We recently sat down with John Ujda, VP of Marketing and Eddie Porrello, online marketing specialist, of Better World Books (www.betterworldbooks.com) to talk about this social enterprise’s roots, its challenges and future direction.  On the heels of some other discussions on the topic of social entrepreneurship, we also got Eddie and John’s perspectives on the social entrepreneurship movement.  With over 200 employees and expected revenue in fiscal year 2009 of $30 million as well as having contributed over $5.6 million to their non-profit literacy partners, Better World Books appears well on its way to delivering on multiple bottom lines.

The entire interview can be found on Better World Books’ ChubbyBrain company profile on the “Inside Info” tab which can be found here.  Excerpts of the interview with Eddie and John are below as well, but we highly recommend you check out the company’s profile to learn more about Better World Books and to read the entire interview with Eddie and John.

For those that don’t know Better World Books, if you can provide some context and history of the company, what problem it is trying to solve and how it is doing that, that would be helpful.

Eddie: Better World Books is an online bookstore that sells books to raise money for our literacy partners.  We work with tons of public and academic libraries throughout the US and five main literacy partners.  Those are Books for Africa, World Fund, National Center for Family Literacy, Invisible Children and Room to Read.

It was founded by three Notre Dame graduates in South Bend.  After they graduated, they had a ton of college textbooks that they were getting very little money for from the bookstore and they just had them lying around.  So they figured it would be a common problem amongst graduates so they decided to have a book drive at Notre Dame to raise money for the Robinson Learning Center which is in South Bend, Indiana.  They ran this book drive and acquired a ton of books and sold them online through various channels and money from that initial book drive went to providing funding for Robinson.  They then realized that this was a pretty good business model and thought that this could be a way to have an impact and raise money for literacy campaigns throughout the world through book sales.

This was in 2003 when the first book drive happened.  From there, they started scaling it and having book drives on other school campuses.  They eventually got a warehouse in Mishawka, Indiana right next to South Bend.  And the rest is history.

And that brings us today.  We are a pretty large online presence now and we’re doing fairly well and growing rapidly.  And have raised over $5.5 million for non-profit literacy partners.

John:  I’ll just expand on what Eddie said.  After those guys did that first book drive and won the case competition at their school, they were pretty fortunate to connect with an individual named David Murphy who is our current CEO.  David was a judge in that competition and then became an advisor to them and then later left his private equity position to take on the CEO role.  David was instrumental in securing some of their initial debt and some of their venture funding last year for the business.  That fleshes out some of the engines of growth.  It was a great concept that came together with pretty good execution and then introduced a little gray hair to the equation with David.

We in fact had a $4 million round in April 2008 venture capital round led by Good Capital.

In terms of the size of the company today, can you provide a sense for headcount and revenue?

John: We are a little over 200 employees.  It is seasonal and we are in our down season right now as January is peak during the time when textbooks are being purchased.

Our revenues for fiscal 2009 will be in the ballpark of $30 million.

Your growth has been funded by your venture capital funding.  We read an interesting anecdote that your VC wanted to decrease the number of books you were giving away for free.  So given the multiple bottom line that Better World Books has, how do you strike the balance with your investors since you’re not strictly bottom-line oriented?

John: We were pretty fortunate to have linked up with Good Capital as they represent private investors who put their money up wanting to get a good return for their investments, but being willing to not have that be the highest rate of return in the market in exchange for having some good come of it.

And not just a glow of good that says “Aren’t you glad you got a lower return and did some unaccounted for good” but really accountable and measurable benefit.  With Good Capital, we’ve put in place some real social metrics.  One of those is what is the amount of money that is going to our literacy partners, how many books do we actually directly donate and what type of environmental impact do we have.  We measure these things with a high degree of granularity and by partner.  Not just our top 5 partners but about our 80 literacy partners in total.  So we were fortunate to find Good Capital as there mission is in synchronicity with our venture.

Can you give us a sense for those metrics and where they are today?

Latest hard figures are for the end of the calendar year.

We’ve given north of $5.6 million to our non-profit literacy partners.  We have kept 20 million pounds of books out of landfills by either reusing them or recycling them.  We’ve donated 1.2 million books to international destinations with 1.1 million being textbooks that have gone to Africa through our partner, Books for Africa.  And we’ve purchased over 6000 tons of carbon offsets through our carbon offset program through Carbon Fund.  That is an option for every customer who buys a book.

So what have been the challenges in going from 3 guys to a company that is now 200+ in the course of 5 years?  What are the opportunities as well?

Eddie:  As far as the main growing pains, it is scaling it and doing so efficiently.  We have ea great acquisitions team that does a great job acquiring books primarily from universities.  And public and academic libraries from around the country.  In addition to that, making sure that we’re offering a quality service to the customer.  First and foremost, we want to be a quality retailer of books to the consumer.  We don’t want to people feel that they’re giving up quality on the product or customer support side to fund their and our philanthropic mission.  So I guess one of the big challenges is also competing and getting the word out there and staying true to quality customer service and having a quality service while also focusing on our mission - our social and environmental benefits.

John:  Since you’re also looking at this from a historical perspective. One of the interesting ones has been focus.  This is not unique to social enterprise but there have been myriad opportunities along the way and some of the opportunities that have been pursued have been fruitful and some of the others have been distractions.  So keeping the company focused on the mission is one of the big challenges.  We’re probably more focused now than the company has been in years.  Just in terms of driving profitability today.  But no question that this has been one of the challenges.

