VentureBeat

Social activism startup Virgance is no slow mover. The San Francisco startup, which last month took the wraps off two projects aiming to change the behavior of corporations through consumer buying power and help intelligently distribute philanthropic wealth, has acquired a solar-power cooperative effort called 1 Block Off the Grid (or 1BOG) that will give homeowners in 20 cities leverage to go green.

Like Virgance’s other efforts, 1BOG is all about community effort toward a common good. But there’s an added element to 1BOG: It’s also a great way to personally benefit from activism. Under the plan, consumers who want to install solar panels band together into coordinated buying groups to cut a deal for their own home’s installation.

The resulting savings can be really good: One of the participants in 1BOG’s inaugural program in San Francisco cut 43 percent off list price, according to co-founder Sylvia Ventura. For the average customer, the benefit will probably be closer to about 20 percent off, or $1.50 per watt that’s installed. Apply that to a $25,000 solar system, and you’ve just saved $5,000 — and rebates knock off much of the rest of the price.

Some 180 people received a home evaluation out of that group, with 35 eventually buying, which made the “1 Block” appellation rather fitting. However, there’s nothing to limit the size of the groups that go in for the packages. And since coordinated solar buys aren’t new — some cities have run their own — it’s Virgance’s method of marketing and profiting from 1BOG that really stands out.

The three founders of 1BOG will manage the 20 cities that the company is moving into themselves, combining outreach through blogs and newspapers with word-of-mouth through people joining the program, who are also operating out of self interest, knowing that larger groups equal larger savings.

When it comes time to negotiate the installations, the 1BOG founders kick back in, using their knowledge to haggle down the price (co-founder Dave Llorens is, himself, a solar installer). For 1BOG’s cut, it takes 25 cents per watt, out of the total average savings of $1.75. So on that $25,000 solar system alone, Virgance might make almost $1,000 dollars. With hundreds or thousands of participants, the numbers add up.

The idea seems almost too easy, as reflected by the confidence of Virgance CEO Steve Newcomb, who told me that 1BOG alone will be “in the millions of dollars of revenue very, very soon.” But it’s also worthwhile to remember that the solar installation market is very new, and there’s a lot of room for new ideas. And sometimes, it’s the simple ideas that work best.

It’s new enough that there’s not even a commonly accepted term for it. Some call it “social capital” or “social entrepreneurism”, others “blended value”, and some choose the Starbucksian name “double-triple bottom line.” You might just call it making money from doing good.

Microcredit is the major innovation that popularized the idea of alternatives to traditional philanthropy. An economics professor named Mohammed Yunus famously pioneered giving very small loans to people in developing countries to build businesses or take care of basic needs, often something as simple as opening a small store or buying vaccinations for a family.

Contrast that to aid organizations that have spent hundreds of years providing selective handouts — with little result. In just three years, microfinancing by both non- and for-profit organizations has taken flight, with a huge effect. The key was simply adding old-fashioned capitalism and a business model to charity.

Today, businesses that act with philanthropic goals but operate under business plans that mandate turning a profit are beginning to consider themselves a distinct group. Companies like the fair-trade juice venture Adina World, low-cost solar light maker D.light Design, microfinance group Unitus and the online social change startup Virgance all have fundamentally different businesses, but the same motivator: a better world.

A recent conference, Social Capital Markets 2008, saw several hundred entrepreneurs gather in one place to trade ideas for getting financed and growing in a world that’s still dominated by old-line institutions like the Red Cross. A common business model involves co-dependent non- and for-profit arms working as a single unit. One example: Zerofootprint, a carbon calculator for cities that has a non-profit foundation doing strategy for the for-profit corporation.

While most philanthropic ventures still operate solely as non-profits, there’s a growing niche for the new breed. That’s because, as Elizabeth Funk of Unitus put it while speaking at the conference, “greed is one of the fundamental drivers of humanity.” For-profit businesses have a drive that was long ago lost in the sprawling bureaucracies of traditional aid groups.

The goal, however, is not solely maximizing profits. Good Capital, a venture investment firm in San Francisco that focuses on social capital, walks a cautious line with its investments. The fund requires a positive return on its money, but also guards against profit-taking. “Nobody wants what happened when Ben and Jerry’s sold,” co-founder Kevin Jones told me, referring to the socially responsible ice cream maker’s buyout by a giant conglomerate. “You had these great shops in San Francisco with social programs. All that went away within two months when Unilever bought.”

