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BOAS is requesting funding to scale up our vintage fashion platform that donates all (non-reinvested) profits to effective charities. If you are interested we can share the pitch deck with you, or email me on vin at boas . co 

Disclaimer: I couldn't find the policy on making to the community aware of a funding requests. I sometimes see these requests, but I erred on the side of caution by doing a quick take instead of a post. Please let me know if funding requests on the forum are not appropriate and we'll take it down. 

Here are the key details:

  • BOAS is a reverse auction vintage fashion platform that donates all profits to effective charities. 
  • BOAS aims to make buying vintage fashion 10 times faster than Vinted/Ebay and 4 times cheaper than Zalando
  • User friendly iOS, Android apps
  • BOAS donates all (non-reinvested) profits to effective organizations with a mission to save one million kids’ lives (this is the simple message we communicate to customers)
  • BOAS and this Profit for Good (PFG) model are endorsed by Rutger Bregman, ‘the Dutch wunderkind of new ideas’, TED speaker and double NYT bestseller
  • Research indicates people prefer buying from and working for PFG's that donate profits to charities, so they grow faster and more profitable than for-profit competitors, possibly making them more effective at multiplying money than traditional philanthropy. There is also research that finds no statistically significant increase in profitability
  • BOAS is pioneering with a reverse auction in online retail, with a surge in revenue per visit of 500% when they launched the feature (more research on RA's driving higher revenues and prices)
  • Unlike competitors, BOAS ensures quality and product popularity by purchasing vintage fashion in bulk. This means you can confidently know what you're getting and make purchases within minutes
  • BOAS is currently seeking €596K in grants, equity, convertible notes, or loans. The terms will be tailored based on the impact and risk profile of each investor
  • BOAS has received a 10K unsecured loan from two EA's so we can show more traction (we didn't have the liquidity to buy enough stock to further grow revenue before)


EA arguments we've heard against funding us and our clarifications

Argument: if you have a for-profit business model you should be able to raise for-profit investment
Clarification: we believe this to be an understandable but common misconception. Companies that generate profits for charities cannot raise for-profit investment. No for-profit investor will invest in something that returns to charities rather than themselves. 

Argument: "with FTX we have a strong prior against funding companies who donate profits"
Clarification: it's up to everyone individually to assess the fairness of comparing a vintage fashion platform to a crypto criminal. FTX did not donate profits, SBF donated his part of the profits/shares. We donate profits directly, they don't go through founders or shareholders, that's philanthropy. Our financials are 100% transparent, so they can be scrutinised by the community at all times. 

Argument: why would a philanthropist donate to you instead of donating to an effective charity directly?

Clarification: direct donations are great and generate direct impact and we encourage them. In addition, we have a riskier startup model that has the potential to multiply investment (e.g. invest €1 in BOAS and we try and turn it into €10-100) for effective charities. Because there is some preliminary research that PFG's grow faster and more profitable, this would make them more effective money multipliers than investing in for-profits and donating (part of) the returns. Example: you have company A and it returns profits to anonymous shareholders, and you have the same company A returning profits to charities, people generally prefer to work from and buy from company A returning profits to charities, which leads to several business advantages like easier customer acquisition, better employees and longer employee retention. This drives higher profits. 

Argument: why don't you start a for-profit company and donate your shares?

Clarification: there are three reasons why we're not doing that at this moment. Firstly, if it's true that PFG's are more profitable, they are better money multipliers, so going this route would be more effective. Secondly, I can donate my shares, but if the company ends up being a billion dollar company, generally 90% of shares will be held by other founders and investors who will not donate the majority of their shares. Thirdly, we expect most of the impact to come from showing other companies and philanthropists that the PFG model works. We have already influenced other entrepreneurs and their companies to donate more or all of their profits. If we show it can grow fast and get funded, we believe to accelerate the amount of entrepreneurs and companies to donate more or all of their (non-reinvested) profits. I have pledged 100% of my personal shares to charity through Founders Pledge already and the company is a GWWC company pledger too. We want to take it a step further by having all shares of the company pledged to charity. 

Argument: your team is weak and/or your idea is weak.

