, have its own account managers, and enhance the product to best serve their customers – in addition to generating excess revenue to give back to their communities. I understand that this is similar to how Salesforce.com and .org are operating today.

With respect to the 1% of employee time, many companies today don’t have formal time off.  Employees are trusted to fulfill their obligations no matter how they get it done and to be sure that they don’t leave their team in a pinch.  But without formally stating that this is a value for the company, busy people often won’t make time for it.  I think that with today’s flexible, trusting work schedule, there is room to innovate here.  As I write this now, one of our individual contributors is spending 9 days in Kentucky at a girls’ Space camp during her ‘vacation.’  This is giving back to our community and I look forward to understanding how we can incentivize others to do the same.

I’ll leave you with the a summary from Marc’s book, “How to build and Employee-Inspired Foundation”

  • Start from the Very Beginning
  • Canvass Employees About Their Interests
  • Establish a Formal Strucutre to Elicit Employee Involvement
  • Make the Foundation Part of Your Company by Making It Visible
  • Recognize the Efforts of Employees
  • Foster the Foundation in Good Times and Bad
  • Let if Evolve and Change

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