Last year, Blake Mycoskie confronted the one dilemma all entrepreneurs dream of: what to do with a personal windfall. In Mycoskie’s case, the $200 million (after taxes) that arrived after he sold half of his company, the buy-one, give-one shoe retailer Toms, to Bain Capital. He consulted family and friends, intending to find a philanthropic cause that he could embrace and attack, in the manner of other entrepreneurs such as Bill Gates, Marc Benioff, and Sergey Brin. But Mycoskie has always been an unusual businessman, a free spirit sprinting down a path of his own invention. His decision: use $100 million of that money to launch an investment fund that will back, well, companies that want to be like Toms.
Encouraging clones isn’t high on the list of strategies recommended by the world’s finest business minds, especially when, as with Toms, dozens of companies have already mimicked the pioneering idea that once distinguished your brand. When Mycoskie launched Toms a decade ago, the one-for-one approach was radical. “No one was talking about business being a force for good,” recalls Mycoskie. “Nobody was talking about social good, or the triple bottom line, or B Corps.” But now brands from Warby Parker to the Company Store offer customers the feel-good thrills of one-for-one shopping, while a host of other companies are being founded on similar principles. Threatening stuff? Not to Mycoskie. “The moment the model is not really a competitive advantage for Toms is the moment when we’ve won, society-wise,” he says.
So far, privately and through the Toms Social Entrepreneurship Fund, Mycoskie has made 16 investments, ranging from $25,000 to $1 million, in a diverse and ambitious set of companies. Some are tiny, like ArtLifting, a website that sells artwork created by homeless and disabled people. He’s also supporting the petition site Change.org and Rubicon Global, a data-driven garbage hauler that has been called “Uber for trash.” “The diversity is really appealing to my entrepreneur side,” says Mycoskie, who sees his investments as part of a larger “crusade to prove that business can be a force for good.” That effort also involves Mycoskie acting as a consultant and adviser to the companies’ founders, and eventually bringing them together at a convention or conference he’s planning for the fall of 2017.
This vision marks a remarkable turnaround for Mycoskie. Two years ago, Toms had stopped growing for the first time since its founding. Critics, from philanthropists to business pundits, questioned Mycoskie’s leadership: Did his one-for-one approach really help people, or was it yet another example of a capitalist’s fly-by philanthropy? (Mycoskie points out that Toms doesn’t just give away shoes; it funds sight-saving surgeries, helps ensure safe drinking water, and creates jobs in communities including Port-au-Prince, Haiti, home to one of its shoe factories.) And even if Toms did help, critics wondered if the company’s revenue doldrums were a sign of the limits of Mycoskie’s model, or of his ability. At a time when Toms was having more troubles than ever, Mycoskie blithely declared that the company would open a new “one-for-one” business every year.
“I made a lot of the mistakes founders typically make,” he says. “One example: Trying to drive that growth, I put too many butts in too many seats.” Toms started getting weighed down by the kinds of problems Mycoskie associated with traditional corporations: slow decision-making, hierarchy, and infighting. “People would come work for Toms expecting ‘Kumbaya,’ and it would be like Shark Tank,” he says. “It got to the point where I didn’t want to come in myself.”
Finally, Mycoskie realized that to keep the company moving forward, he would need both professional and financial backing. In 2014, he sold 50% of Toms to Bain Capital in a deal that valued the company at $625 million. To many, Bain seemed like a strange partner; after all, it was once headed by Mitt Romney, who was caricatured in the 2012 presidential campaign as the embodiment of corporate greed. But according to Mycoskie, Bain is committed to his social mission; the private equity firm has even put its own money into the investment fund. Just as important, “Bain has helped me really focus,” says Mycoskie. “Where can we win? How can we capitalize on the deep connection we have with our customers?” His first move was stepping down as CEO and appointing Jim Alling, the former chief operating officer of T-Mobile, to the position last April. (Mycoskie is still heavily involved in marketing and product development.) Instead of launching new one-for-one businesses, Toms is now beefing up its core product by expanding its range of shoe styles, and advertising to buttress its already strong word of mouth.
The injection of funds has also prompted Mycoskie to reconsider his company’s mission. “We thought that ‘one for one’ was why we do what we do, but we realized that it is just what we do,” he says. “The ‘why’ of our mission is that we care for one another.” Indeed, now that the old model has been fully appropriated, it’s time for something more expansive: Toms has launched ads that complement the “One for One” logo with a new one, “For One, Another.” It’s a broader slogan, one that matches Mycoskie’s investment ambitions: “I’m going deep on the idea that social entrepreneurship can be the future of business.”