Clarification: I believe this was certainly true, but a lot has changed. In the beginning I was a solo founder for a long time working on a business (sustainable Amazon) that wasn't unique or differentiated apart from the PFG model. We are now 3 founders with 6 former startups, 3 successful exits, an early employee of a unicorn (startup going to 1 billion valuation) and 30 years of experience in the e-commerce field. Our employees include Oxford, Harvard (AI) and IIT graduates. We are adding a fourth founder with a strong track record soon. In addition, we have pivoted to a faster growing market (used fashion is 25% per year) with a unique idea (a reverse auction) and a unique way of buying (we buy in bulk where competition is peer-to-peer or buys from individual customers). We have for-profit investors who wrote us they would consider investing if it was for-profit, including 3 startup accelerators who declined us for our profit destination in the last rounds. I'm happy to share this external validation with interested investors.

Argument: you need to show more traction so we know this works

Clarification: I agree this would be great. The reality for us right now is that we have almost no budget to buy used fashion, making it impossible to sell much more (no stock=no sales). We also have a marketing budget that's only €300 per month. We managed to grow fast in the first three months after launching but flatlined because we were limited by only having 100 products live. With an early €12K investment we can show more growth again, and expect €2.000 in July and €3.500 in August, but expect to flatline again after because of liquidity reasons. 

Argument: this isn't longtermist (for investors who focus there)

Clarification: our profit destination (global health) is mostly not, because it's hard to sell longtermism to the average consumer. The Profit for Good model might be considered longtermist, if it succeeds in getting many companies to donate their profits, rather than most profits going to shareholders (who give an average of about 5-10% to charities in the form of philanthropy). It might help get more profits to charities and if the business model prevails it does so sustainably without the voluntary decision of wealthy people to donate or not

Things we're unsure about ourselves:

  • We can't asses our % odds of getting funding, versus doing the same thing for-profit. We are fairly certain it's more likely this gets funded if it returned profits to shareholders
  • As an early stage startup our odds of failure are high, probably still at well over 50%. There's a big chance we're going to turn funding into negligible amounts to effective charities and only a small chance we're going to turn it into millions ore more for effective charities
  • We're unsure about the tax benefits of investors investing in our model. They might not get the same benefits as investing in foundations
  • We're not sure how motivated founders are by money versus doing the same thing for charities. We have great founders, and our current best guess is we attract above average founders, because successful founders have the financial means to join something that's not for themselves but for effective charities. This might not scale to one million companies unless philanthropists fund founders
  • We're unsure how big the added effect is of funding Profit for Good versus funding for-profits and donating the returns
  • Funding in BOAS might lower the direct funding to effective charities (i.e. the money invested in BOAS would lower money going to effective charities), so it might have a negative short term impact even if we succeed in the long term
  • Giving from PFG's might not be democratic (e.g. the founders decide where it's donated). We are slightly reassured because the counterfactual is mostly philanthropy and that's similarly undemocratic
  • Donated profits might lower taxes, leaving less for governments to fund important causes
  • Many companies might follow, but donate to less effective charities but choose popular ones (because that helps them grow faster). Philanthropists might make more considered donations because they are less burdened by what's popular

We're more than happy to get more arguments against this project in the comments!  

We can't asses our % odds of getting funding, versus doing the same thing for-profit. We are fairly certain it's more likely this gets funded if it returned profits to shareholders
 

Without expressing a broader opinion (because I don't have a fully formed one), I think there's a coordination problem here. I don't know how much capital one would need to create an organization that could divert large buckets of money to effective charities, but I would imagine it is pretty significant. Failing to raise a sufficient amount will cause the enterprise to be ineffective, and likely lead to any contributions generating zero impact. It's difficult for any of us to assess the probability that BOAS will receive adequate capital, but the response so far to fundraising requests from PFG corporations suggests the odds may be fairly low. 

To my knowledge, there's also no centralized entity with a track record vetting which PFG ideas and teams are more likely to generate profits. Although you can use founders' past experiences and other proxies, that's less likely to be predictive than a trusted evaluator. Few EA funders are in a position to evaluate a clothing platform well.

In contrast, consider a Charity Entrepreneurship potential incubatee. In addition to the external vetting, my understanding is that the incubated organization isn't going to launch unless it attracts enough funding to have a realistic launch trajectory. If I were one of the CE seed funders and offered $10K, but no one else stepped up to the plate, I assume the charity wouldn't launch and I could re-deploy my $10K elsewhere. 

