 Good afternoon and thank you for joining us today. My name is Camille Kerr, I'm the research director at the National Center for Employee Ownership and I'm joined here by Paul Hudnut who has many hats but a couple of them are a board member at New Belgium Brewing and a professor at Colorado State University. I'm also joined by Melissa Hoover who is the executive director at the U.S. Federation for Worker Co-Ops and Dermot Hickish who's the director of business development at B-Lab. And what we're here to talk about today is something that I think will be increasingly important as this sector grows and matures and that's succession planning. And succession planning is a hot topic in general right now. It's not unique to the social sector. It's something that because of our demographics is becoming more and more relevant to businesses. There are millions of baby boomer business owners right now who will be transferring billions of dollars in assets and most of them will be transferring it in the next decade and the vast majority have no succession plan and Marjorie Kelley in her book Owning Our Future the Emerging Ownership Revolution calls this the legacy problem and what she mentions in her book is that we need to preserve the things in our organizations and our companies and our social enterprises that that create impact and the earlier you start planning and this is a theme that you'll see throughout this presentation the earlier you start planning for succession of your of your business the more options you'll have and the more likely you'll be to have a successful transition plan. And in this context what I would call a successful transition plan and we don't have a lot of examples to draw from in our sector but what I would call a successful transition plan is one that respects the values of the organization of all of its shareholders and of all of its other stakeholders. So with that let's look at some of the options that are available to us and I think I need a clicker. Oh it's up there. Thank you. So let's look at some of these options and social enterprises have both conventional options and alternative options for a transition plan and the alternative options are to sell to employees and there are different ways to do this and the one that the National Center for Employee Ownership we encounter most the one that's most prevalent in the United States is through an employee stock ownership plan or ESOP. Other types of employee ownership plans you can do it through a different type of trust. It's not very common in the US but many of you have heard I'm sure of the John Lewis partnership that has a democratic governance structure in the UK one of the largest retailers in the UK. There's also cooperatives which Melissa will touch upon a little bit more and you can also sell directly to select managers through leveraged buyout or other means. There are also dual class share structures and you'll hear about this in terms of newspapers often like the New York Times the family that has owned the New York Times maintains those shares that are voting shares where they're still publicly traded and there's still other outside investors. Also there's Novo Nordisk which does diabetes insulin and they have a dual class share structure where a foundation owns all of the voting shares of stock so they maintain governance while still being able to have investment. You can also unlike a conventional business social enterprises have a social mission so they have the option of converting to a non-profit structure depending on the type of public benefit that they are providing. But social enterprises also have conventional options available to them and the ones that we hear about most are merger or acquisition that can be a sale to a competitor sale to a strategic buyer of some sort or a sale to a private equity firm. There aren't that many private equity firms currently in the space but that's something that could change in the near future. There's also the option of going public and just because you use a conventional option like selling to a competitor or going public doesn't mean you necessarily are giving up your values in the process and Dermot will talk a little bit more about how becoming a benefit corporation can help you preserve those values despite using one of the more conventional options and in general we're looking also on a conventional side of things there's transferring to family which isn't at least in my experience so far particularly relevant to this space but it could be something if more and more businesses are embracing a social um embracing a social mission there might be more that want to pass that down to family so eventually we could start seeing something like that be an option as well. So when you're considering any of the options that you have here there are a few things that you need to keep in mind and one of the first ones and we saw earlier in your earlier panel Paul is what is your what is your ownership structure? If you have outside investors that's going to drastically limit your options because they are a shareholder that's going to have a lot of say in what your transition is going to look like and if you're expecting to have shareholders or if you're expecting to have outside investment it's something you should really consider moving forward what how do I want to structure my exit and will this investment affect that? Also it's a big question of is staying private and independent an important goal to you for a lot of companies that's very important we want to stay small we want to stay private and we want to make sure we're carrying on our mission the way that we intend to others are happy to sell to a competitor happy to scale and the more impact the more people they touch the better but you should know those questions going into it. Another question that will affect how you decide is how do the founders or the current leadership that you have how do they want to be involved in the business going forward do they want to keep leading the business it's so selling to a competitor might not be the best option and another one and this will especially be important when we talk about co-ops or converting to a nonprofit how important is how much money you get out of that transaction selling to a strategic buyer is going to have a different price tag you're going to get less liquidity than if you are selling to a strategic buyer you'll get more liquidity than if you sell to a co-op or if you convert to a nonprofit you likely will get nothing for that for that transition so those are some of the things that we need to look at when we're making these decisions and another thing that I want to emphasize is that when you're making these choices some of these transitions like selling to employees not only maintain your mission but can increase it because your