Greenstart backs Carrotmob, the crowdfunding startup for social good

By Erin Griffith , written on May 7, 2013

From The News Desk

A few years back, the recession enabled a new kind of capitalism-activism called "cash mobs." Local consumers would, all at once, mob a business and spend money to show their support for the recession-struck gas station, or clothing store, or deli.

But before the existence of cash mobs, a similar movement called Carrotmobs had been doing the same thing with a focus on social good. Carrotmobs are like cash mobs, except community members earmark their spending at a store or restaurant for a specific social improvement like environmentally friendly lighting, bike racks or sustainably produced menu items. Many businesses want to make these positive changes but are limited by cash to get started, says co-founder Brent Schulkin. More than 100,000 Carrotmobbers have now engaged communities to encourage social change for 260 businesses to the tune of $1 million in 20 different countries.

Until recently, Carrotmob's website would merely organize the "mobs," who would then show up at the business all at once and spend their earmarked cash. (The ideas are created by community members, but the businesses must agree to the plan before the event.) But now, Carrotmob has developed a platform that allows the mobs to purchase their earmarked money online as a voucher. Notably, moving the transaction online gives Carrotmob a revenue model; the company takes a small percentage of each transaction. Since launching the online platform, six Carrotmob campaigns have been completed.

Now that the movement has a business model, Carrotmob has teamed up with the investment vehicle Greenstart, which has invested $150,000 and design services into the project. Greenstart last month killed its accelerator program and transitioned itself into a more traditional seed investor with a design studio element. The program's goal is to help green companies differentiate themselves through strong design. In March, Mitch Lowe, Managing Partner, cited the importance of design in the smart thermostat company Nest, now valued at $800 million. “There are 100 smart thermostat companies out there. Ten years later one broke through without even emphasizing the green part because of the aesthetics and simplicity,” he said. The firm hopes to apply that philosophy to its portfolio companies; Carrotmob is its second investment since changing the program (the first was stuff-sharing site Yerdle).

The goal of the Carrotmob's design will be to remove some of the choice and openness of the platform, which sounds counter-intuitive. Right now, anyone can propose any kind of socially conscious business improvement to any business. The campaigns range from providing a scholarship program to employees, to adding Braille to menus, but the most common is energy efficiency. Narrowing down the options will make it easier for people to organize campaigns and get businesses involved. Around half of campaigns are organized by groups like schools or city councils. The rest are started by meddling citizens.

Schulkin says he was initially worried he'd have to enforce accountability -- that businesses might not do what they'd promised. But that hasn't been a problem, he says, because businesses care about their reputations. Besides, the marketing value they get from such a campaign is more valuable than the money they might get from a brief boost in sales. Carrotmob has a contract with the businesses and could hold money in escrow in order to enforce accountability, but Schulkin says that has not been necessary yet.

Carrotmobbers are not donating -- they get whatever full price item they purchased a voucher for -- and its up to the businesses to work out the margins. It serves as a way for the small business to get some cash to invest in projects that would require a large up-front investment.  While other startups like SmallKnot allow communities to support local businesses in exchange for rewards. Carrotmob believes it is the first crowdfunding platform to let people "vote with their money" for social good in small and local businesses.

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