If a new charity gets enough funding to launch but ultimately falters a few years down the road because it couldn't sustain funding, it probably accomplished at least some good in the interim. If a PFG enterprise fails while it is still in the reinvest-and-attract-capital phase (which I imagine could last for a number of years), its impact is basically zero. Therefore, "risk of failure due to not attracting enough capital" is a greater and longer risk for a PFG enterprise than a charity.

I wonder if some sort of capped-profit model might work better. Perhaps for-profit investors could buy up to 49% of the shares at an appropriate discount but with a rule that the amount of their return would be limited to 10X (or whatever) of their investment? That would create a legible signal for the philantrophic community that third parties with skin in the game believed in the PFG enterprise's profitability, would reduce the coordination risks, and would still allow a "most of our profits go to charity" marketing claim. If the enterprise were doing well but was being hampered by the "most" claim, it would be easier for the EA community to buy out those capped-profit investors and donate the shares to the nonprofit (or similarly eliminate them) which would enable an "all profits" claim.

Hi Jason, replying in bold. 

Without expressing a broader opinion (because I don't have a fully formed one), I think there's a coordination problem here. I don't know how much capital one would need to create an organization that could divert large buckets of money to effective charities, but I would imagine it is pretty significant. Failing to raise a sufficient amount will cause the enterprise to be ineffective, and likely lead to any contributions generating zero impact. It's difficult for any of us to assess the probability that BOAS will receive adequate capital, but the response so far to fundraising requests from PFG corporations suggests the odds may be fairly low. We forecast to break even after 4 years and need a total of 2 million dollars to reach that point. This might be too aggressive, so in reality it might be significantly more. We have forecasted for quick and aggressive growth, but our business model does allow for earlier break even, but we would return less profits to charities. So far PFG's had a hard time raising any capital and my personal experience is that it is (much) harder than raising with the same thing if it was multiplying money for investors. EA however has funded many things with millions, and there is plenty of philanthropic capital. We work with a fundraising company in The Netherlands called Generous Minds, who raise capital for impact businesses and they have an 80% success rate. That's the most impartial and accurate number I can give for our fundraising odds too.

To my knowledge, there's also no centralized entity with a track record vetting which PFG ideas and teams are more likely to generate profits. Although you can use founders' past experiences and other proxies, that's less likely to be predictive than a trusted evaluator. Few EA funders are in a position to evaluate a clothing platform well. PFG ideas are for-profit ideas, so they can be vetted by anyone who has experience in vetting startup profit making potential. I agree few EA funders have that experience. I have some experience and when I judged EA for-profit funding I thought it was subpar so won't argue against it. EA does however have some donors who have made their money in startups and should have above average experience vetting PFG ideas. A great example are all the founders pledge members. 

In contrast, consider a Charity Entrepreneurship potential incubatee. In addition to the external vetting, my understanding is that the incubated organization isn't going to launch unless it attracts enough funding to have a realistic launch trajectory. If I were one of the CE seed funders and offered $10K, but no one else stepped up to the plate, I assume the charity wouldn't launch and I could re-deploy my $10K elsewhere. Same would go for BOAS. We're happy for investors to wait for others to be on board too so they know we can raise the full amount. Not optimal for our impact potential but if that's what an investor wants we're happy to oblige. 

If a new charity gets enough funding to launch but ultimately falters a few years down the road because it couldn't sustain funding, it probably accomplished at least some good in the interim. If a PFG enterprise fails while it is still in the reinvest-and-attract-capital phase (which I imagine could last for a number of years), its impact is basically zero. Therefore, "risk of failure due to not attracting enough capital" is a greater and longer risk for a PFG enterprise than a charity. Yes, if it was not clear: we're certainly a higher risk bet. 

I wonder if some sort of capped-profit model might work better. Perhaps for-profit investors could buy up to 49% of the shares at an appropriate discount but with a rule that the amount of their return would be limited to 10X (or whatever) of their investment? That would create a legible signal for the philantrophic community that third parties with skin in the game believed in the PFG enterprise's profitability, would reduce the coordination risks, and would still allow a "most of our profits go to charity" marketing claim. If the enterprise were doing well but was being hampered by the "most" claim, it would be easier for the EA community to buy out those capped-profit investors and donate the shares to the nonprofit (or similarly eliminate them) which would enable an "all profits" claim. I have thought about this endlessly and can fill a book with my thoughts on it. I ultimately believe showing that companies can donate all profits and actually grow faster and more profitable because they do (because customers prefer PFGs and employees rather work for them), is such a strong signal to founders, philanthropists and customers that anything else would be much lower EV for me to work on. I must say I'm unsure about this, and many people disagree and think we should do 50/50. 

