Towards regenerative governance and economic models in scaling a Software-as-a-Service enterprise
About two weeks ago, the entity that I convened, the Restorative Practices Alliance, walked away from $1 million in investment funding from a mission-aligned capital group. There were two reasons that we walked away, the first practical, the second philosophical. By way of context, let me begin by explaining that I am a connection phenomenologist and have spent the past 25 years studying connection and what gets in the way (generally trauma), primarily through the lenses of six disciplines: mindful awareness, applied neurophysiology, social justice, deep nature connection, Indigenous Lifeways, and cultural linguistics. In 2010 I founded Applied Mindfulness, Inc., which is by legal structure a privately-held California Corporation. In 2018, I convened the Restorative Practices Alliance, which is presently operating as a DBA thereof, pending us being able to develop the appropriate legal framework for it to operate autonomously. The Restorative Practices Alliance is, in fact, an ancestral neuro-technology cooperative that operates globally with clients in 40 countries. Our mission is to scale human and planetary flourishing, and to that end we have created a neurodevelopment model, of which I am the principal architect, that we crowdsourced with the help of 5,000 wellness professionals, and have assembled with the on-going mentorship, guidance, and collaboration of over 40 mentors and advisors in 20 disciplines of wellbeing from 18 cultures, with combined experience of more than 1,000 years, 10 of whom are among the acknowledged world’s leading experts in their respective disciplinary areas. The entity is designed to operate as a global public utility, re-enriching the human and ecological commons. Although we use the word organization to describe such an entity, in English the associations with that word are static, and so we find it more appropriate to use the word organism. It is a living, breathing, growing reparative organism. In the parlance of Silicon Valley, which is an hour south of where I live, we would say that it is scaling virally, although that sounds like something a pathogen would do. This is not a pathogen, it is an anti-pathogen, but I’m using the terms of art because they illustrate a deeper problem with our language, and how we conceptualize both growth and success. In Silicon Valley, a software company is successful when it scales like a virus.
One of the problems with this is that the only thing in nature that replicates as quickly as a virus is, well, a virus. And cancer. Neither of these are, in all likelihood, good conceptual models for sustainable growth.
I founded Applied Mindfulness, Inc. in 2010, after directing a 501c3 non-profit organization called The Mind Body Awareness Project for about three years. The Mind Body Awareness Project was founded in 2001 to bring mindfulness and social and emotional learning tools to incarcerated youth. During my tenure, we grew the organization’s budget seven-fold, youth served five-fold, and tripled the size of our instructor body. We convened a nationally-recognized curriculum and research advisory board, and authored an extraordinary curriculum. In 2008 we were one of 8 organizations from a pool of 246 applicants that progressed to final round consideration by the Robert Wood Johnson Foundation, a national foundation, for funding under their LIFP program, which funded innovative model community health projects to bring them to scale. The organization was growing rapidly.
I left because our funding was not sustainable. During my final year, when we did not receive LIFP funding, I had personally written more than 60 grant proposals, and I couldn’t get our work placed firmly on a sustainable financial basis. I thought, and still believe, that we should have been paid to teach these young people. I didn’t think we should have been required to depend on the caprice of philanthropy. I was dismissed by the board because I had proposed that we extend our work, which was very effective, by virtue of the curriculum we had developed, and the quality of our multi-cultural instructor body, into medicine and mental health, where I was confident that we could secure stable contracts based on the value we were providing. The board feared that this movement would divert our focus from serving the most marginalized youth.
