Inherent Public Benefit
Small businesses are the backbone of local economies in the United States and around the world. They create more jobs than all other sectors combined (big business, government, non-profit, etc.) and yet often struggle to survive due to lack of capital, expertise and other resources that are commonly available to large businesses. CCCs are designed to solve that problem by bringing the resources available to public companies down to local small businesses. By providing those resources to small businesses, CCCs are helping them to survive, grow, create more jobs and in general better serve their communities. Thus CCCs inherently provide a broad public benefit by their very existence and efforts.
Sustainability and Triple Bottom Line
An CCC can go even further by incorporating the concepts of sustainability and triple bottom line, i.e., making sure the whole enterprise is not only financially successful, but socially and environmentally as well.
The push to make businesses more socially and environmentally responsible is gaining traction worldwide. In the U.S., we see two overt expressions of this. The first are those companies that become certified as B Corporations (over 1,700 worldwide as of Aug 2016) and the second is a new form of statutorily defined corporation called a benefit corporation. As of Aug 2016, more than 3,000 such corporations have been formed in the nearly 30 states in the U.S. that have adopted such corporate statutes. B Corporations and benefit corporations represent a natural constituency for an CCC that wishes to incorporate sustainability throughout its enterprise.
An CCC that fully embraces sustainability will be helping to not only foster small businesses in general, but will be moving them as a group towards a more inclusive form of capitalism that will better serve all stakeholders – employees, managers, owners, customers, suppliers, the community in general and the world we live in.
How CCCs Work
CCCs gather small and mid-size companies together into an entity large enough to be a public company. So instead of investing in an individual small company, investors invest in the public CCC, which then invests in many small businesses at one time. It spreads the risk, provides liquidity, and facilitates recouping the original investment plus a healthy return.
CCCs Are Flexible
They can provide access to funding for a wide spectrum of companies including startup, growth and even mature small and mid-size companies. Investments can be individualized for each company. CCCs can mimic crowdfunding, yet also act like a investment fund, a holding company and a commercial lender rolled into one.
CCCs represent a whole new set of options for funding small businesses, whether by a crowdfunding portal (only recently approved by the SEC) or other means. In fact, they may be better than the most idealized version of crowdfunding, and almost certainly better than what was left after the SEC completed its rulemaking on Title III. The same is true for conventional VC funds, angel funds, etc. CCCs are better, their rules are already in place and they can be used today.
Benefits of CCCs
|> Provide capital (and perhaps credit) to small and mid-sized startups, growth and mature companies.
> Built-in exit for investors, therefore easier to raise money.
> Investors have benefit of owning shares in a large public company, yet can direct their investment to an individual private company.
> Allow investors in existing funds to divest from companies too small to go public or sell at a profit.
> Flexible structuring: businesses can be wholly or partially owned subsidiaries, incubated companies, joint ventures, etc.
> Public companies are typically valued far higher, i.e., a greater multiple of earnings, than private companies, giving investors a higher return.
|> Can “incubate” future CCCs around industry sectors or other criteria.
> Businesses can choose their optimum size and not be pressured to grow merely to satisfy investors. They may remain under the umbrella of the CCC forever, without being forced out or forced to be acquired by another company (a typical condition for VC-funded companies).
> Will offer mentoring at all stages of the business cycle, thereby enhancing survivability and growth of subsidiary companies.
> Natural network for businesses within the CCC.
> Can provide shared services at better prices, e.g., payroll, insurance, accounting, IT and more.
> Can cross market with other subsidiaries under the CCC, thereby increasing sales for all.
> But probably the most inclusive benefit that an CCC can provide to small businesses is to inculcate them with the broad concepts of sustainability. When triple bottom line philosophy and practice become core values, they bring a rigour and discipline to every facet of the business, making them not only better businesses, but better corporate citizens. There is substantial evidence that companies that embrace these principals are more successful, financially and otherwise, than conventional competitors.