And they backed that idea up with an investment model that was based not on future speculation, but on capped dividends (sometimes called Demand Dividends). Once we hit a certain revenue threshold, we start paying a portion of our profits back to our investors, until they’ve all received 5x their initial investment. That solved the “exit” problem, and meant investors can make a solid return without CAN ever being sold. Finally, we’d found a way to raise money that actually reflected our goals and our values.

“CAN is making huge impact by aligning their business model directly with their impact. We are proud of helping structure an investment that will support and grow that in the long-term.” — Derek Razo, Co-Founder & Partner, Purpose Ventures

Their commitment pushed a few more angels to our side, and brought our total investment round to $380,000 — $30,000 more than the goal we started with! But more than the money, we had a financing structure that actually aligned everyone’s incentives: When CAN makes money, our artists make money, our non-profit partners make money, our investors make money, and most importantly, more social-impact artwork is created and distributed. There’s no pressure of an exit looming to distract us from the real work of the business. We’re focused on our artists, our customers, and our impact, not on the hopes of a bigger future deal. And with a 5x return, our investors are still poised to make real money over time, without pressuring us towards unreasonable scale or away from our mission.

With Purpose on board, we still had the daunting task of convincing our previous investors who had signed the convertible note earlier in the round, including CAN artist Crystal and her husband Chris Sacca — well known VCs themselves — and also Matter.vc, who still owned an equity stake in the company and is a real life VC firm — to sign on to this new structure. Lucky for us, they were all enthusiastically supportive of CAN, and of the larger need for alternative financing and ownership models.

“We are excited to be participating in the unique financing and ownership models that Creative Action Network and Purpose developed and we were honored to help Max navigate that unknown territory. We’ve always believed in the power of Creative Action Network to have a positive, scalable impact on society and to build a sustainable business. We’re excited that they’ve cracked the financing and ownership model that not just works for them but for the whole community that has supported them along the way. We believe it makes sense to find the right financing model for startups that have the potential to make an impact and a return but aren’t poised to be the next Google. There are a lot of startups out there like that and this model hopefully is a blueprint for how they can finance themselves going forward.” — Corey Ford, Co-Founder and Managing Director, Matter Ventures.

It was super hard. Getting the eight investors who ultimately said yes still involved about 65 other prospects who all said no. It took 6 months to get the investors committed, and another 6 months to put the legal paperwork together. We rechartered as a Public Benefit Corporation, set up a new ownership structure ensuring power stays in the hands of our artists and community even after the founders leave, and couldn’t be more proud of what we’ve built.