We forecast to break even after 4 years and need a total of 2 million dollars to reach that point. This might be too aggressive, so in reality it might be significantly more. We have forecasted for quick and aggressive growth, but our business model does allow for earlier break even, but we would return less profits to charities.

I'll defer to those with money and experience, but it seems that traditional for-profits should recognize the advantages that PFGs have and would be expected to act quickly to try choking them off early in their development. Stated differently, if a full-fledged PFG that was generating and donating significant profits would be a serious risk to the big guns' profits, I'd expect them to be willing to deploy significant sums to prevent the PFG from getting there. So your war chest may need to be hefty enough to survive and grow despite competitors using their significant resources to subsidize their products. I hypothesize they would be more likely to target a PFG because they know the PFG doesn't have the same access to VC and other sources of funds that traditional for-profits do.

As a cynical move, they could even give more to charity out of their vintage sales than BOAS could in the early years. "We give 100% of our non-reinvested profits to charity" is a much more compelling value proposition when there are meaningful profits being given. The people on this Forum would be sophisticated enough to see through what the big fish were doing and would realize that the long-term charitable act was to buy from BOAS anyway. I don't think the average consumer would be.

None of that is to say that PFG is a bad idea, but that I would expect a PFG enterprise facing well-financed opponents to need significant financial firepower in reserve to discourage these kinds of attacks from incumbents, and to (nearly) match subsidies and schemes if the incumbents used them anyway, 

This concerns me too. Large for-profits have long and strong track records of buying up or outpricing competition until they die. I suspect they will try and do the same with PFG. They cannot buy PFG's because they won't be willing to donate profits, so they will resort to trying to outcompete them until they die. It will have to be relatively stealthy, because we enjoy a stellar reputation because of our business being fully aligned to doing good, and it's a serious PR risk for any company to attack us directly. I do believe that if we show we can grow fast and profitable, it might become much easier for us to get more funding, and there is plenty of philanthropic money available if we have a very strong case in terms of traction (e.g. revenue growing quickly, strong path to strong profitability). If there's a real shot we can take on the biggest vintage fashion platforms, I believe there will be big philanthropists who will recognize the opportunity to get a whole industry to go PFG. Once you have a dominant PFG in an industry, it will be hard for for-profits to compete, because buying from them would only make sense if they are much cheaper or have much better buying experiences, because otherwise people prefer to buy from PFG's. And even if a for-profit competitor is doing something disruptive the PFG can just buy them like the for-profits do now and donate more to charities in the future.  

The other concern I have and forgot to list is a for-profit competitor with the same strategy as BOAS popping up and being backed faster and with more money. I now spend most of my time trying to raise funding for this. If there's someone out there with the same strategy and for-profit motives, they will have an easier time raising, so they raise more and raise faster. This means they can build and scale faster and we might end up losing because it takes us too long to raise too little. 

The small shot we have at showing everyone startups can donate all non-reinvested profits and scale fast, and the impact of that (mostly through many other companies starting with the model and people realizing they can buy the change they want to see in the world) makes me only willing to try the PFG route. I have been urged to change to a for-profit model and donate my shares (sometimes by for-profit investors), but we wouldn't have the indirect impact on other stakeholders to start moving their profits to work on important problems, and if it turned out highly succesful, 90% of shares would be held by shareholders, who share around 5-8% of that through philanthropy. So the net profits actually going to philanthropy would likely be at least 90% lower, and the indirect impact would be zero. Even in the most conservative scenario I end up with having to try this model. 

I think this was a helpful comment in that it demonstrates a sophisticated awareness of and an attempt to grapple with a key challenge of PFG models (as I see it). I can't speak for anyone else, but I feel like some of the material I've read in the past promoting PFG doesn't pay enough attention to how competitors might be able to exploit PFG's challenges in raising capital.