I left, founded Applied Mindfulness, Inc., and proceeded to bring our work into medicine and mental health. Our first project was working with a brilliant pediatrician in the Bayview / Hunter’s Point of San Francisco, where she was running the Bayview Child Health Center. Her name, at the time, was Dr. Nadine Burke. We then proceeded to work as consultants for many Bay Area organizations in medicine and mental health, initially training young people, and then those who served them, in a mindfulness-based approach to wellbeing. In 2013 we started being asked to train wellness providers themselves in resilience. For about five years, we conducted hundreds of trainings with many thousands of wellness providers. It is a fact well established in mental health training pedagogy that as the acuity of client distress increases, those providing services to them experience increased stress. This is conceptualized variously as secondary traumatic stress, or vicarious trauma, and often shows up as what is known as compassion fatigue or burnout. In its simplest formulation, if you have an empathic connection with people who are suffering, and your job is to help them, this will impact you. It makes sense. In 2018, when the demand for our services began to exceed our capacity to deliver them, we began to develop educational media. First, we created a film series. Then, when the COVID-19 pandemic arrived, we took the neuro-developmental model we had been assembling, hired a software engineering team, and built an innovative connection phenomenology software platform. This brings us current in our story.
As a consulting firm, we were generally in high demand, and so our revenue was quite stable. For about eight years, I trained clients 10–20 hours per week, and made a sufficient living, in tandem with my wife’s salary, to afford a middle class lifestyle in the Bay Area of California, where a middle-class lifestyle does not have a middle-class price tag. In 2018, when we began to develop film, we began to seek outside growth capital. I was fortunate in several senses, having already established an extensive network, and we were able to rely on Community Development Financial Institutions (CDFIs) for early funding. Banks wouldn’t lend to us. They had no interest in our story, the potential of our work, or the projects we were engaged in. As a now for-profit entity, we couldn’t approach philanthropy. Mostly, I self-financed our projects, bootstrapping them, as it is called. In this manner we produced our first film series, taking on about $50,000 in outside funding (we spent $30,000 in two days filming in 2019, working on our anti-racist films, just to give you some sense of the costs here). Ultimately, our film series came to be comprised of 14 films.
The size of the projects before us made it necessary for me to focus most of my energies on developing the new business, but I had to continue consulting to have the funding required to keep making films. So for about two years I did not draw a salary, and we folded all revenues back into the business. During this time we drew heavily on savings, and leveraged a large line of credit on our condominium. This did not delight my companion. I began meeting with angel investors. At the first such meeting, with an angel investor and film producer, the man asked me two questions about our work, which I answered in the first five minutes. He then launched into a monologue about himself, his accomplishments, the technological breakthrough in the first film he had produced, the awards he’d received therefrom, how it had revolutionized cinema, his many successful investments, crypto-currency, specifically Bitcoin, its philosophical implications, then cannabis, cannabis farming generally, cannabis farming in Africa, then how he had been cheated by a billionaire from Hong Kong regarding cannabis in Africa, which continued uninterrupted for about 30 minutes, until we were paused by a phone call he had to take. He gestured for me to continue sitting, spoke to several people on the phone for a minute, told them a story, put a hand over the mouthpiece and told me that he had to be on the call, but was enjoying our conversation so much that he didn’t want to stop talking, then muted the call, kept the headpiece on his head, and re-commenced his monologue. Since he was wearing headphones, and on another call, I didn’t know if I could talk to him. It made me exceedingly uncomfortable. After the first five minutes of him speaking I had realized that, had he written me a check on the spot, I would have pushed it back across the desk because I never wanted to see him again.
Not all of our meetings with angel investors were this bad, but the formula was pretty much the same. The technology investors didn’t like the social benefit aspects of our work, or understand their logic, because they threatened profits. They wanted fewer humans, more Artificial Intelligence. Less customization, more automation. We finally connected with a set of social impact investors, and I proceeded to have longer and more fruitful discussions. We felt more seen, more understood. We worked extensively on an early funding round with an institutional social impact investor, who I still deeply like and admire, in the lead funding position. We engaged in four successive hourlong conversations with them as they pored over the business plan, pitch deck(s), pro formas, projections. In our ultimate conversation, near its conclusion, their representative enthusiastically asked me to develop a pro forma modeling two business trajectories. “In the first one,” he said, “I’d like to see your vision for how the next year would look if you had $500,000 to work with. In the second, I’d like to see how it would look if you had a million.” At this point, I’d already spent four hours on the phone with him, over the course of four months, and countless hours generating documents, budgets, projections, etc. “Morris,” I said to him. “Let me ask you a question. Are you contemplating investing half a million dollars? Because as far as I know, you’re talking about putting in less than half that. Why are asking me to do this work if you aren’t considering making an investment of that size?”
