what is a zebra company?

 

DEFINITION + CHART

Think of our most valuable institutions—journalism, education, healthcare, government, the “third sector” of nonprofits and social enterprises—as houses upon which democracy rests. The existing model of VC-backed disruption rewards razing them to the ground. We, by contrast, propose an extreme home makeover, with zebra companies providing the blueprints and tools.

We see a common pattern among zebra companies’ founders, and in their cultures:

  • They approach the design process from a place of curiosity, inquiry, and humility.

  • Their goal is to help, hear, and, yes, heal the customers and communities they serve.

  • They are interested in collaborating with and learning from existing institutions rather than fully dismantling and replacing them.

Thanks to the work of many thinkers,* we’ve refined our vision of what a zebra company is, stands for, and does. This chart outlines how a zebra stands up against its mythical cousin, the unicorn—and presents the building blocks for what we believe is a better way forward:

INSERT CHART HERE

WHY IT’S SO HARD TO BUILD ZEBRA COMPANIES

In the last year we’ve spoken to countless founders, investors, foundations, and thought leaders who believe zebra companies are indeed crucial to our society’s success. But through these conversations and our own experiences we’ve learned that building zebra companies is nearly impossible. They fight for survival because the capital and systems are not set up to encourage their birth, let alone to support them through maturity.

From those conversations, we have distilled the five most common challenges facing zebra companies:

1. Zebras are stuck between two outdated paradigms. We can’t count the number of times we’ve heard, “If only you were a nonprofit, we’d give you a grant.” Or the flip side, “If only you could draw me a hockey stick, we could invest in your round.” The most promising path for companies pursuing both profit and purpose is to create a hybrid for-profit/nonprofit business model. This, however, is beyond the capacity of most young companies because the legal, operational, and regulatory requirements can be complex and expensive. Public Benefit Corps are still investor kryptonite and don’t make zebras easier to fund. And B-Corp certification is a nice but expensive badge of honor, but doesn’t make it any easier to obtain funding.

2. Impact investing’s thesis is detrimentally narrow. Much of the $36 billion of impact investing is restricted to fields like clean technology, microfinance, or global health. These are important causes, yes, but we believe that every industry is ripe for impact investment dollars. Yet right now, this relatively immature market limits innovation in sectors that could desperately use it. Impact investors have essentially replicated the vertical thinking of so many foundations, and organize their portfolios in sectors where they seek specific outcomes. This ignores the opportunity of lateral system innovations--changes to process, infrastructure, or technology across sectors and geographies.

3. The problem isn’t product, it’s process. We don’t need more apps. Building more technology isn’t the silver bullet to solve the biggest challenges we face today. An app, for instance, won’t solve the homelessness crisis in San Francisco and other cities that have become the favorite haunts of the tech industry. The obstacle is that we are not investing in the process of helping institutions like schools, newsrooms, or governments to adopt, deploy, and measure the success of innovation, whether that innovation occurs via an app or a new mental model, new workflow or a new way of doing business.

4. Foundations, philanthropists, and government must step up. Zebra products and services are critical to the flourishing of our communities, individual well-being, social justice, and democracy. Yet options for investment in for-purpose, for-profit companies remain scarce. There is a lack of education on both sides: foundations, family offices, individual philanthropists, and government decision-makers don’t have a straightforward and tested path to investment, and companies seeking investment don’t have the capacity to apply for more creative formats of mission-aligned money. (“Grant writer” is not a job description on for-profit org charts.) This leaves funding from these sources focused on nonprofit organizations, despite the great advances being made by nimble startups with less bureaucracy. The philanthropic funding that might be best suited for zebra companies’ needs and the social impact they generate is therefore out of reach.

5. Zebra companies? They’re often started by women and other underrepresented founders.  Three percent of venture funding goes to women and less than one percent to people of color. Despite venture capital investors’ good intentions to diversify their portfolios, we see little meaningful progress being made. And although women start 30 percent of businesses, they receive only 5 percent of small-business loans. (In Portland, women have taken matters into our own hands).