This post was written by CASE Executive-in-Residence and Sproxil Co-Founder Alden Zecha in October 2016. He has over 25 years of experience in more than 35 countries and has founded several companies, including SEAD Innovator Sproxil, Inc., a social venture that provides a consumer SMS and app product verification service to help consumers avoid purchasing counterfeit products, and We Scale Impact, a consulting firm that specializes in global health ventures.
In impact investing circles, we have long talked about the scarcity of large, financially-rewarding, investor exits. While there have been some financially profitable exits and many enterprises with valuations now well above what investors paid for their stakes, there have been very few exits with deal prices at which pure financial investors take notice.
Two weeks ago that may have changed. In what is arguably the largest acquisition to date of a social enterprise, Unilever announced that it was acquiring Seventh Generation, a B Corp and maker of eco-friendly household products, for what Fortune, citing a “source familiar with the deal,” said was between $600-700 million.
Privately held Seventh Generation’s shareholders include at least three institutional investors, Catamount Ventures, Generation Investment Management and Schooner Capital, all of which include mission as part of their investment theses. According to the Wall Street Journal, in a 2007 funding round investors valued the company at $100m. Nine years later those investors are exiting with a 6-7x return. Not bad for a modest social enterprise based in Vermont.
Just as important as the financials of the deal is what this deal may signal in the marketplace. The line between social enterprises and “regular” enterprises may be disappearing. Social enterprises are now entering the mainstream. When Unilever North America President Kees Kruythoff described the acquisition he didn’t discuss the social or mission-based aspects of the business. He just described it as a business decision, saying “We’re thrilled to add Seventh Generation to our brand portfolio, providing us with the opportunity to accelerate growth with our retail partners and connect in new ways with consumers.”
That said, Seventh Generation CEO John Replogle stressed that the Seventh Generation brand will remain mission focused when he said “Today marks the next chapter and we’re proud to join Unilever and its shared vision for purpose-led business on a global scale. Working together we are confident we can have a positive impact on the health of billions of people around the world, truly fulfilling our mission of nurturing the next seven generations while transforming global commerce.”
One can see that the two may have slightly different views of the future but they aren’t in conflict and they feel confident that they can move forward together. In fact, Nitin Paranjpe, President of Unilever’s Home Care business, seemed to emphasize that by saying: “Seventh Generation has long been a disruptor in the US marketplace, leading the industry in sustainable innovation while attracting new generations of conscious consumers. This addition to Unilever’s product portfolio will help us meet rising demand for high-quality products with a purpose.”
So social entrepreneurs and investors take note, times are definitely changing. Mission driven business is entering the mainstream, attracting the attention of large corporations and providing investors with significant financial returns. Oh, and did I mention that the Honest Company, another B Corp, has been rumored to be the target of a $1+ billion acquisition deal?