Turning Nonprofits into For-Profits
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New hybrid corporate structures allow nonprofits to accept private investment without diluting their missions
The nonprofit Bikestation reached a crossroads in late 2007. Founded in Long Beach, Calif., in 1996 to design, build, and manage bike transit centers, the 10-employee organization couldn’t handle all the calls coming in on its $300,000 budget, funded mostly through earned income. With little grant funding available, the board determined that the best way to meet demand was to raise money from private investors—which meant turning Bikestation into a for-profit social venture. “We just didn’t have the resources to expand the mission and the vision further,” says Andréa White-Kjoss, who joined the nonprofit as CEO in 2004.
CORPORATE CONSTITUENCY STATUTES
For now, however, social ventures must find creative ways to straddle the line between nonprofit and for-profit. At Bikestation, the board decided to form a new for-profit company called Mobis Transportation Alternatives. They incorporated Mobis in mid-2008 and raised $500,000 from angel investors, including the Tech Coast Angels, late last year. Staff members switched to work for the new business, and Mobis licensed the intellectual property from the nonprofit, including the Bikestation name and other proprietary information for creating transit centers. The nonprofit remains essentially a holding company for the intellectual property, though Bikestation plans to use the licensing revenue to make grants. As part of the agreement, the nonprofit got a small ownership stake in the new Bikestation and controls a seat on the board.
For Bikestation, the for-profit model is paying off as well. The new company has increased staff from 10 to 14 and is helping to open four new transit hubs this year, bringing the total to 16. Bikestation won’t disclose revenue, but White-Kjoss says it has raised projections for 2009. The company is expanding beyond its traditional customers—cities and transit agencies—to market to universities, corporate campuses, and other developments. “We’re able to do what we’ve been wanting to do for a long time,” says White-Kjoss.
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