Do you think it's fair to view [large potential market + bigger profit margins + market that is naturally prone to centralize on a few dominate players] as a set of circumstances in which competitors would be more willing to commit large sums to sinking a PFG upstart? Unfortunately, those are probably also factors that give a PFG enterprise the best shot at delivering massive amounts of money to charity. This does seem to be the high capital-at-risk / high potential-reward quadrant of potential PFG enterprises. Let's call that playing on hard mode. In contrast, competitors in the market for (say) premium-ish salad dressings have weaker incentives to burn lots of money to bury a competitor.[1]

From your last paragraph, it sounds like a lot of your theory of change comes from showing the world that PFG is a solid model and spurring other founders to choose a PFG model. Given that, I'm curious why you've chosen what seems to be a "hard mode" field. Do you think the "hard mode" problem permeates (almost) all potential PFG opportunities, or do you think the added impact of succeeding on hard mode is worth the added risk?

I'm just a public-interest lawyer (so not wealthy), but if I were a potential investor one of the questions I'd be asking here is whether the showing-the-world objective could be obtained for less financial risk in a market where competitors are less able and/or less motivated to subsidize than the likes of eBay. By analogy to how we fund global health work, I'd ask why we couldn't run a less capital intensive pilot as a trial (cf. an RCT) before committing to something that risked deep coffers (cf. funding at scale).

  1. ^

    In that example, presumably Newman's Own had its own subsidy, too -- free use of a strong celebrity endorsement. But the point is that (say) 5% market share can still be a success in the salad-dressing market for Newman's Own, and that it isn't a kill-or-be-killed market like (e.g.) social media.

Replies in bold. It's messy, unedited and I'm tired, so keep that in mind! 

I think this was a helpful comment in that it demonstrates a sophisticated awareness of and an attempt to grapple with a key challenge of PFG models (as I see it). I can't speak for anyone else, but I feel like some of the material I've read in the past promoting PFG doesn't pay enough attention to how competitors might be able to exploit PFG's challenges in raising capital. By far the biggest bottleneck I have come across when talking to dozens of entrepreneurs trying to get PFGs off the ground is the lack of access to capital. Getting founders to start PFGs is not the biggest problem (our cofounder job applications had great pipelines), getting great employees is certainly not the problem (we hire less than 1% of applicants) and customers see the model as an extra reason to buy. From the PFGs I talked to this seems to generalise, although I did hear a view having some trouble finding cofounders. They all struggle with raising capital, and they raise less than their for-profit competition. I do think this can be solved, because philanthropy is hundreds of billions, but we need some of it to go to testing this model more rigourously. 

Do you think it's fair to view [large potential market + bigger profit margins + market that is naturally prone to centralize on a few dominate players] as a set of circumstances in which competitors would be more willing to commit large sums to sinking a PFG upstart? Unfortunately, those are probably also factors that give a PFG enterprise the best shot at delivering massive amounts of money to charity. This does seem to be the high capital-at-risk / high potential-reward quadrant of potential PFG enterprises. Let's call that playing on hard mode. In contrast, competitors in the market for (say) premium-ish salad dressings have weaker incentives to burn lots of money to bury a competitor. I don't have a prior but I do expect that they'll try to sink a PFG upstart, but I'm not sure if they would try and sink it more than a for-profit upstart. They will also have to do it in stealth mode, because otherwise we'll drag them through the PR dirt. On another note companies are still run by humans and I'm not sure how comfortable they would be with actively trying to kill a company that's here to save kids' lives. It's hard to say but I don't think they'll try to kill us any harder than other startups doing it for-profit, and we have benefits they cannot match (tax benefits, hiring mission driven employees, employees willing to work harder/smart, free software, advice etc.). Overall I don't see this as the biggest risk. I see the biggest risk as underfunding as opposed to the competition. My main worry is another company does the same thing with 50 million in venture capital model and we're too slow because we only have 1% of that. 

From your last paragraph, it sounds like a lot of your theory of change comes from showing the world that PFG is a solid model and spurring other founders to choose a PFG model. Given that, I'm curious why you've chosen what seems to be a "hard mode" field. Do you think the "hard mode" problem permeates (almost) all potential PFG opportunities, or do you think the added impact of succeeding on hard mode is worth the added risk? There are successful PFG upstarts who've done up to a couple million in donations with easier modes. I think the real change comes when you can show that you can do a PFG unicorn. That will start raising everyone's eyebrows and get people thinking. There are billion dollar PFGs (Bosch, Patagonia, Carl Zeiss) but they only turned PFG when they had the cashflow to do it. The most successful PFG startup that made it is Newman's own but they did not have the funding bottleneck. I think that's an amazing case because it was a hyper competitive market and they made it work, perhaps because they were the only unique one with their business model. Commodities in general can be interesting. If you can buy 1 liter of detergent for 5 bucks or 1 liter of detergent for 5 bucks that donates to [charity you like], I think people will start choosing the PFG. The problem is getting to that stage with a funding bottleneck. 