impact may be that you're serving a disadvantaged population and creating access to water creating access to sewage that otherwise wouldn't be accessible but when you sell to employees you also have the added benefit of sharing the wealth that that business is creating with those who are creating it so these transition strategies not only give you an option for maintaining your impact and values as you move forward as an organization but deepening that impact and grounding your company in your community and sharing wealth with those who are helping to create it so with that I'm going to hand it over actually to Paul and we'll get to your slides a little bit later there okay well I I'm Paul Hudnut and I think the reason I'm on my on this panel is I've been an independent director at New Belgium Brewing for six years and we've been through this process of trying to figure out what I refer to more as liquidity than exit because all the people are still there we've just transitioned our capital structure when we became 100% ESOP company at the end of last year as part of that transaction we also became a B Corp which I think has some interesting wrinkles about how you can maintain mission and and embed some of those principles in ways that that bind people who aren't your stakeholders now but might be interested in your company in the long term a little background about New Belgium Brewing often people say they haven't heard of New Belgium Brewing but then I say fat tire amber ale and they're like oh yeah we know them but New Belgium Brewing is the eighth largest brewery in the country and the third largest craft brewer they the overall industry is about a hundred billion dollars craft brewing is less than 10 percent of that so for a long time there's been tremendous opportunities for growth as people kind of rediscover the craft of beer and and the variety of beer and New Belgium has been positioned very well through that that growth period but as the company this has been a the company's 22 years old now that's a long time and over that time the original owners of the company had developed had built a company that had a great deal of value and so as a board we had to begin to explore are there ways to to harvest some of that value for the shareholders and that quickly got us into discussions as a as a mission oriented company what would our what would our options be and we explored a lot of them over a fairly long period of time the other thing I like to point out is that we are a beer company we are not saving the world with clean water or clean fuel or anything and beer has been around for thousands of years so I think I guess I hope what that does is encourage you to all think about what is it about how you make whatever you make or offer whatever you offer what are the ways you can make that work important because it is about more than making beer and our mission sounds pretty hippie-dippy it's it's to operate a profitable brewery that makes our love and talent manifest and that is pretty certainly not a mission statement that you would see for a lot of companies but it it gets to what we're about and how important it is to develop the people in the company so that they feel like they are bringing that love and their talent to work every day so while we explored a lot of options in this path we kind of came back to the idea of really wanting to to sell the company to to our co-workers and and then that started us down this path of there actually are some firms out there that are investment bankers that specialize in this field and attorneys that can help you with that the the way the transaction basically worked is the company borrowed a lot of money both from banks and from the selling shareholders enabled to in order to basically buy out all the remaining stockholders we were already about just under 40% esophoned so this was going from 40 to 100 and the way we did that was borrowed money bought those shares back I can't get into the real numbers of the transaction but what I can say is we explored an IPO we explored being acquired by other breweries and as part of that we began to appreciate the value of what our company was worth and the ultimate transaction we did we were able to I mean we were able to get a kind of a market level EBIT multiple through through financing now right now debt financing is kind of at historically low levels which allows you perhaps to do that that that's certainly a part of of of penciling these transactions out but I think what we were able to do and it was hard work was to find kind of an exit price that worked well for our shareholders but also allowed the employees to have some upside so that they weren't kind of under a structure that was not sustainable in the long term and we closed that transaction at the end of last year announced it to our employees in January and as part of that we also had taken the idea of B Corp becoming a B corporation to our employees and having them approve that structure I think what the B Corp allows us to do first the certification is a useful process to go through to kind of see how you compare to others and it's also you go through this checklist and you're like oh we didn't do so well on that one so it's kind of aspirational and particularly like oh somebody else did better on that than we did we should work on that but the other thing it allows us to do is we were very cognizant of the fact that you know ESOP owned companies could be sold some big person could big company could come in and make an offer to our ESOP trustees so part of what we also had to do was figure out ways to build in other things that would that would would in effect be sure that we had at least many years of kind of of of this path so the B corporation for us also became this process to go through really articulating what your corporate purpose is and embedding that into an acquisition policy that is board members you know we have fiduciary duties but we can also follow these acquisition policies where we have to take into account all stakeholders not just the owners and some other things so I'll stop there and turn it over because we have some other great panelists too so Paul's talking about one form of employee ownership and it's the most popular form there are thousands of ESOP companies in the US employing millions of people some other examples would be king arthur flower dance go those are both certified b corporations but there are quite a few other forms of employee ownership ones that are broad based or ones that are focused at the top management and when we're talking about when we transfer it to to melissa she'll be discussing cooperatives esops what paul is talking about don't require democratic management or democratic governance you can have governance there is some level of governance that employees need to participate