Hey, aspiring social entrepreneurs — tech startups aren’t your model

When Gabriel Mandujano launched Wash Cycle Laundry over six years ago in October of 2010, his business was in the first cohort of local social enterprises to rake in venture capital.

But taking on outside investment wasn’t in the immediate blueprint.

“My original plan wasn’t to raise that type of equity,” he said. “Probably in a foolhardy way, I thought we would do everything completely bootstrapped. For me personally, the much more relevant context was, ‘Would I be doing this in a nonprofit?'”

That’s the sector Mandujano was coming from. Just before getting Wash Cycle Laundry up and running, Mandujano had just spent two years as the executive director of The Enterprise Center in West Philly and spent some time in Mexico City advising government bodies there on sustainable transportation.

“I really loved those two experiences,” he said. “[But] I think there were a lot of frustrations I had with nonprofits as a business model.”

When Mandujano returned to Philadelphia in August 2010, he was returning to a fledgling social enterprise scene that was just beginning to become comfortable with itself — a bedrock was taking shape in a local ecosystem comprised of social enterprise accelerator GoodCompany Ventures, Wharton Social Impact Initiative and a more robust local chapter of angel network Investors’ Circle.

“Things were starting to move at that point,” Mandujano said. In 2013, Investors’ Circle members invested over $300,000 in Wash Cycle Laundry — but Mandujano wanted to experiment with other types of funding.

“I think we probably have one of the most diverse cap tables of a company of our size,” Mandujano said. Before taking on venture capital from IC Philly and Robin Hood Ventures, Wash Cycle Laundry landed low-interest loans from foundations like the Patricia Kind Family Foundation (as a PRI).

“We also have a pretty innovative debt equity hybrid instrument, our most recent financing, from a group called the Distinguished Social Venture Foundation,” Mandujano said. “That’s got elements of low-interest loans but also elements of equity in a way that I think is really cool.”

But venture capital isn’t for everybody, Mandujano said. It depends upon your industry. And innovation, he said, is not an industry in and of itself.

“You can be very, very innovative and have a business model that doesn’t need and might be harmed by venture capital,” he said. “You can be innovative in an industry that has a lot of options available — including bootstrapping.”

A more relevant question than “should I take venture capital?” — what are your aspirations for the exit of the company? That’s the best way to determine what your financing strategy should be, he said.

Six years after launching Wash Cycle, Mandujano has three tips for aspiring social entrepreneurs:

• Don’t wait. “If you’re still trying to decide whether this is something you want to do, [know that] you’re always going to have to take a leap. There’s never going to be a perfect time.”
• Get to market. “You want to figure out your business model pretty quickly. For most people, that means you need to get to market as quickly as you can.”
• Don’t idolize the tech sector. “The way you’re going to grow and build a coffee shop company isn’t going to be the way you build a B2B [business-to-business] software solution,” Mandujano said. Instead, look to local coffee shops, to Saxbys, to Starbucks. “There’s a lot of received wisdom we get from the tech sector on how to start and grow a company. If you’re a social enterprise and a tech company, you should pay attention to that. If you’re not, give equal weight to the received wisdom from your industry.”