Ultimately they told me that, based on our revenues (we were pre-market at the time) they couldn’t justify a 250K investment. Meanwhile, our work continued to grow, rapidly, globally, by word of mouth. At this point we were nearing 5,000 customers and subscribers globally. We hadn’t done any advertising, because we didn’t have the budget for it. We had broken even through digital channels, converting our consulting business completely to online revenue, which had increased 250% in the previous five months.
I had, by this point, spent about $500,000 of my own money, $180,000 of which was in a HELOC, and was now holding about $120,000 in business-related debt-from CDFIs, SBA loans, as well as $70,000 in outstanding vendor debt. None of these numbers were large for an early-stage software concern with the potential for impacts that we had, but the sense of pressure I felt was enormous. In January of 2021 (we were already profitable at this point) it became overwhelming and I reached out to my family for help. They graciously stepped in and lent me $20,000, which was enough for me to take a deep breath. I proceeded to then organize a friends and family round of crowdfunding, and began reaching out to friends, family, faculty, advisors, and clients. Within a month we had raised $100,000. At this point, one of our core advisors offered to make an introduction for us, which brings me to the point where this essay begins. He introduced us to a firm specializing in transformational investments in socially-conscious businesses, and myself, our advisor, our Head of Business Development, and their Principal met. I have, in another essay, described the particulars of that meeting, so I won’t re-iterate them here, but I will tell you what became clear to me.
Of capitalists, this gentleman was among the best. He was generous, oriented toward social benefit, clear, efficient, and savvy. And yet, the system in which this is all operating still sucks, literally. It sucks because in order for him to do his job, on behalf of the people whose money he is investing, he still has to try to buy as much of our company as he can, at as low a price as possible, so that he can stick the biggest diameter straw into us, and suck out the most value. Capitalism sucks.
At the end of our meeting, I felt like I’d been to see a proctologist. I don’t take issue with someone wanting to examine the company. The investment they were considering was large. They want to feel around, stick their fingers in things, squeeze, press, etc. I get it. The practical problem for me was that this process itself is de-valuing, and our ability to agree on a valuation–what is what we created actually worth, right now–is itself fundamentally problematic.
The bargain in which we would engage is the age-old bargain. Trade their risk now for bigger loss or reward later. They make a bet on us, and then they want it returned exponentially. The problem for me, at the end of the day, is that what we are building here is for a horizon that is not 90 days out, but seven generations. What we are building is for our grandchildren’s grandchildren’s grandchildren. And I can’t afford to sell them out to a white guy who is already rich, or to anyone for that matter. I can’t let him, or anybody, stick a straw into the lifeblood of the organism we are birthing, and suck.
Yet that is capitalism in distillate form. In its current incarnation, it is always extractive.
When I say that I’m not a capitalist, it isn’t because I’m a Marxist, or a socialist, or because I have some other system in mind. It’s simply because, at the end of the day, capitalism makes the world transactional. It reduces the ineffable to a transaction, and in so doing it sucks the beauty out. I had a conversation with Dee Hock, the Founder Emeritus of VISA, about the difference between a community and a corporation. He asked me what was the difference between the two? I told him I didn’t know. He said, “A community doesn’t monetize all the exchange of value.” Think about it. In community–with our friends, our families–we exchange value all the time. We exchange childcare, dinner, advice, listening…these are all things that have value. We just don’t monetize them. We don’t send our brother a bill after the phonecall that says, Active listening, 45 minutes at $100/hr. = $75. Conceivably we could. This is what, in fact, capitalism does. This is the professionalization of helping. But in a community we don’t do this because it would be insulting. That 45 minutes of listening could be priceless. Turning something into a transaction devalues it. It turns love-making into prostitution.
