Melbourne social enterprise Who Gives A Crap sold nearly 3 million rolls of toilet paper in 2014/15 and gave half the proceeds to WaterAid Australia, but co-founder Simon Griffiths says the donation would have been less had the startup adopted a non-profit model when it launched two years ago.

Griffiths was still wedded to the non-profit model in 2010, when we travelled to the US to meet potential backers of Who Gives A Crap. However attendance at a social business incubator called The Unreasonable Institute changed his mind.

“I realised that the hybrid model gives you the best of both worlds. Especially when you’re starting out and are unproven, the prospect of at least some financial return widens the universe of people willing to take a punt on you," he says.

The hybrid model also brings an entrpreneurial vigour lacking in the non-profit sector, he believes.

“We’re probably the most over-qualified toilet paper company there has ever been," says Griffiths, an engineering and economics major from the University of Melbourne whose co-founders are Danny Alexander, formerly innovation director for ideo.org and Jehan Ratnatunga, who still works for Youtube in Los Angeles running partnerships strategy.

“If you the shift the incentives, you draw more entrepreneurs into the social impact world and make it easier for them to reinvest in staying there. We’re all rewarded for growing this company - and that means the company ultimately does more good."

Since Griffith sat on a toilet until $50,000 was raised via crowdfunding to get the first rolls manufactured for sale in mid-2013, Who Gives A Crap claims its donations to WaterAid have provided 69,380 people from the developing world with access to a toilet, mostly in East Timor and Papua New Guinea.

Subsequent working capital came from a $50,000 loan from Melbourne philanthropist Mark Cubit. Struck at a “sub-commercial rate given how risky we were at the time", Cubit stipulated that repayments of the loans went to a water charity of his choice - in this case the Tabitha Foundations’ Wells project.

Fast-growing sales from Who Gives A Crap’s home-delivered subscription-based model helped repay that loan by the start of 2015, at which time a “significantly larger" facility was underwritten by Cubit and Melbourne’s Impact Investment Group, a funds manager specialising in social enterprise investment.

Debt is a better working capital solution than equity for a social enterprise, says Griffiths, as it’s allowed the founders to assign shares to its employees (the company has five fulltimers today).

“That’s been helpful, especially in the early days, as a trade-off for lower salaries. One of the great challenges of a social enterprise start-up is that you have to be profitable from day one, otherwise you have no social impact," he says.

“Not too many of those Silicon Valley stars can say they were profitable while growing as fast as we’ve been."

Possible exits for Who Gives A Crap’s founders in the medium-term are sale to another toilet paper company - provided continuity of the charitable giving was guaranteed - or an IPO.

“There’s not been a successful exits from our type of business to learn from, but this model has become more popular so I’m sure there will be plenty over the next five or ten years," Griffiths says.

Who Gives A Crap’s rolls are manufactured in China - the founders regularly visit the factory to ensure ethical and quality standards - and warehoused in five mainland capitals.

“Ship miles produce one-tenth the emissions of truck miles so we try and keep truck miles to a minimum. Plus the dispersed warehousing means if you order before 10am you’ll get your box of toilet paper the next day," Griffiths says.