Toms sells 50% stake to Bain capital, proving social entrepreneurship can be profitable

By Michael Carney , written on August 21, 2014

From The News Desk

Toms Shoes may not have invented the social enterprise – a for-profit blend of business and philanthropy – but it surely popularized the concept among both consumers and investors. It even spawned a new name for the phenomenon called “compassionate consumerism.”

Thanks to the footwear company’s successful and highly visible “buy one, give one” campaign, the world now has dozens of other companies taking a similar approach to brand building and community development. Skechers followed Toms’ lead – a bit too closely for some – launching its BOBS (Benefiting Others By Shoes) label, while Urban Outfitters similarly launched its Threads for Thought apparel line. In the startup world, Warby Parker may be the next most visible example of this trend, but the list, and the impact of this movement, has a very, very long tail.

Today, Toms founder Blake Mycoskie finally cashed in on the success of this model, taking on the first outside equity capital in the company’s history (it has raised debt) with the sale of 50 percent of Toms to Bain Capital according to a report in Reuters. Mycoskie, who astonishingly was the sole shareholder prior to this deal, will retain 50 percent ownership in the eight-year-old Los Angeles company.

The deal, which Reuters describes as an auction among multiple interested private equity firms, reportedly values Toms at $625 million, inclusive of debt. Toms states that the new investment will help the company both accelerate business and also support its philanthropic endeavors.

“This partnership will enable Toms to grow faster and give to more people in more ways than we could otherwise,” Mycoskie said in a statement.

According to the Toms website, the company has donated more than 25 million pairs of shoes to needy children, and, through its eyewear line, helped restore sight to over 250,000 people. Through Toms Roasting Co, Mycoskie also donates a clean water for every every bag of coffee purchased.

If the fact that everyone from schoolchildren to celebrities can be found wearing Toms products wasn’t enough, today’s investment should offer further proof that social entrepreneurship can be highly lucrative and when applied thoughtfully, can actually make a business more successful than if it focused solely on the bottom line.