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I get pitched a lot; the deal flow in the entrepreneurial ecosystem is immense. Considering I play in the social entrepreneurship space, it can also be inspiring.

Great ideas need financing. We always recommend bootstrapping and hitting up friends and family as a start—mainly because we have a distaste for how dilutive many rounds of financing can be for founders—but sometimes outside financing becomes necessary. And so the pitch dance begins. In the last three years we have raised over $22 million for social impact for-profit corporations and have seen the full spectrum of financing offers, term sheets and structures.

Private equity investors at some point want an exit. Typical exits are acquisitions or initial public offerings (IPOs). There are many, many investors who only invest in publicly traded corporations because they want to keep their investments liquid and desire the visibility that comes with this type of investment.

Read: Why Founder-Run Firms Are Best

With the emergence of social entrepreneurship, activists are using for-profit corporations as vehicles for their social impact missions. With social finance still a fairly fledgling industry, social entrepreneurs need to bridge the gap between activism and capitalism, and leverage traditional financial institutions and investors to fund their companies. Social entrepreneurs need to tell a compelling financial ROI story or risk staying unfunded.

Activists have much disdain for the public markets because of the perceived conflict of the stock exchange profit agenda versus their own personal priorities and social impact agendas. My perspective: IPOs are not inherently bad—they give access to capital when no other is likely or possible.

Regardless if you are a mission-based company or traditional for-profit only, be forewarned that going public can potentially kill your company.

Many entrepreneurs are approached by investment bankers to do a reverse takeover (RTO); a listing using a shell company on an existing stock exchange. This is attractive to companies seeking financing because the lead time to going public is quicker than doing a traditional IPO. On paper it gives cash-deprived companies and liquidity-seeking investors what they both desire. What you may not see is that the equity held in the shell may exist because of the failure of another company. Those previous shareholders may want an exit as quickly as possible, especially if the shell is coming to the end of its useful life. If these legacy shareholders want to sell their shares as soon as they are able and your company does not have the buyers to compensate or enough attractive announcements, your stock price will plunge. Along with your dreams.

Read: Financing Strategies for your Startup

Recently, Alterrus Systems, the vertical farming company that produced the Local Garden brand of leafy green vegetables in a greenhouse on top of a parkade in Vancouver, went bankrupt. Alterrus was the first publicly traded B Corporation in Canada. I firmly believe that the company failed because it was a public company. Despite its potential and tremendous benefits to the world, long-time shareholders that had suffered for years with untradeable shares, sold any shares they could at whatever price. No matter how the company performed, the share price would fall. Eventually, new investors (debt and equity) balked at the capital structure and the company could not attract the capital it required to maintain its operations.

The lesson I learned from Alterrus is that in spite of the ability to initially raise capital through a public offering, it is not for every company. It can potentially send your dreams (and those of your shareholders) down the drain with no fighting chance.

Read: Is the B Corp Certification for You?

Joel Bakan, corporate lawyer, professor, and most famously the writer of the influential film The Corporation, spoke recently on how publicly traded companies are actually legally mandated to focus solely on investors and do not have the legal standing to take other stakeholders into consideration. Profit is all that matters.

Lesson learned. Until social finance evolves, there is one standard metric for business: profit.

Darrell Kopke is the founder of institute B, a Vancouver-based accelerator for entrepreneurial businesses that put profit and societal value on equal footing. Formerly general manager (and the sixth employee) 
at lululemon athletica, Kopke currently is part-owner of several growth companies and a board member with The Gratitude AEffect Foundation, a Vancouver-based charity devoted to ending homelessness. He founded iB in 2010.

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