Why Robert Downey Jr. and Craig Dubitsky are giving away part of their new coffee company

Hello and welcome to Modern CEO! I’m Stephanie Mehta, CEO and chief content officer of Mansueto Ventures. Each week this newsletter explores inclusive approaches to leadership drawn from conversations with executives and entrepreneurs, and from the pages of Inc. and Fast Company. If you received this newsletter from a friend, you can sign up to get it yourself every Monday morning.

When serial entrepreneur Craig Dubitsky (Hello Products, EOS) was developing Happy, his new coffee company, he says he also wanted to reinvent the relationship between entrepreneurship and philanthropy. Rather than making a one-time gift to a charity or even donating proceeds from every purchase to a nonprofit, he and cofounder Robert Downey Jr. decided to grant an undisclosed equity stake in Happy to the National Alliance on Mental Illness (NAMI), a grassroots organization that helps individuals and families affected by mental health conditions.

“We thought, ‘What can we do that’s relevant culturally and socially, and do it in a way that hopefully is as endearing as it is enduring?’” Dubitsky tells Modern CEO. “This was a big idea around what we like to think of as emotional innovation, which is focused on meaningful human connection.”

Giving back with equity

Dubitsky and Downey join the ranks of hundreds of tech startup founders who have given away part of their companies to philanthropic causes. Pledge 1%, a 10-year-old nonprofit, helps companies and founders donate 1% of their time, products, profits, or equity to social impact initiatives. Of the 18,000 companies that have made a pledge, about 10% have pledged to grant equity in their companies. Organizations that have set aside equity to fund their social impact programs include Airbnb, DocuSign, PagerDuty, and Slack. Pledge 1% says, thanks to equity set asides, more than $2 billion in new philanthropy has been earmarked in recent years.

Pledge 1% has helped make the process more turnkey for founders—it has worked with law firms, for example, to create documents to facilitate equity set asides—and it has created frameworks and talking points to make equity grants more palatable to boards and investors, who may object to dilution of their shares.

A powerful commitment

Jan D’Alessandro, chief legal and philanthropy officer at Pledge 1%, says equity grants are a powerful way of signaling to employees, customers, and partners “that we are a company that cares about giving back.”

For NAMI, being on Happy’s cap table—or list of owners—is just one of the benefits of its partnership with the company. Each container of Happy coffee has a QR code that links to the NAMI website. “While the opportunity of equity revenue is exciting and groundbreaking, I also understand, beyond the financial, the undisputable value of this partnership is the idea that so many people are going to learn for the first time about NAMI and available mental health resources,” says Jessica Edwards, NAMI’s chief development officer.

“The partnership is emotional and authentic, not just transactional.”

Share your own social impact

Are you a founder or CEO who has pledged equity to a cause or for your social impact initiatives? How do you practice “emotional innovation?” Write to me at stephaniemehta@mansueto.com. We may share your insights in a future edition of Modern CEO.

Read more: innovating philanthropy

Robert Downey Jr. wrote about “fast grants” to accelerate climate change research

Why Pledge 1% was Fast Company’s Most Innovative Nonprofit of 2017

How small companies are building philanthropy into their business models

The right way to give it all away, according to one entrepreneur and investor