But this what the wellness industry does. The music industry. The film industry. We turn life, helping, art into an industry, we commodify it, we turn it into a transaction. What capitalism does is to take the beauty of the world, the great treasures of the commons–cultural, spiritual, ecological, imaginative–extract its value and sell it back to us. It turns imaginative play (our birthright) into a video game, and charges us for this. It is not a creator of wealth, but impoverishment. More coin, less Spirit.
There are many people who have thought more deeply and more ably than I about creating a regenerative economy, and how we would have to change our money system to help it concord with, as Charles Eisenstein puts it, the more beautiful world our hearts know is possible. There are different ways to design money, negative interest money, for example, that could support this conceptual shift. I can only speak within the small sphere of my direct experience, and what my heart tells me. But there’s something false in the nature of ownership–the impulse to possess–to own ideas, or land, something deep in the heart of it that’s rotten and untrue.
How can we own an idea? And yet, what is known as ‘intellectual property’ is just this. Property itself, the ownership of land–how is it possible to ‘own’ something that has been here for billions of years? Will be here for billions more? These concepts estrange us from relationship. They enclose, circumscribe, and lock down, taking us out of reciprocity. Regardless of what the title papers say, I will never own land. I can steward it, take care of it, tend it. I could also destroy its regenerative capacities. But in none of these circumstances will I ever in fact own it. At an absolute level, we don’t own anything. Even our bodies themselves are on loan from the Universe.
One of the benefits, and the accountabilities in our work is that it forces us to keep imagining, and designing the future we want to inhabit. How do we create an economic model, in our work, that concords with the kind of Small Band Hunter Gatherer values, grounded in connection, that are the wellspring of human flourishing? How do we establish governance of our organism in alignment with these values?
Ironically, or perhaps expectedly, our current civilization has not developed these structures. There literally does not exist, in American law, a legal structure that maps onto the kind of organization we are building. When Dee Hock founded VISA, he created it as a chaordic alliance. Chaordic is a term he coined- a hybrid of chaos and order, that came from his close observation of living systems, which he explains in the book The Birth of the Chaordic Age. VISA was chartered as a non-stock membership corporation, with a charter that he and a team of advisors and attorneys drafted that shaped the manner in which its members (typically banks) collaborated (i..e, in honoring transactions through an inter-banking system) and could compete (i.e., in issuing cards). There was no precedent for this model, and the legal structure is still so esoteric that I can’t find a living attorney who knows how to draft such a charter. (If you know one, please let me know. We have a job for you. ;) I’ve spoken extensively about this with Dee himself, who is now in his nineties, and has offered to help us (for a fee of course, as perhaps he should. Since it was a non-stock corporation, despite the fact that last year VISA had $18.2 trillion dollars flow through it, its Founder and CEO Emeritus has no equity).
Stepping outside this morning, the Sun rises, the birds sing, the plants freely exchange oxygen with me. They grow fruit, and the birds eat it. None of them have a charter, as far as I can tell, yet all share their gifts. They collaborate, exchange, mutually enrich. They compete–those birds both fighting for that fruit; one of them carries it off. In turn, he will take a little bird dumplet, dropping the seeds back to the ground, and fertilizing the soil. Step out your door, and all around us in the Living World is the playbook of Circular economy, the cliff notes to an ancestral future based in the gift.
Yet here, down in the muck of civilization so-called, it’s a slog to keep the organism moving in a way that doesn’t sell it out, a slog to design the legal structure for a what is, in essence, a trans-national tribe.
Gabriel Kram is a Connection Phenomenologist. He is Founder and CEO of Applied Mindfulness, Inc., Convener of the Restorative Practices Alliance, and Co-Founder of the Academy of Applied Social Medicine. His most recent book, Restorative Practices of Wellbeing: A Compendium of Restorative Practices, is widely available July 12, 2021.
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