How Better World Books Built A Multimillion-Dollar, Venture Backed Social Enterprise–with David Murphy

In this 7-minute clip, Better World Books President and CEO David Murphy talks about the company’s fiduciary commitment to its nonprofit literacy partners and how it received funding, initially with an SBA loan and later through Good Capital, a social investment firm. Right-click and download for the MP3.

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Distributing books Tanzania, 2006. (L to R) Michael Retzer, then-U.S. Ambassador to Tanzania; Pat Plonski, Executive Director of Books for Africa; David Murphy, President and CEO, Better World Books (Courtesy of Better World Books)

Better World Books has several rare characteristics. It’s a for-profit social venture with a true triple-bottom line. It gives stock options to its nonprofit literacy partners. And it’s received $4 million in equity investment in a round led by Good Capital.

Better World Books collects and sells used books online to fund literacy initiatives worldwide through its five nonprofit partners, Books for Africa, Room to Read, Worldfund, the National Center for Family Literacy, and Invisible Children. Books are shipped carbon neutral with offsets from, and those that don’t sell are kept out of landfills through a certified recycling program. Today, Better World Books collects tens of thousands of books per day, given to the company by college students, libraries and other individuals.

The company promises 8-10% of its revenues, not profits, to its literacy partners. President and CEO David Murphy explains that Better World Books makes a fiduciary commitment to its partners so that when a book sells “it’s a liability on our balance sheet, regardless of whether we make money or we don’t.”  Beyond this, which is the basis of Better World Books’ mission and its origin, the company wanted its partners to be able to share in its success.  So with Good Capital’s encouragement and guidance, Better World Books created a mechanism to give stock options and a board seat to its literacy partners, turning them into shareholders and giving them a voice in the company.  David and co-founders Xavier Helgesen and Christoper Fuchs diluted their own options to creat the pool.

Each year the five organizations are evaluated on how well they met their objectives and supported Better World Books; they receive additional grants for high performance, which they can use without restriction.

By turning its nonprofit partners (which many companies would think of as just charitable beneficiaries) into shareholders, Better World Books ensured that its social mission brought an economic value to the business, which would preserve the mission in the case of a buyout. Kevin Jones of Good Capital who helped structure the deal calls it “mission insurance.”

At the time of this post, Better World Books has diverted 33, 951,415 books from landfills and raised $8,446,480.37 for literacy and education by selling used books.  And it’s profitable, earning more than $48 million in revenue and growing at 30%.

If you like this interview you should thank David on Twitter like this. You can follow Better World Books at @BWBooks.

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