in but not like with cooperatives which you'll hear are generally a one member one vote structure so tell us about how cooperatives can then be an option for smaller possibly social enterprises that want to maintain their values right yeah thank you so paul did a great job of talking about the way and esop structure works for a large employee owned company and i think new belgium is the proof of concept one of the many proofs of concept that a hundred percent esop can work for a large company and worker co-ops tend to be they're another flavor of employee ownership and they tend to be used with smaller companies and as camille mentioned there's a democratic participation in governance and management built into the form according to the co-op principles it's a one member one vote structure that can take any number of forms i think everybody's nightmare is is cooperative means everybody votes on everything and that's rarely the case and never the case in larger co-ops there's a sort of pretty sophisticated mechanisms for making different kinds of decisions at different levels but the democratic participation is a is a critical part of cooperative ownership the other part is is the shared ownership so a cooperative is a member-based form it's a business but it's a it's a member-owned business that operates for the benefit of its members and in a worker co-op those members are the people who work in the co-op um you may be more familiar with something like a consumer co-op like a local food co-op or rei where your membership is based on being a consumer or a producer co-op like organic valley where the co-op members are the are the agricultural producers a worker co-op operates along the same principles the membership is just shifted to the employees um and so what when is a worker co-op used as a transition mechanism typically with smaller companies it can use some of the same tools as an esop does to to do the buy out and to save the owner capital gains taxes on the transition on the sale of the business um it tends to be a good fit for companies where deeper democratic participation is desired um it also tends to be a good fit for companies that want to preserve um a sense of uh that want to limit growth or need or want to stay small that's not to say that all cooperatives do stay small but it's a nice fit for a smaller company um just to give a little bit of context on worker cooperatives they're sort of esop's little sister right now um in terms of size and scope and scale there are about 350 worker co-ops in the country um they tend to be overwhelmingly small businesses under 50 or 100 workers um concentrated on the coasts um and located in sort of a real variety of industries for those of you who are local some worker cooperative examples are the arismendi bakeries the wages house cleaning cooperatives and the the big daddy of bay area co-ops rainbow grocery so so those are worker owned and run cooperatives and in the us we're seeing growth in the service sector and in the alternative energy sector in worker cooperatives and particularly an increased interest in cooperative worker cooperatives as a transition structure for small businesses camille gave some pretty um strong statistics about the number of baby boomer retirements that are coming up and we're seeing that experientially the owners are interested in exploring selling to their workers one of the sort of largest the largest worker cooperative in the world is in spain and it's sort of a guiding light for some of us and worker cooperatives here in the us because it shows that a worker cooperative can be realized at scale um and in manufacturing and and sort of all the the the holy grails um that that we're aiming for and that's the mondragon cooperative in spain and i mentioned that name hoping that you'll look it up a little bit just some quick statistics it's the seventh largest business in spain it employs about 85 000 people it's all over the world it's a multinational corporation 250 countries so they figured out how to do r&d and manufacturing in a way that brings worker cooperatives to scale we're not there yet in the us but i think we have a lot to learn from things like the e-sub community about how to reach scale with worker ownership um some of the challenges and benefits of worker cooperatives um they're they we haven't figured out financing yet we're still getting there in terms of a transition mechanism for financing so it's a bit irregular in terms of structuring that deal the benefits on the other hand to the selling owners are that the mission really the social mission of the business has a much greater chance of being institutionalized and the benefits for the buying owners are of course that they get to keep their jobs and keep the business in business so it's it's a it's a vehicle or a tool that's evolving and as we're seeing increased interest we're interested in learning from from you all here at soak up about how you might think about transitioning to employee ownership but also sharing some of our pretty powerful models and another form of employee ownership that i touched on briefly before and where we see a large scale is the john louis partnership and they have a democratic they really translated democracy very literally into the workplace they have a constitution all of the employees there are considered partners it's not a model that we've seen developed in the united states but as we move forward with social enterprise the world is kind of our oyster as i mentioned there are very few transactions that we're even referencing when we're talking about social enterprises that have scaled or been mature enough or whose owners were ready for liquidity or ready to move on it does seem like this tent might fall over by the way in case you see our eyes jetting around a little there's a lot of wind in san francisco right now but there are very few that we've seen successful or otherwise so when we talk about these models cooperatives are still in development as a way to transition a business but we should explore these and if you are an entrepreneur if you're a social entrepreneur don't take anything off the table because you can use any number of these structures to make this to make your business successful in the long term so i want to talk to have durman talk a little bit more about how benefit corporation status that corporate form can help you pose yourself either if you want to um go through a conventional option like sale or merger or if you want to stay private i know that new belgium is you or is considering using it to pose poise itself to save private but other organizations that other companies that you're working with are using leveraging it to keep their mission through a transition to say a public company or to a transition to uh to being acquired by a larger company yeah and just