I'm just a public-interest lawyer (so not wealthy), but if I were a potential investor one of the questions I'd be asking here is whether the showing-the-world objective could be obtained for less financial risk in a market where competitors are less able and/or less motivated to subsidize than the likes of eBay. By analogy to how we fund global health work, I'd ask why we couldn't run a less capital intensive pilot as a trial (cf. an RCT) before committing to something that risked deep coffers (cf. funding at scale). We only need 2 million to break even (we can likely choose earlier break even but at the cost of growth and future impact potential) and 500K right now (we can do with less, even 150-200K but would be suboptimal). I wouldn't consider that massive as opposed to the funding other EA orgs get, which is very often within or (far) beyond this range. I think we can only get EA funding if the upside is massive. If I start a PFG clothing line it might do reasonably well, but it might only move a million to charity when successful, and I don't think EA funds things that move a million when successful.

I think we're at a stage where PFG already has had some good trials with good results (preliminary research showing they live longer and hint to higher profitability). The date on the massive PFGs is that they outperform the competition. I think these results are good enough to warrant a slightly bigger bet in the range of 500K-2M I talked about above. 

A potential problem for EA funding this I believe is their lack of knowledge on judging startups. There aren't many EAs who can judge the profit potential of a for-profit startup correctly, and they often don't deeply understand the business, market and business model so they end up too unsure and not funding this. I should also note that there are two EA entrepreneurs who are skeptical but supportive of this idea. Both haven't been updated with our progress in a year so they might be less skeptical now. We might not be funded because people think our team and/or business sucks, and if they are right that's fine. However, from the PFGs I talked to they don't seem funded by PFGs, even the ones I talked to who I thought had great teams and ideas and who I believe would certainly be funded in the for-profit space. They usually end up unfunded, finding funding outside of EA from startup investors, either as a PFG or when they turn for-profit.

BOAS has had serious interest from for-profit investors (3 last round accelerator declines and multiple investors hinting they would invest if it was for-profit), and we were often asked to go 50/50 or for-profit and me donating shares. I'm reasonably confident that we would have already been funded or in a good accelerator if this was for-profit. This also means we're moving slower and competition with funding might start to catch up with us. 

If fundraising fails, I might restart a similar company for profit and donate almost all my shares, but 90% of shares (if successful) would not go to charities and there would be zero impact of showing the model works and getting more PFGs to start, and it would be strong evidence for others not to start PFGs. However, if that company secures funding quickly from reputable investors/accelerators, it would have been a strong sign that EA missed out on an opportunity, and maybe it would signal to investors that they should invest other PFGs.

The most successful PFG startup that made it is Newman's own but they did not have the funding bottleneck. I think that's an amazing case because it was a hyper competitive market and they made it work, perhaps because they were the only unique one with their business model. 

 

Newman's Own is a difficult case study to evaluate for me because of the Newman factor. You could see Paul Newman's very public commitment to the brand as a mix of three sorts of advantages that most PFG enterprises wouldn't have:

  • A subsidy: how much was / is a celebrity endorser worth? AFAIK, Newman's Own got the value of Newman's goodwill / name recognition for free in addition to the market advantages of being PFG. You could model that as equivalent to a subsidy in the lesser of the value of the Newman endorsement or the cost of securing a similar endorsement.
  • A difficult-to-clone feature: Are there other A-list celebrities who would be willing to put their face on a bottle of salad dressing even for money? Even if there were, would they be willing to do so after Newman had set the standard for what putting your face on a salad dressing bottle means? Taking millions to put your face on Kraft, while consumers know that Newman was putting his face on Newman's Own for charity, would likely cheapen the A-lister's brand.
  • A legible guarantee of charity: Newman's involvement with Newman's Own gives the customer a stamp of approval from someone they feel they can trust (and whose reputation would take a major hit if the charity connection was overplayed or bogus). There's enough charitywashing by plain old for-profit organizations to expect some cynicism from consumers that the PFG enterprise is the real deal.