Where do you see the company going and the next wave of growth coming from?  Does it go deeper with the existing model or does it go beyond books?  You read about folks like Zappos that are going beyond shoes into other areas for instance.  Where do you see Better World going with the model they’ve created?

John: This will clearly come from our current vertical.  Used books is a $2 billion dollar industry a year just in the US so it’s not hard to see that there is a huge amount of upside and so it would be a mistake to get distracted from that mission right now.  That said, never say never.  Years down the road, we could diversify but right now we are not sitting around talking about how are we going to sell CDs next week.  We are talking about how are we going to sell more books.

We are reading the company is elected to be a B Corp?  Could you give some insight into what being a B corp. is about?

Eddie: B corps are a group of corporations that have directly baked into their mission a social or environmental cause.  It is an organization that polices against greenwashing and unsubstantiated claims of being socially or environmentally responsible.  We work with closely with B corp. and actually are a founding B corp.  They periodically review companies and make sure they are producing g a certain level of social and environmental good.  It is essentially a designation that indicates that you have made a commitment to not only your shareholders but to stakeholders, the general public and everyone at large.  And you have that written into your mission and your core business model.  Beyond that, it is an organization forces companies to produce on those fronts as well.

So there is a certification that comes of this?

John: There is.  Actually B corps come out of a non-profit called B-Labs.  And B-Labs actually runs a company through a fairly rigorous process to be accepted as a B corp., and they audit those companies periodically.  B labs is working at the state and federal levels to create a new legal entity which is the B corporation that adheres to these tenets of serving all stakeholders vs. purely serving shareholder.

What are your personal views as to whether the term social entrepreneur become overused and diluted to some extent?

John: I don’t know if it’s overused yet as there are lot of people on the street who’ve not heard the term, but it is a burgeoning movement and more and more people are learning about it.  And that there are sort of hangers-on who are greenwashing or who are trying to call themselves social enterprises because they simply contribute a % of sales.

Mind you, I’m not saying anything bad about companies that give a percentage of sales to a cause.  I love the idea.  But I think there is something more to a social enterprise than simply making charitable contributions.  I think there is something built into the business that is about doing something more for the environment and society in some way.

Eddie: I guess it’s just about aligning the mission and it needs to be baked into the fundamental core of the business vs. something done as an aside.  There is nothing wrong with that as the more money that goes to charitable causes is always a good thing.  But a business that is a social business or social entrepreneur will have that be a focal point or a core part of the business in a way that is different than just a business that has decided to do social good.

So let me brainstorm with you.  If I have a company that sells yoga mats and gives some percentage of revenue or profits to charity, by your litmus test am I social entrepreneur?

John: From my perspective, that equates to a healthy company that is doing something great for society but maybe not at the level of social enterprise.  But if they were sourcing their yoga mats as hand-woven fair trade mats, now you’ve tied in some other aspect that in my mind that elevates the enterprise as now it’s not just about a donation of money but some other social good that is built into their business.  That if they stopped doing that, they wouldn’t be the business that they are.

Any other things that you’d want to highlight about Better World Books?

Eddie: This is general advice for companies looking to do something that is socially entrepreneurial and that is that the mission and the product align so that it makes sense. One of the things that works for us is that we are selling books to promote literacy.  And customers understand it.

I’ve seen things that the tie between the social mission and the actual product is not clear and that could be a stumbling block for someone trying to get into the space.

John:  One other thing we’re pretty excited about is around the quality of our customer service and the level of service we provide.  We actually measure it through Net Promoter Score and our net promoter score is regularly month over month in the mid 90s.  And this almost unheard of.

And obviously, it is not a granular metric.  But it does give a good sense for how excited people are to be using us and people are walking away with a really positive impression of us which is awesome as without them, we cannot fulfill our mission.

So as a result, when you look at your customer acquisition costs, do you see a relationship between your high net promoter score and a lower customer acquisition cost?

John: I think we do but I’m not sure we have it quantified yet.  We clearly know when we spend a dollar what we got out of it, but we haven’t so well quantified what is driving people to purchase who are not coming from a dollar of spend?  We have a lot more customers than we’re spending to get so there is some qualitative evidence to suggest that net promoter has an impact.

We also ask people how they’ve heard of us and heard from a friend is a high score in that survey.

On the marketing front, has BWB grown linearly and quite organically or from the beginning has it been a more explosive growth curve?

Initially, it grew very organically as we didn’t have a web presence in the beginning.  The website has been around for only 2.5 years but the company has been around for 5.5 so initially it was just sales through 3^rd party marketplaces.  Now certainly the 2 years the site has been around, the team whose been promoting it has done a great job getting the word out of it.

In the first 7 months of this year, our own site traffic was up 115% over the first 7 months of the prior year so some huge growth within our own property.  So in a sense, if you look at our own site traffic, there has been a hockey stick there.  But we’re just scratching the surface there.

And any more plans to fundraise?

No plans to raise capital at this time.  WE are funding ourselves form operations.  Luckily the company has been well stewarded in recent history so we can do that in this current environment.  And this is a good thing as I’m not sure if we wanted to raise capital, we’d be able to do that in this environment right now.  We’re in a good position in terms of not wanting or not needing to do that.  We don’t want to dilute where we are at right now.