just to add a bit of context before diving into specific case examples just thrilled to be at soak up again love this conference so many great people here um at belab we're very fortunate to be working with for-profits of every type from sole proprietors to cooperatives and esops to companies that are public already are going public we've always started with uh the the entrepreneur at the mind at the very beginning thinking how can we uh help redefine success in business and these entrepreneurs are really thinking about succession from the very start they want to be impactful for people for planet and for the shareholders at the same time so really about the theory of being best for the world comes to mind uh at belab you know we we try to tackle this in three ways and it is an ecosystem approach where it is interrelated we look at this as far as certification how do you look at a good company versus good marketing we need standards to be established so that companies that want to maintain mission over time can actually do a health check and see what's going on uh we need new corporate forms that actually allow entrepreneurs to live out their mission for the long term and have control of their company for the long term that's where the benefit corporation piece of policies come in it's been really thrilling and we also need to enable impact investors a platform to to measure impact and quantify it in a way where they can channel capital to the right companies that are going to be the most impactful that really meets the investor's mission and underlining goals of making profit and also having a real special impact in the strategies they have so to that end we've been working with gears which is a multi-stakeholder collaboration a lot of action and so cap on that and launching now be analytics which is a platform to help that happen you know I think one last thing about our name too on belab we were founded in Philadelphia and Billy has a long history of of legacy within the founding fathers and benjamin franklin in particular and that's what we really embody as belab as a laboratory we're trying to experiment here to create new models and new new ideas that can really progress to a deeper economy very much as mr franklin did in the 1700s towards stimulating intellectual thought in the united states in a very early stage b-corps are of every type of industry you're probably talking a few of the investors in the room from rsf to farmland lp and there's a number of them that are largest for instance cabot creamery is a farmer own cooperative it wouldn't be the first one that comes to mind for many people when being a cooperative that it would also be a b-corporation patagonia is well-known yvonne schrinard took a very strong strategy there to maintain the legacy of patagonia's mission as he looks to retire and and move away from the day-to-day operations there a couple other companies that have been really exciting obviously new belgians on the panel so I think we're going to dive into a lot of detail there dan sco did go 100 employee on this year really great strategy by by mandy cabot the founder there to think through how do we make legacy happen how do I make dan sco be around selling great shoes for a long time and then there's other companies like indigenous which if you haven't stopped by the pit stop yet they're they're giving a bunch of entrepreneurial advice and their approach to sourcing the apparel has always been about a cooperative or a series of women-owned cooperatives throughout central america so they're they're looking at this not in their own business structure but other structures that can really help maintain their mission towards moving people off the base of the pyramid and upstream into a much more lively environment I think I'd love to talk about method today have there's been a recent acquisition there and plum organics as well was recently purchased by Campbell company and there's a really good story there and ben and jerry's will come up as many people know they've recently been certified as a b corporation a real homecoming from all the the drama that happened when the acquisition by unilever happened several years ago before moving into that I just wanted to share some of this growth and the exciting thing about this and reaching 800 plus b corporations right now and over 200 benefit corporations in the united states is that these are companies that want to think about succession for mission it's not it's not a hypothetical thing these are living breathing organizations built by entrepreneurs led by entrepreneurs that are if they're going to leave they're probably going to start new companies and we're we're helping create the structure and the support to make sure that they can get a get ahead and stay ahead and maintain that mission throughout the lifestyle and ideally have the maximum impact I mean that's what we're all here for at socap is about increasing our impact and doing it in the best way possible where we aren't compromising our values along the way benefit corporation is gaining a lot of traction in the u.s we've just reached 20 states the exciting thing for us was this year Delaware past it which many of you know 60 percent of all fortune 500 companies are registered in the state of Delaware over a million corporations are registered in Delaware this is the home of corporate law for the united states and to see the governors stand up and say this is a free market no cost great approach for entrepreneurs to have an option to maintain mission over time is a real milestone not only for us at b-lab but for everyone that is working in this new economy and realizing you know we are trying to make a real transformation here and this is a great option you know the the debate about whether you can invest in a benefit corporation whether you can see it succeed we'll go on but i think the proof is already in the in the passing of the legislation and the number of new entrepreneurs that are taking it up that these these models are going to be successful and we're going to see it scale over time so just quickly on what a provision is for a benefit corporate legislation it is still a c or an s corporation you're still going to be taxed the same way you would be as a traditional corporation you do carry a higher purpose for a material sufficient impact on society and the environment and that is the enabler for these entrepreneurs to say i want to maintain a high level performance that is sufficient that is that is scalable and material at the size of the company that i'm at for any founder in the room this is probably really exciting for you to realize that you have the potential to do this as you scale it adds a lot of clarity so those investors that are looking for you are going to be able to understand where your values lie and what you want to do in