Stated differently, how well does Newman's Own work without Paul Newman?

  • I think it's quite likely that the Paul Newman's endorsement had a large effect. It's impossible to say how well the brand would have done without his endorsement. My best guess is that it would have made it with just the charitable destination of profits, because it didn't have a funding bottleneck. I do think it would have grown slower without Paul Newman actively endorsing it. 
  • Celebrities are very often willing to put their face on anything for money. There's literally millions of examples of that. I'm at least 99% sure you could get a celebrity to put their name on a sauce for the right amount of money, I haven't googled but I'm sure there are examples of celebrity people on food packaging. How well it would work is hard to answer though. 
  • Some people are cynical towards PFG's. We were endorsed by one of the most famous authors in The Netherlands (Rutger Bregman) and there was some cynicism in the comments (I believe there were around 300 comments), but the vast majority of people seemed positive. The difference I think is really between giving away all your profits or just donating a small part to charity, which can be seen as charity washing. I have talked to a bunch of PFGs and they really do seem to enjoy great reputations. I specifically asked if they ever had to deal with bad PR and none had. For the major PFGs like Patagonia and Bosch, I'm aware that Patagonia had some negative PR about PFGs being a way to evade taxes, but the reporting on that was much smaller than the positive new (and you could say that any press is good press, which I've usually found to be true for the sales of brands after press, even negative press).

Celebrities are very often willing to put their face on anything for money. There's literally millions of examples of that. 

Yes, but it'd still be difficult for a for-profit salad dressing company to fully clone the Newman endorsement. I think the Newman endorsement is synergistic with Newman Own's PFG status -- the consumer understands that Newman is endorsing because he really stands behind Newman's Own and its mission, not because someone is lining his pockets. It's like the difference between repeated favorable press coverage in the New York Times and buying advertisements in the New York Times -- they aren't really the same thing. Moreover, I think whoever is hawking Kraft would face some unfavorable comparisons to Newman, and would thus demand a higher fee than in the counterfactual where Newman doesn't exist.

I have talked to a bunch of PFGs and they really do seem to enjoy great reputations. I specifically asked if they ever had to deal with bad PR and none had. 

I don't think my main concern is "bad PR" per se. It's my view that companies with characteristics similar to BOAS often run at a loss and/or need to re-invest almost all their profits into the business for an extended period of time. I think that is particularly likely where established market players will try to muscle it out, and a competitor could arise with easy access to VC money (both analyzed upthread). The PFG value proposition is much less legible if the company has been around several years and little has been donated to charity. So the crux here is how much time consumers will allow BOAS to start actually delivering meaningful sums to AMF, and how quickly BOAS can do that. My priors are skeptical, but I don't claim expertise in evaluating specific business plans.

Companies like Bosch were -- i assume -- already profitable when they transitioned to PFG, so they could immediately show (rather than tell) their charitable plans. Part of my point about Newman was that his involvement may have provided reassurance to early-stage consumers that this was eventually going to work out and monies would eventually flow to charities. So neither would give me a strong sense of how long consumers would give BOAS a "PFG boost" without big donations flowing to AMF.

Incidentally, I own a Bosch dishwasher, which is not a minor purchase (~$1000), and had zero idea that they were predominately PFG (92%). They don't seem to be advertising on that.

Replies in bold.

Celebrities are very often willing to put their face on anything for money. There's literally millions of examples of that. 

Yes, but it'd still be difficult for a for-profit salad dressing company to fully clone the Newman endorsement. I think the Newman endorsement is synergistic with Newman Own's PFG status -- the consumer understands that Newman is endorsing because he really stands behind Newman's Own and its mission, not because someone is lining his pockets. It's like the difference between repeated favorable press coverage in the New York Times and buying advertisements in the New York Times -- they aren't really the same thing. Moreover, I think whoever is hawking Kraft would face some unfavorable comparisons to Newman, and would thus demand a higher fee than in the counterfactual where Newman doesn't exist. I agree with all of this. 