One of Good Capital’s early investments was Better World Books, which got $4.5 million earlier this year to collect old textbooks for resale or free distribution to developing countries. Jones relates that the company wanted to give away too many of its books, a move the investors had to block to maintain margins. “They were scaring away investors — they were scaring us,” he said. But those same investors also allowed other aid organizations to buy into Better World, a move Jones calls a “reverse poison pill” designed to help block potential buyers motivated only by profit.

Overall, the returns promised by funds like Good Capital, are lower than traditional venture investment, but there’s no shortage of investors who want in. Right now, those are typically “high net worth individuals”, in industry parlance — meaning rich people — but if the first generation of funds proves it can turn a profit, traditional investors like pension funds will likely come knocking as well.

What’s not lacking are young entrepreneurs looking for a way to change the world. Social capital is far from mature, and Jones predicts “a lot of failures” as the fledgling industry finds its wings, much as the organic food and fair trade markets have been doing for a decade. But those are now mature industries, and their successes foreshadow a permanent place for social investment.

For many years, giving large amounts of money to charity, or affecting the moral choices of major companies, has mainly been the province of elite donors and the corporations themselves. Changing this status quo seems difficult — there’s simply a huge divide between those who have money to give away and the power to make decisions, and those who do not.

But a new San Francisco startup called Virgance thinks there’s a way to use social networks to give the masses power over such decisions — with the willing participation of the business world, no less. If the company’s ideas take off, it could have a serious effect on the way both charity and corporations work, by directly reaching into companies’ coffers.

The idea behind Virgance isn’t just setting a bunch of people loose on a social networking application and hoping they’ll self-organize, which is often the pie-in-the-sky hopes held by the sort that talk about the “power” of social networks. People need ease of use and amusement, while companies want clearly defined, predictable returns. Virgance is gearing up to launch two activism campaigns that are structured to achieve those aims.

Those two are a social networking application called “Lend Me Some Sugar”, which will allow individuals to redistribute the money that big corporations give to charity, and CarrotMob, a sort of offline business competition that rewards corporations for making sustainable choices by organizing “buycotts”. Yes, that’s the opposite of a boycott.

CarrotMob has already had one success. Started by Brent Schulkin, who joined Virgance as a co-founder, the idea had its first run in San Francisco in April of this year. Schulkin asked over 20 local stores to bid on the business of his group, by promising to spend a portion of the profits on energy efficiency.

The store that won bid 22 percent, in return making over nine thousand dollars from the three-hour buying spree, or around four times the receipts from a normal day. A video about that first event is here.

Schulkin hopes to kick off similar events around the country, bringing them up to an ever-larger size to convince businesses to get into the game. And to prove it’s not just an idea for San Francisco liberals, an upcoming event is being planned for Kansas City.

“Lend Me Some Sugar” takes a rather different tack. Big corporations all have a philanthropy budget of some size, because a percentage of profit can be donated as a tax write-off. Really big companies face a challenge in figuring out where and how to distribute the millions of dollars they have for charity, and have internal bureaucracies that determine how to spread it around.

So for Lend, Virgance’s other founder, Steve Newcomb, wants to give companies a new way to benefit from their philanthropy. Say you’re on Facebook, and you go to the Lend application. You’ll be presented with a certain number of points, which represent corporate charity funds. You can then decide which of several hundred charitable organizations to send those funds to. And what’s more fun than giving away someone else’s money?

The trick is that the funds you’re distributing are branded, so you can see, for example, that Acme Inc. is the company that’s donating. Acme ends up looking great — after all, you’re getting to use its money. If you’re active in giving out funds, you’ll get access to more, and can also form groups or compete to distribute philanthropic money.

Newcomb, a former founder of semantic search company Powerset (we profiled Newcomb early this year) says finding interested donors is “kind of like shooting fish in a bowl”, because Lend would effectively give the companies access to a marketing channel they’ve never had before, as well as doing away with the difficulty of running their own internal philanthropic apparatus.

Both CarrotMob and Lend are slated for official launch later this year. And there’s also a plan for Virgance itself, a for-profit company, to make money in the process. The Lend application will have advertising — Virgance will not skim off any of the charity funds. CarrotMob will also avoid tapping the funds of users or companies, instead tapping the team event concept to sell merchandise like t-shirts, as groups start up around the country.

Another recent Facebook application to give users power over companies is Village Green Energy, which pushed several wineries to switch to renewable power. And there’s the grandaddy of philanthropic applications, Causes, a highly successful app that helps rally users to raise funds for non-profits.