Making a Do-Gooder's Business Model Work

The Entrepreneur: Blake Mycoskie, 32

Background: A self-described serial entrepreneur and inveterate traveler, Mycoskie's ventures have ranged from a laundry service for college students to a reality-TV network. In 2001 he was a contestant on the CBS (CBS) television show The Amazing Race (he finished third). In January 2006, Mycoskie traveled to Argentina to learn how to play polo, practice tango, and do some community service work. While there, he was struck by the country's health and poverty problems and discovered that numerous children did not have proper footwear. Soon after, he came up with the idea to create a shoe for the U.S. market based on the traditional Argentine alpargata—a slip-on in lightweight fabrics and vibrant colors and prints. He envisioned a company that operated in a way that helped others while offering something unique for the consumer.

The Company: In May 2006, Mycoskie launched TOMS Shoes in Venice, Calif., with $300,000 of his own money. Retailers such as Bloomingdale's, Nordstrom's, and Urban Outfitters embraced Mycoskie's version of the shoe, and TOMS sold 10,000 pairs during its first year in business. Since its launch, Mycoskie has donated over 115,000 shoes to children in need around the world through a series of "Shoe Drop" tours. The recipient of the People's Design Award from the Cooper-Hewitt National Design Museum and the Smithsonian Institution, TOMS has expanded to include a line of t-shirts, hats, and infant onesies. It now has 45 full-time employees.

Revenues: Estimated $4.6 million since its launch

His Story: "The idea to start TOMS Shoes came during a trip to Argentina back in 2006. I had been successful starting five strictly for-profit businesses, but I was ready to do something more meaningful. I always knew I wanted to help others; it was just a matter of finding the right way to do so. I had the capital. Now, it was time to do something that wasn't just for profit.

"Of course, the timing was also perfect for the American consumer, too. With the rise of social and eco-consciousness and the economy in a downturn, people were looking for innovative and affordable ways to make the world a better place. Since I did not have professional experience in the shoe industry, I had to learn quickly. I met with shoemakers and vendors in Argentina to learn the tricks of the trade and establish a business.

"TOMS is different from the other companies I have started: It combines my love of entrepreneurship and my desire to help others. When I was a student at Southern Methodist University in 1998, I met entrepreneur Bob Dedman, the man behind ClubCorp. He was a self-made billionaire who was also incredibly philanthropic. He gave away $200 million. At the time, I had just started my laundry business and I asked him for a piece of business advice. He told me: 'The more you give, the more you live.' I have always kept Bob's advice in the back of my mind.

"At first all I wanted to do with my new business was to be able to give kids in Argentina shoes. I didn't want to start a charity. I wanted to self-fund the venture. So I came up with the buy-one-give-one-away model. I based it on the idea that if I could sell a pair of shoes for $40, I could make a good pair of shoes and give another pair away. I wanted to build it in a way that it could sustain itself.

"My thinking was that TOMS would show that entrepreneurs no longer had to choose between earning money or making a difference in the world. I wanted to prove that conscious capitalism is a viable business model for innovators worldwide, and entrepreneurs can focus on being ambassadors of humanity. By the beginning of 2007 we had orders from all over the world—and I had a real business that supported itself.

"In our first year in business we were able to make good on a promise I had made to the children of Los Piletones, Argentina, when I first visited in January 2006. With the original intention of bringing back 200 pairs of shoes, I returned to Argentina with 10,000 pairs to match the purchases of caring customers. Many of these same customers expressed the desire to join TOMS on our giveaway trips. Now, through a new bi-monthly program we set up, they can hand-deliver shoes to children in Argentina and see their impact in person.

"About a year and a half ago, I was giving a speech in Northern California, and a woman came up to me. She told me about this disease in Ethiopia called podoconiosis, a form of elephantiasis. People were getting it through the soil and being ostracized from their communities. The disease causes disfigurement and ulcers in the lower legs—but it is 100% preventable by wearing shoes. The pictures she showed me were so horrible I couldn't believe it was that bad. Within about eight months after that meeting, I did research and went on a trip to Ethiopia. I saw thousands who had this disease. Five months after returning, I had a plan to launch a shoe drop there. This past holiday season, we provided 37,000 Ethiopian children with shoes that will keep them from contracting this disease. I saw firsthand that conscious capitalism isn't just an idea—the results are real. Our efforts are ongoing. Last year, I pledged to give 100,000 pairs of shoes to children in Haiti through the Clinton Global Initiative.

"Ultimately, it is our customers who drive our success. In fact, many of our customers become something more: 85% of our employees and interns were customers first. Without their dedication, our one-for-one model would not be possible. This fall, we launched the first intern tour. Each team of interns traveled to high schools and colleges across the country and hosted TOMS events to encourage students to make a positive change in the world. Many of these interns stay with our company and become passionate, hard-working, full-time employees.

"When you buy shoes, you can now make a conscious decision to give back or not. To repeat Dedman's advice, when you give more, you live more. Take my word for it: you won't ever look back."

—edited by Stacy Perman

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