I don't think my main concern is "bad PR" per se. It's my view that companies with characteristics similar to BOAS often run at a loss and/or need to re-invest almost all their profits into the business for an extended period of time. I think that is particularly likely where established market players will try to muscle it out, and a competitor could arise with easy access to VC money (both analyzed upthread). The PFG value proposition is much less legible if the company has been around several years and little has been donated to charity. So the crux here is how much time consumers will allow BOAS to start actually delivering meaningful sums to AMF, and how quickly BOAS can do that. My priors are skeptical, but I don't claim expertise in evaluating specific business plans. We thought about this a lot. We allow voluntary checkout donations (no cost to us) which is already generating donations. We can also work with donation matching from a philanthropist. Suppose you're a philanthropist that donates to AMF already, it would be interesting to do that partly through BOAS (e.g. for every purchase we match a €5 donation), where it wouldn't be riskier or costlier, but you have the benefit of helping BOAS grow, with the potential to make large sums for AMF. We're also transparent about needing money to grow so our donations will be relatively low. Transparency, donation matching and voluntary donations add up to amounts that seem significant to customers (e.g. a €10.000 total charity donation might seem substantial when you've only had €1 million in sales). Many PFGs, in my opinion, donate too much too early and hurt their future profit/donation potential. It might be because their customers demand it, but I don't have data or knowledge on that. If customers demand earlier/higher donations that hurt growth, that might be an argument against PFG. On the whole we'll have to see what the value of better employees and more loyal customers is as opposed to the negative value lower odds of raising funding and the potential necessity to donate.

Companies like Bosch were -- i assume -- already profitable when they transitioned to PFG, so they could immediately show (rather than tell) their charitable plans. Part of my point about Newman was that his involvement may have provided reassurance to early-stage consumers that this was eventually going to work out and monies would eventually flow to charities. So neither would give me a strong sense of how long consumers would give BOAS a "PFG boost" without big donations flowing to AMF. The successful large PFG's, with the exception of Newman's Own indeed pivoted to PFG when they had the cashflow/profits to do so. Based on what I've learnt from BOAS and talking to other smaller PFG's I haven't seen issues where customers would stop believing in PFGs. They either do well and donate some money to charities (in our case, voluntary donations and hopefully donation matching) or they die for various reasons (possibly sometimes because they're not funded because of their PFG model). 

Incidentally, I own a Bosch dishwasher, which is not a minor purchase (~$1000), and had zero idea that they were predominately PFG (92%). They don't seem to be advertising on that. AFAIK no one I talked to knew about Bosch and they don't seem to advertise with it. Employees of Bosch sometimes know but not always, and the region where they spend their profits does seem aware. I'm interested to know why Bosch decided to not actively promote their PFG status, where usually PFGs do. The same goes for Carl Zeiss. I believe it's because they either don't know the value and/or want to be modest families who rather give in silence. In Europe it's not common to be vocal for philanthropists about their giving. 

You could put on manifund - that seems like a great place for this kind of thing https://manifund.org/

Hi Nathan, thank you for the suggestion. I actually asked whether it was a good fit and the initial answer was that their grantees usually do not fund things like this (that makes sense because our project is very unusual). I have asked follow up questions but I suspect it is because they want it to be more longtermist. You could argue that changing the capitalist business model so that profits are used to tackle important problems (by donating them or investing in effective organisations) would be longtermist, because it's a sustainable way to generate funding in the future, without relying on voluntary philanthropy (something that has caused EA much suffering the last year). 

I will see what they say and we might put our project on there.  

FYI it's now live on manifund (I was encouraged to push it live there): https://manifund.org/projects/investment-in-boas-to-generate-5-10k-monthly-sales-to-secure-full-investment

How are we making sure unsatisfied people fill in (EA) surveys?

I was reading survey outcomes and I was wondering if it wasn't filled in, for whatever reason, by people who are more satisfied than the average, because satisfied people are more likely to fill in surveys than unsatisfied people. 

I'm reasoning from own experience so the intuition might be wrong. But I'm often less likely to fill in forms for movements/companies/events when I'm unsatisfied. For example: I never fill out my landlord's satisfaction survey because I know their service is not good and am not hopeful the survey will change anything about that (or they even do the survey for anything else than regulation forcing them to do it). When someone actively asks me to do a satisfaction survey, I'm much more likely to do it for them if I'm satisfied than when I'm not satisfied. I wonder if this generalises. I can also see others being more likely to fill out a survey when they are unsatisfied, and I'm unsure whether there is a known bias for this kind of thing (maybe it has been researched).