A New Type of Hybrid

(Article free for one week only from the Spring 2011 issue of Stanford Social Innovation Review)

Social entrepreneurs have taken the hybrid model to a new level, crafting it into what is in effect a single structure that can operate as both a for-profit and a nonprofit.

by Allen R. Bromberger

Much to the chagrin of social entrepreneurs, U.S. law does not currently recognize any single legal entity that can simultaneously accept tax-deductible donated capital (charitable contributions and grants); invested capital (equity investment for which investors seek a market rate of return); and quasi-invested capital (such as loans or program-related investments [PRI] from foundations that are structured as investments but in which the funder has a strong philanthropic motive and neither expects nor demands a market rate of return). As a consequence, social entrepreneurs are typically forced to choose between for-profit and nonprofit models that require them to compromise their social vision and restrict their ability to finance and operate their ventures in a way that meets the founders' own needs as well as those of their investors, customers, employees, and other stakeholders.

Continue reading this article online at the Stanford Social Innovation Review (SSIR).