The hybrid organizational forms designed with social enterprises in mind have proven to be hothouse flowers. Flourishing in state legislatures, even those with the most distinguished pedigrees—such as Delaware’s public benefit corporation—have so far failed to thrive in the marketplace. Fortunately, hybrid financial instruments offer a source of strength and stability that can help social enterprise to take root. This Article examines the valuable role that financial instruments can play in providing social enterprises with the capital they need to grow. Debt with equity features and equity with debt characteristics constitute the lion’s share of such financial tools. More exotic financial tools, including some tailor-made for social enterprise, can be deployed alongside hybrid debt and equity instruments that any venture might use. To set the stage, Part I provides a brief overview of the achievements of the benefit corporation to date. These include their incredible success in state legislatures and their consciousness-raising about the legitimacy and value of companies dedicated both to achieving profits and generating social good. Part II considers next steps. In particular, it lays out the challenges faced by benefit corporations and other social enterprises seeking capital to enable them to survive and scale. Part III, which makes up the bulk of the essay, considers a variety of financial tools that could be harnessed to meet these challenges. Although common stock and standard corporate bonds will often fail to align the interests of entrepreneurs and investors in double-bottom line ventures, a variety of less conventional financial instruments offer considerable promise.
Dana Brakman Reiser and Steven A. Dean, Financing the Benefit Corporation, 40 SEATTLE U. L. REV. 793 (2017).