Philanthropy As Profit Motive: When Making Money Isn't Enough

Jul 2, 2018

For some business owners in Northeast Ohio, making a profit isn’t enough. They feel they need to give back to the community as well. That's the focus of this week's Exploradio.

Todd Goldstein was 25 when the Great Recession hit.

"Everyone remembers 2008, right? The lines of people getting laid off, these executives getting parachutes with lots of money," he says. "I think people really said, enough’s enough."

His own future
Like many young people caught in the crash, Goldstein felt that he had to create his own future. So, he and a friend founded LaunchHouse. It’s a business in Highland Heights that provides rentable coworking space for entrepreneurs and self-starters. It began humbly, in the upper floor of a pizza shop.

Todd Goldstein saw a gap in Cleveland's work environment and decided to fill it with LaunchHouse.
Credit Jeff St. Clair / WKSU

"We got a six-pack of beer, a pizza, and we thought literally this could just be the two of us," he says. "We had about 10 people show up."

It was enough to know that he was onto something — the need to create a place where entrepreneurs can help one another succeed.

"I’ll never forget — we had one person that left crying, a second person who recognized they should probably give their family back their money, and a third person who said, ‘wow, me and this other person should be my co-founder and we should start a business.’"

10 years later, his job is still to help businesses grow. LaunchHouse has launched over 60 firms. It’s a business model that values connectedness as much as it values individual success.

What's driving social entrepreneurship
Kent State University business researcher Kostas Alexiou says the motivation behind social entrepreneurship grew out a distrust of Wall Street following the Great Recession.

LaunchHouse's wall features a drawn light bulb with a quote: "An entrepreneur is someone who jumps off a cliff and builds a plane on the way down."
Credit Jeff St. Clair / WKSU

  

"This younger generation is looking to get some of that back and move away from this sort of philosophy predicated on greed," he says.

But many businesses have used the social enterprise model for years, such as Newman’s Own, TOMS Shoes, and Ben & Jerry’s. These companies all have one thing in common: philanthropy as profit motive.

"I think that social entrepreneurship represents the next evolution of capitalism," Alexiou says.

Embracing the evolution
It’s an evolution that brewer Jeremy Langham embraces. He’s trying to get Ironborne Brew Works up and running. Part of his business model includes donating a portion of his proceeds to charity. He hopes to connect with his neighbors by giving them the opportunity to vote on which charities to support.

"We’re trying to keep the organizations that are doing the great work with the resources they need so they can continue to do that great work," Langham says. "Doing things that you’re going to do anyways -- buying a pair of shoes, getting something to eat — when you can see that ‘my dollar stretches further here,' it becomes a really powerful thing."

With this, Langham hopes to empower the people who buy his beer to create change.

"It’s kind of like living vicariously through the organizations that we’re supporting," he says.

And today, that seems to be what some consumers are doing more often.

Principles behind products
Mintel is a global market research agency that put out a report in 2015 saying that buyers don’t just take products at face value anymore. They care about the principles behind them.

They found three out of five consumers believe ethical issues are becoming more important. Kent State’s Kostas Alexiou agrees with this activist outlook.

"There’s an extent to which I believe it’ll just be called entrepreneurship -- if it hasn’t already," he says.

LaunchHouse features many tables like this one, where community members can collaborate with others or work independently.
Credit Jeff St. Clair / WKSU

Building the business
Back at LaunchHouse, founder Todd Goldstein gets his coworking family together for a group photo. He says this enthusiasm is pretty typical.

While social entrepreneurship is a big driver at LaunchHouse, business is still a priority.

"It really is understanding and building a profitable business first, and then finding how you give back," he says.

It’s an idea sparked by a generation that believes doing good is good for the bottom line.