the future it's a very attractive approach and the the ability to to make decisions still remains within the company so what that means is the liability on the external side is not there and there's a lot of perception that say an environmental nonprofit can now sue you because you're a benefit corporation it's simply not true the the liability and accountability is still within the company itself and so it's you and your shareholders that have the ability to make decisions on what is strategic for your company what is impactful for your company it's a very enabling type of corporation which is which is fantastic so i'm going to pause there and transition back to camille's for a little more conversation well dermit brought up the case of ben and jerry's and we're going to hear about seventh generation as well and for a lot of people those two transitions are synonymous with a say sellout or failed um mission preservation transition but that's not necessarily the whole story and i think it'd be fun to talk with the panel about what the different perceptions are on what those transitions meant what sacrifices we have to make when scaling do we have to make any sacrifices or should we scale you know these are a lot of questions that we need to deal with as a community as we start looking at organizations mature and grow um so paul how do you feel about what ben and jerry's that the lessons we learned from the sale to uniliver meant okay well i like ben and jerry's um coffee heath bar crunch is my my flavor so i think it's interesting i like it's it's very hard to know what happened behind the veil and a lot has been written and a lot of people are kind of firmly on one side or the other i i think it's really cool that they've come back in as a b-corp so i um and i think that must be difficult to do as part of a large multinational like unilever um i think the there are a couple things maybe i'll put it in the perspective of an entrepreneur so i think there are a few things that ben and jerry's did that are still out there and available so one of the things as i understand it is when they were just a small ice cream shop in burlington they began to raise money from the community and through kind of uh a limited stock offering and i see that becoming popular again now so for instance um farm power up in washington state financed that way and it's kind of a cool way to do small offerings but those those shares weren't restricted again as i understand it and so they ended up in people's hands whenever you sell equity that equity at some point is going to want to get cashed out and so i think they started some things that they didn't really understand because they were ice cream makers not you know financially uh necessarily financially savvy entrepreneurs um i think the lesson that is widely popularized around ben and jerry's is that that some of the things they did stopped happening once the acquisition happened and i think that's the maybe the soul searching question rather than dwelling on what had happened or didn't happen is what's your vision for your organization what would you hate to see happen if you sold either as a founder or as a subsequent owner of the business as an investor what are what are kind of the things you would want to avoid and and i think really thinking that through for us you know new belgium is really a part of the fabric of four columns and the idea that someone could buy us consolidate our brands and move our brands to another brewery would would tear the heart out of the company so that was one of the things that even when we were looking at acquisitions for instance was that that was going to have to be kind of a non-negotiable principle well by being employee owned um and having all our employees so embedded in our community i mean i just we just had our big tour to fat and four columns we had 25 000 people dressed up in costumes and ride bikes it took two hours to run the parade through the starting like it's a freak fest that's part of what we do we don't measure ROI on that we don't have to because it's kind of like just this cool thing we do every year and every year it gets bigger and more people get excited about alternative transportation but they also get excited about getting their freak on and just being different for a day and i don't know how you measure that but i'm really glad to be part of a company that gets to do that and i think you know so there's this kind of negative of like we would never want to see the brewery moved and this positive of like we would not want to have an owner that wouldn't let us be freaky so it's that kind of combination i'll pass it on to my others yeah as way of background you know ben and jerry's um was a real spotlight within values-based business getting acquired by large multinational and during the transaction a local community group of investors in vermont i got together and they made an a market value offer to purchase ben and jerry's and really try to keep it local following that unilever up the their bids and over a number of days in transactions and pressure on the back end unilever did acquire ben and jerry's um what was interesting though is you know we we looked at it and they they were able to certify as a b corporation two years ago because they were set up as a wholly owned subsidiary and we think the the pressure now that we look back at all this during that time really opened the eyes for unilever to say holy smokes we can't just gobble this this great company up like everyone else we need to like think about what's important to this company and and realizing the linkage between yeah fun great ice cream uh but the deeper layer of what was actually creating the brand value there and that as a result ben and jerry's kept the vast majority of the jobs in the local burlington area they ended up keeping all their practices the same and it's to the point now where ben and jerry's can actually make their own uh political statements on certain issues that they care about where unilever might not necessarily agree upon that um and for them to certify is really a reinforcing mechanism not only for their employees to say hey we are maintaining mission they they scored an 87 they needed an 80 point to certify as a b corp but you can now look at it from a consumer or even a shareholder in unilever and say if this company during the recertification drops below that 80 point bar and loses their b corp certification you're starting to see mission drift and that that's going to be the potential for over the long term for any any company that is acquiring a b corporations and wanting to maintain that status is how how do we maintain high impact and the high level of transparency that comes with it i think we were excited to see plum organics recently uh was acquired just uh three months ago by uh Campbell