Can Tech Startups Appease Wall Street While Achieving Their Social Mission?
Etsy, at least, may have figured it out. (This post originally appeared on Fast Company)
Over the last decade, there’s been an outpouring of concern about how Facebook, Google, and other Internet companies treat their user data. This concern continues as the next generation of startups, like Uber, Lyft, Homejoy, and Postmates, are being taken to court by people like worker rights lawyer Liss-Riordan, who formerly filed class-action lawsuits on behalf of truck drivers, waiters, delivery men, cable installers, and call center workers.
Industry leaders have written about how these collaborative economy startups must start sharing value with their own community in order to quell concerns over worker rights, citing examples of how startups like Quirky and models from cooperatives are paving the way by sharing the financial rewards with their own community. Along with the entrepreneurs that run tech startups, we can all learn from these models.
Etsy, a 10-year-old marketplace, features makers from around the globe, and is a registered B Corporation. Recently, the company filled for an IPO. That’s right: Etsy, the social good marketplace empowering mom and pop artisans to sell their wares is now a ticker symbol listed next to companies like Walmart, Exxon, Coke, and Ford.
Etsy’s B Corporation status signifies the organization is aimed at doing social good—not just creating profits for investors at all costs. B Corporations are expected to focus on the fair treatment of workers and partners, and be responsible stewards of the environment, all while providing economic returns to the company investors.
According to the B Corporation website, Etsy has a rating of 105 out of 200 points. The average B Corporation ranks 80 points, which would likely be higher than the average Wall Street traded company that may be primarily focused on investor returns. While there are questions about the profitability of Etsy, the market appears to be responding positively to the IPO, and it is now valued at a market cap of $2.4 billion dollars.
So how will Etsy able to balance out the needs of investors while serving its social good mission?
One way is by offering creatives and partners the opportunity to purchase equity in the company before the IPO. Etsy reserved 5% of its shares for these providers. This was a smart move for the company, as it fosters one of the highest form of loyalty with its community: shared destiny. As Etsy performs well in the market, creators who purchased the shares benefit as well. Those creatives have already seen a 39% increase in the value of those shares since the IPO.
Etsy isn’t the only company to share the rewards with their community. Other large companies are also following a similar path:
- U-Haul launched the U-Haul Investors Club to enable the market to invest in its trucks, which offer a share of the dividends of vehicle performance
- Hasbro partnered with 3D printing maker community Shapeways to offer up the IP of toys and let makers glean revenue from every created product
- Barclay’s Card created the Barclays Ring, which enables communities of committed customers to design and use the credit card as well as distribute profits to the their favorite non-profits.
- GE partners with Quirky, where inventors who submit new product ideas share in the financial rewards.
As we go forward, companies that care about longevity of their relationship with their customers will share the rewards with community, fostering long term loyalty, deeper engagement, and advocacy from customers and partners. As companies like Uber and Airbnb prepare for their material events, they might consider sharing the rewards with their own community. In the end, companies that share the ongoing wealth with their community are more likely to survive, since the interests of all parties are aligned for the long-term.
Disclosure: Barclay’s Card is a customer of Catalyst Companies, founded by Jeremiah Owyang.
[Illustrations: Petr Vaclavek via Shutterstock]