I’m pleased to announce that FirstRoot is now a Benefit Corporation. This raises a question: “What is a benefit corporation.” In this post, I’ll explain why we made this choice and how we’re using this new status to promote our mission of improving financial literacy.
What is a Benefit Corporation?
The website BenefitCorp.net describes it this way:
“A benefit corporation is a legal tool to create a solid foundation for long term mission alignment and value creation. It protects company missions through capital raises and leadership changes, creates more flexibility when evaluating potential sale and liquidity options, and prepares businesses to lead a mission-driven life post-IPO.”
To become a benefit corporation (B-Corp), you must state your public benefit in your articles of incorporation. This is how we explained ours:
“The specific public benefit to be promoted by this corporation shall include promotion of financial literacy through educational software and financial services.”
While this describes what a B-Corp is, and outlines our public benefit, it doesn’t explain why we made this choice. For that, we need to dig a bit deeper.
The Philosophy Behind the B-Corp
In An Entrepreneur’s Guide to Certified B-Corporations and Benefit Corporations, Patagonia, the world’s first certified B-Corp, elegantly outlines the deeper values and philosophy that motivates B-Corps:
“We live in a time of social and environmental crisis, with a disturbing — and destabilizing — degree of income inequality that creates anxiety for all but the most economically secure. Even the affluent cannot be spared anxiety about the planet. According to E. O. Wilson, we have a 35-year window to learn how to adapt to climate change and prevent the conversion of nature into universal desert. To put things right will require an unprecedented level of cooperation and civic engagement on the part of human beings. We will need responsive government; strong, engaged NGOs and nonprofits; and socially and environmentally responsible businesses to produce our goods and services.”
Companies seeking to pursue these values need the protection afforded by the B-Corp status. Instead of maximizing profit by paying subsistence wages, or using product development processes that harm people or the environment, B-Corps operate in a way that focuses on true sustainability for all stakeholders.
The Drivers of FirstRoot’s Mission
FirstRoot’s unique mission of promoting financial literacy aligns with many of the tenets outlined above.
We’re committed to income equality by paying our employees fairly. And while that’s a good start, it’s not enough to form a company mission. A broader interpretation of income inequality is financial inequity. And a root cause of financial inequity is financial illiteracy. Addressing this creates a more sustainable society.
But solving societal problems requires the participation of multiple actors, often with competing interests. As Patagonia notes, we “require an unprecedented level of cooperation and civic engagement.”
This leads to the soul of our approach: participatory budgeting, a process in which a group of students collaborates to determine how to invest a shared budget to improve their school or community.
Participatory budgeting is a rare and magical process. It promotes financial literacy, design thinking, and civics, aligning with the 4 C’s of the 21st-century curriculum: Creativity, Critical Thinking, and Communication. Students experience true agency and stewardship over their futures, learning through their own experiences how money really works.
This creates a lived experience that enables students to venture out and build the better society envisioned by the B-Corp movement.
Do we need B-Corps?
It’s valid to ask whether or not we need B-Corps when there are other options. For example, FirstRoot could have been a nonprofit, or it could have remained a C-Corp with a commitment to the Business Roundtable’s purpose of a corporation as promoting an economy that serves all Americans. 
While both choices have merit, each has significant drawbacks. Nonprofits struggle with funding, especially acquiring the capital needed to expand operations. Becoming a B-Corp allows FirstRoot to continue to raise funding to support our growth. And when the time is right, we will be able to provide a financial return to our investors.
While we could have remained a C-Corp, I wanted to make a formal statement to all of our stakeholders, from parents and students to employees and investors, that FirstRoot is pursuing a higher mission. I wanted them to know what we stand for and why we’re doing it. And I prefer the advantage that being a B-Corp gives us in recruiting the very best talent: value-aligned people who’d rather work for a fintech committed to making the world more equitable instead of the traditional banking and financial community who prey and profit from the financially illiterate.
We’re here to make the world just a bit better. And now, back to it.
References An Entrepreneur’s Guide to Certified B Corporations and Benefit Corporations
https://www.patagonia.com/on/demandware.static/-/Library-Sites-PatagoniaShared/default/dw5c36363e/PDF-US/CBEY_BCORP_Print.pdf The Business Roundtable, https://www.businessroundtable.org/business-roundtable-redefines-the-purpose-of-a-corporation-to-promote-an-economy-that-serves-all-americans