Campbell soup company and and for Campbell to do this they you know it was the first time they looked around they're like what the heck is a b corp thank you what is this thing why do you why do you think it's really important to you uh and over the course of the the conversations about how the acquisition was going uh they subsequently decided to make uh plum organics a wholly owned subsidiary as well to maintain plum's mission uh for the long term with the values attachment to local kids and healthy living uh to make sure that the foundations were kept intact and the like and plum was able to show up on Delaware on the first day that the benefit corporation policy was enabled and and with the support of their new parent company to say hey you're allowed to adopt this new corporate structure we support it because this is what your your brand value is about this is what your essence is a as a living breathing organization is about and i think oh go ahead i may i think that that's a pretty valuable contribution that cooperatives can have to this conversation the b corp codifies um that sort of multiple bottom line and i and cooperatives have feel a great affinity with that because we do as well it's built into our structure and an internationally accepted set of seven cooperative principles that also codify that kind of multiple bottom line concern for community member participation democratic governance you know those kinds of principles and then an additional set of values that have been adopted by um the mandra gong cooperative that i mentioned in spain but american cooperatives as well one of which is that capital is subordinate to labor and if we're talking about creating a truly non-extractive economic model you know that that i think can be a valuable um sort of north star and i understand that may be a controversial concept in this crowd i put it out there because i think it's important to recognize as paul said earlier today in a session that we are some of us are trying to create a fundamentally different system and if we're using the tools um that are available to us without sort of thinking about what the values and principles are that underlie those then we may end up replicating the very things we're trying to change so i think cooperatives can be valuable in that um in that role um well let's discuss both sides of this a little bit further so on one side what she's talking about is different forms of stakeholder ownership and grounding ownership through the second generation with different stakeholders whether it be the employees in in worker cooperatives the producers and producer cooperatives or the community and we have seen some examples there's this bakery in michigan i believe and it was a staple of the community and when it was going out of business and they had donuts there and when it was going out of business the police force all put in their private money into this bakery and renamed it cops and donuts and they volunteered labor to keep this organization going even though the owners could no longer run it and it's been successful and and now is is a profitable and and part of that is just that it's this exciting cops and donuts it has flair to it and marketing to it but also part of it is that it was a community staple and there's stakeholders that were there to purchase it so there are a number of possible stakeholder models that are out there that we've seen very little of but that could develop but on the other end of that what role do you guys think that private equity is going to play in social enterprise as we move forward and as these organizations sale we we see a lot of venture capitalism in the impact investing world what do you think about buying more mature companies is it responsible in this community to buy a company in order to switch it around and sell it a few years later even if you help it get more on its feet so what do you think about that paul i know you were on a more investing panel earlier she keep asking me first well i don't i'm not aware of those we did talk to some private equity firms and the the structure that they're often willing to do is to put money in at a certain multiple and then take it back out at that same multiple so if you're growing your your cash flow they they can make a return for their investors so that's not a full control transaction and it's kind of what happens if you're not able to pay them back was kind of what the the issue became for us um but we also i mean we had done pretty well and growth through debt financing and so we didn't really feel we needed to take on that equity risk so that for us but i think it's an interesting concept to say there i mean we read all these surveys that the wealth management firms put out that that the next generation wants to invest more sustainably they don't want to just kind of do negative screen investing and we have this sense that there's all this money willing to rush in but for those of us who are in the space know that there's not a lot of money rushing in so there's something keeping that from happening and on the other hand we see at least some brands that have really resonated with a certain market segment around sustainability so i think that's an interesting idea i don't know anyone's grabbed a pool of money and said we're going to go take copper mines and turn them into sustainable companies but i think if someone wanted to take that on it would be kind of an interesting challenge i do think it tends to be now founders going through an evolution of what they want their legacy to be but i haven't seen someone working on on roll-up firms i don't know if anyone in the audience has that but i've seen that but it's interesting idea i don't i don't think it's out there yet the only thing i'd want to add since i'm not sure how many more times i'm going to get questions tossed at me this issue of of exit and liquidity and legacy at new belgium all the people who are working there we're working there over the next day in the same role so the ownership structure changed but the management structure did not change we didn't change the board we didn't change the management team the much of the money that came that was made on the transaction has actually flowed now into a foundation because i think just the values of the people involved with new belgium they weren't like hey now i get to buy an island they were like wow this is more money than i ever really expected to have and so the foundation that's been set up is basically trying to nourish the roots that new belgium came out of so part of what we're that got us all engaged is to kind of recommit to another long slog of building this company even bigger was to be a business role model so i think i'd be remiss if i didn't mention that part of this exit was to set up a foundation to then nourish things like alternative