Why So Many Big Name 2021 IPOs Are Describing Themselves As 'Mission Driven'

In a year when IPOs - venture backed or otherwise - are setting records for funds raised, virtue signaling has become an essential part of the late pandemic marketing lexicon. 

But the reasons for it are based on the demand for money. First, consumer facing companies want consumers, especially Millennials, Gen Xers and Gen Zers, to buy their products and services. Which, data reveal, they will be more inclined to do if they company displays some sustainably-oriented social purpose. Second, that also makes it easier to attract notoriously scarce talent. And thirdly, it attracts investment capital from increasingly important environmental, social and governance (ESG) funds. This year, virtue is more than its own reward. JL 

Corrie Driebusch reports in the Wall Street Journal:

A new generation of startups such as Rent the Runway Inc., Chobani LLC, Warby Parker Inc. and Allbirds Inc., are on tap to go public this fall. They’ll be doing it with this message: It isn’t just about the money. It is also about the mission. In regulatory filings, companies are referring to themselves as “mission-driven,” counting the environment, highlighting their commitments to charity and touting their sustainable methods. A big part of it is still about the money (in) consumers’ pocketbooks and trillions of dollars of investment from environmental, social and governance funds. Many of the companies publicizing their noble ways are consumer-facing and competing for talent

Forget Gordon Gekko. The hottest companies launching IPOs are branding themselves as do-gooders.

A new generation of companies, including startups such as Rent the Runway Inc., Chobani LLC, Warby Parker Inc. and Allbirds Inc., are on tap to go public this fall, people familiar with the matter say. They’ll be doing it with this message: It isn’t just about the money. It is also about the mission.

In regulatory filings, companies are referring to themselves as “mission-driven,” counting the environment among stakeholders, highlighting their commitments to charity and touting their sustainable methods. It is partly a shift in corporate—and employee—values, and partly virtue signaling.

“Thirty years ago, the goal of a company was to serve shareholders. That’s evolved,” said John Chirico, co-head of North American banking, capital markets and advisory at Citigroup Inc. “Everyone is trying to be mission-driven these days. Some companies are founded on that mission. Others have come around to it, and others are not as authentic.”

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A big part of it is still about the money, namely chasing consumers’ pocketbooks and trillions of dollars of potential investment from environmental, social and governance funds.

Sneaker maker Allbirds said in its recent initial-public-offering filing that it had established a new framework for public offerings—a “sustainable public equity offering.” The goal is to create standards for companies going public that claim to be committed to environmental, social and governance, or ESG, issues.

“While many businesses see tension between profit and purpose, we see opportunity,” Allbirds said in its IPO paperwork. “The more sustainable we are, the better we believe our products and business will be.”

The rush of do-gooder companies comes as the broader U.S. IPO market is on a tear, with major stock indexes near records and volatility historically low. Money raised by newly public companies in 2021, including special-purpose acquisition companies, is already the highest on record for any full year, according to Dealogic. Traditional IPOs alone have raised a whopping $105 billion through Monday, just shy of record full-year totals set during the tech boom.

While some late-summer IPOs hit speed bumps, bankers, lawyers and fund managers say they don’t expect those hiccups to discourage companies on deck for fall and winter debuts. After all, the S&P 500 hit its 54th record close for the year last week, and overall IPO performance remains robust. On average, traditional IPOs jumped more than 37% in their first day of trading, the biggest one-day pop for IPOs since 2000, Dealogic data show.

Also among companies on deck: software company Freshworks Inc., targeting a late-September offering at a valuation of roughly $10 billion; and restaurant-software provider Toast Inc., which is seeking a valuation of roughly $20 billion.

Food maker Chobani, best known for its Greek yogurt, is eyeing a late-September IPO at a valuation that could exceed $10 billion, people familiar with the matter said. The company on its website emphasizes that it is committed to “transforming our food system for the betterment of our planet, our people, and our communities,” from “cow comfort” on dairy farms to “responsible manufacturing practices.”

Eyeglass maker Warby Parker touted its commitment to stakeholders—not just shareholders—in its recent regulatory filing, and highlighted its “Buy a Pair, Give a Pair” program that distributes glasses to people in need. The company is eschewing the traditional IPO route and planning a direct listing for later this month.

Roger Federer -backed Swiss running-shoe maker On Holding AG says in its filing it is “committed to positive impact” and outlines how it plans to use 100% recycled polyester and 100% organic natural materials by 2024. The company is set to be one of the first IPOs pitching to investors post-Labor Day and is aiming for a roughly $5 billion valuation, according to a regulatory filing.

When Rent the Runway was founded more than a decade ago, the drumbeat of do-good was softer. At the time, the company’s mission focused more on democratizing fashion than sustainability. Now, the company, which is planning to publicly file for an IPO in the coming weeks, is emphasizing how renting clothes versus buying them is better for the environment, and how it has a small carbon footprint.

It is no coincidence many of the companies publicizing their noble ways are consumer-facing and competing for talent, some lawyers and bankers say.

“It’s the wave of the future,” said Ken Wallach, co-head of the global capital-markets practice at Simpson Thacher & Bartlett LLP. “It’s everything from raising capital from like-minded investors to competition for millennial talent.”

Public-benefit corporations, which have fiduciary duties both to shareholders and social good, used to be few and far between. But Mr. Wallach said boards, which used to worry that being a PBC could impact mergers and acquisitions, are coming around to the structure. He said he knows of roughly a half-dozen coming IPOs that are looking at the legal construct. Allbirds is a public-benefit corporation, as is insurance startup Lemonade Inc., which went public last year. Warby Parker said in a recent regulatory filing it elected to be treated as a PBC under Delaware law earlier this year.

Over the years, many IPOs have boasted charitable or sustainable values in founder’s letters or in pitches to investors and employees. Of course, it doesn’t always last.

When online marketplace Etsy Inc. prepared to go public in 2015, it was one of the first to do so as a so-called B Corp., a seal of approval for environmental and social credentials. Companies are evaluated on their commitment to the environment, community and workers, and they pay an annual fee for the certification. As a B Corp, Etsy had the choice to transition to a public-benefit corporation, or PBC, or let its B Corp status lapse over the next several years. It ultimately chose the latter to maintain its corporate structure