How a for-profit partner can spark innovation.
The upside for the for-profit is that it gets an equity share that may pay off down the road.
Just when I think I have heard every new concept for creating additional revenue for associations, an idea comes along that makes everything else seem passé. The Association of Corporate Travel Executives has successfully executed an idea fresh from the for-profit world. ACTE, which formed in 1988, serves more than 30,000 members involved in the business travel industry in 102 countries. Its chief mission is to develop educational programming, products, and services that benefit the global business travel industry. Executive director Ron DiLeo wants to bring good new products to members as quickly as possible. To do it without gambling significant association funds, ACTE partnered with a for-profit company in August 2011 to form what it calls the Angel Investors Lounge.
The joint venture seeks out companies and innovators that have developed ideas to help those in the business travel industry do their jobs more effectively. Good potential candidates for R&D support don’t just have a great product or service; they have good business plans and forecasts, strong management teams, and a large or quickly growing market.
The Angel Investors Lounge is highly selective: So far only three out of 30 applicants have been accepted. Under the program, the selected entrepreneur gives up a percentage of its capital to the joint venture. In exchange, the entrepreneur receives support from the for-profit to become investor-ready, as well as ACTE’s marketing, promotion, and advisory support. This includes having ACTE members on the entrepreneur’s board and in booths at conferences.
ACTE also provides the entrepreneurs with test-marketing sample groups, both online and through focus groups during ACTE meetings. The imprimatur of acceptance by the association is also likely to be of great value in launching and growing a new product.
The upside for the for-profit is that it gets an equity share that may pay off down the road. It also benefits from ACTE’s expertise in identifying the products or services that are most likely to be desirable to business travelers, increasing the likelihood of a successful selection of candidates.
ACTE benefits too from a potential payoff from its share of the equity. In addition, it increases its perceived value among members by bringing an important new tool to the marketplace as quickly as possible. (One product in the pipeline is a translation app that’s handy for international meetings.)
ACTE members benefit at no cost: Their association gets stronger, and they get a helping hand to do business as effectively as possible.
So how did a typically judicious association board convince itself to try something this radical? According to DiLeo, there were several key factors. First was protecting the association by establishing the partnership as a limited liability corporation. Next was having legal advice that the board was comfortable relying on. Finally, by having the profits from the LLC go to the association’s foundation, the board felt it was advancing the association’s mission.
“We wanted to do more than just talk about great ideas,” DiLeo says. “We wanted to bring them to market.” Would it work for you?