energy human powered transportation kind of the craft and artisanship education that is lacking in our school system today so we're just beginning that journey but i think it's those types of values i mean when we set up corporations we would view them with indefinite perpetual life and yet we don't tend to think of corporations that way anymore we tend to think of them these transactional types of things like how do i build them up and sell them and i think the people that are in this room that are at this conference are trying to say what are the different pathways to do that and i think some of these other ideas they're not well past it's you have to kind of dig a little bit but there are these kind of transactions out there and you may come up with a different one for your company and be up here two years from now i hope to hear from what you guys have done and i think that's a great example of deepening your impact through an ownership transition and ownership transition involves a lot of money generally and it often involves millions of dollars and new belgium took that opportunity to create a foundation others who would create socially responsible businesses might take that money to start new socially responsible businesses there's a lot of different option out there out there for that transition and with some of the options that we're discussing like cooperatives or employee stock ownership plans what the founders or what the current leadership wants to do what how they want to be involved moving forward is a very flexible thing for esops you can continue to be ceo when you sell i'm i'm not sure what happened with camble but it's obviously in the hands of still ceo so i mean there's a lot of flexibility depending on what kind of structure and who the buyers are going to be so i think one of the other important things to realize is that like the capital challenge that most companies get will depend on how quickly you're scaling and we're we're so immersed in tech in in california here that we just think everyone's going to have a 10x 100x growth and that you need this huge amount of capital coming in and you know there's a lot of companies that are on much more of a steady growth pace or no growth pace at all and and a number of our b-corps that are in say the 10 to 20 million dollar category they're they're looking at an esoph is an option when they hit that 40 employee level or they get a little bit larger that they say okay that's going to be a great transition for me as a founder that i can hand it over to everyone else that's been with me through this journey that really wants to be a part of it and build in that retirement component i think also in methods case you know they they were acquired by ecover another real leader in home home detergents over in europe and it has a presence here you know ecover i acquired them last year roughly the same size as method but method is scaling really quickly especially in the u.s. and when the when the team there was looking at uh finally exiting because they did have private equity and it was going on five six years so it was time to find a new a new investor or group of investors sure they're probably looking at procter and gamble and sc johnson these other ones but the conditioning with methods values from the very start with their private equity partners it was it was a partnership not just an investment was this this whole values piece around what is our impact you know the method has the most cradle to cradle certified products on the planet and is really trying to tackle big issues like the the pacific gyre waste patch that we have going on right now and to have them actually acquired by ecover and then seeing adam and eric taking over head of brand and head of sustainability for both components of the of the organization now as well as being able to maintain methods independence was a great way to look at this and say not only are they have they just doubled their ability for impact but they're also building in the succession with a mission-aligned organization that had more capital to help them scale over the long term sure it's not going to happen for every single company but it can happen and the intentionality around that from the very beginning was helpful in steering that direction in that choice and investment and i think derma brings up a lot of the logistics that we didn't go over their requirements for each of these types of transitions to work you need to have achieved a certain size to use in esop you need to be profitable to use an esop and when you're considering these things it's always important to talk to people who know what they're talking about because um while some of these are a little bit you know newer or more flexible esops are codified in federal law there's a lot of things that you need to look at when you have to do evaluation every year it's a little bit pricey for smaller companies so there are a lot of considerations that you need to take into account when you're making these decisions and professional advice really helps with all of those um i i want to ask what you think and then we'll open this up to questions we'd love to hear from the audience but what do you think about the role of debt financing versus private equity financing i know for esops ownership structure and having only a few owners sell like in the case of new belgium there weren't a lot of outside investors that they had to rally up and round up to sell to the esop what do you think the role of having debt available to these uh entrepreneurs social entrepreneurs versus equity available to them will play in how they transition through the first generation durmit let's start with you instead of paul well yeah i i think the more financing options the better and i think that's why like you see look look at direct public offerings right now and cutting-edge capital is doing a bunch of work there it's super popular so it's crowdfunding just to get that initial seed funding without any loss of equity ownership for instance um yeah i think if you can do debt financing it's a great way to be sure that you're going to maintain mission obviously it comes with a a cost pinned to the interest rate and the like but there is good banks out there and there's a lot of a lot of loans available to the smaller businesses especially here in the united states so for worker cooperatives the sort of most common in recent years most common way of financing has been an owner financed sale but that obviously has pretty severe limits and so um in the last i don't know two or three years we've seen some transitions happening using a direct public offering um using traditional debt financing um i think we're we're right on the frontier of figuring out a vehicle or a tool for cooperative business transition that looks a lot like esop business transition but isn't um maybe doesn't have quite the overhead since the cooperative deals tend to be smaller i i mean debt and equity are two kind of starting points and you can morph them around a little bit i think either type of early stage financing you get you should be thinking right from the beginning about what your goals are and if it's important to keep control over the mission you want to build that into the structure at our panel earlier this morning one of the other panelists encouraged entrepreneurs to think about registration rights and and sure that's great as a founder to think about registration rights but you better think about with that equity what else how can you get it back right because if the only way that they can uh liquidate their equity is by selling it to someone else you're going to lose control as soon as you take your first equity investor even though it's a minority position you've taken on all kinds of responsibilities legally to um i mean it's a huge decision to to take i would offer if you're going to do equity put in some type of redemption clause that says if we do a mission related exit like a esop you will allow us to redeem your stock at a certain EBITDA multiple and figure that out what market is now so that you can say to the investor that's market if you go with debt um if i'm an investor and i am i would look at things like i hear you that you want to do a mission related investment but how do i know you're not going to cheat take my money build it up and then like off you go to the races you do a big ipo and we just gave you debt i would put in some kind of a negative warrant that basically says as long as you stay mission related i just am a debt holder but if you switch on me i'm now an equity holder so i think they're different things and those are just ideas i haven't seen them used a lot although i don't see bruce here bruce camels done some really nice work on his blog about um redemption provisions he's an attorney and uh i think these things are starting to be seen but as an investor i'm still seeing plain vanilla series a very little about what the future holds and i think that's because entrepreneurs feel like they don't have leverage and i think if if you're not feeling if control of mission is really important to you and you can't get that from your investors you're talking to the wrong investors and you need to really hear that and back away and say is it really going to be worth it spending years of my life to build a company that isn't going to satisfy my mission at the end and is it better to walk away now or to walk away later we heard a kind of horrible story this morning on our other panel about building up a multi-billion dollar company and then having to lay off 12 000 employees because of an exit out of out of sync with a capital structure i mean is that what you want to spend when you bring in equity you're starting to work for someone else and you need to understand are these people you want to work for so with that let's open it up to questions there are a couple of mics roving around so just raise your hand and they'll come over to you we know employee ownership is kind of a complicated topic as is exiting in general and i think that um touching upon what what you said paul that equity figuring out if you want investors who your investors are will determine your exit it will determine your options from the beginning so the general rule is the the earlier that you start planning all of these all of start asking all of these questions the better you will be in the end when you do want to go undergo this transaction because you'll have the full menu options and you'll have directed it towards the exit that you want from the beginning and mission is important to all these organizations that that we're seeing here today so make sure when you're talking to investors that you're talking that they're speaking your language because when it comes to exit if they're not then you might lose some of them the things that make your company what it is so i don't see any hands in the audience unless um you have any last minute comments from our panelists i think i just share a little bit of context on patagonia and you know they were amongst the the first companies in california to become benefit corporation they're also certified and and you know yvonne trunard and his wife melinda are sole shareholders of patagonia which is now in the half billion dollar range and they have family that they can handle hand the shares off to and which is what they're most likely to do i don't have back end knowledge on how the will structure or anything but for them that would they were looking at the company and thinking okay do we want to take it public do you want to uh do you want to sell it to the employees do we want to get other investors or what are other options that really keeps patagonia's mission going for with this heavy focus on conservation of the environment uh and until the the policy passed on benefit corporation yvonne was really looking at at putting it into a foundation in a trust uh which which seemed like the the most highly likely way to preserve mission for patagonia over the long term and even though the culture there is so strong so passionate the workers love being there the family really cares about all these issues but what happens over time you just don't know uh and the challenge what they they realize within the trust format i believe in california and don't quote me because i might get this wrong was somewhere around 12 years in a foundation in california must sell at market value a component of the shares of the company at least in patagonia's case that was the the direction that they were given which meant the mission would be intact for 12 years after the the trust took over but then in 12 years time the open market had the ability would have the ability to um to make a purchase or a partial purchase of patagonia and then to paul's point you know you now have a new group of shareholders in there because market value can really escalate and ultimately that was the choice that um yvonne chose when he said i'm going to make this a benefit corporation and and adding conditions to make sure that this mission can be intact and yes it probably did take a couple million or more off of their valuation because they added in so much extra language to preserve mission but for him that was the right thing to do because he looks at it as a land easement that hopefully will keep patagonia going for another 50 100 or even 250 years like king arthur flower is which is one of the the leading um employee-owned companies in the united states well thank you all for joining us today in the audience and thank all of my all of the panelists here for contributing this information we're here afterwards if you'd like to ask any questions