Ask HN: Is it possible to start a successful tech non-profit?

[_m8fo]

I've been very curious about this.

There seems to be a few categories of non-profits/social enterprise that are heavy in their tech usage that are also relatively large. The goal here is to see if it is possible to make a great social impact and be relatively unaffected by the interests of investors, which presumably will (but not always) be in conflict with the social impact interests.

* Direct Nonprofits: - Wikipedia - Khan Academy

* Nonprofits with for profit Subsidiary - Mozilla Foundation

* For profits with a nonprofit like governance - Craigslist - Kickstarter

I would love to hear your thoughts on more examples to flesh out the above, or perhaps a refutation of my argument that a for-profit organization cannot make a huge social impact through traditional means. (For example, would Wikipedia be as influential today if it were a for-profit? Craigslist a nonprofit?).

I would also love to know if there are any further articles/books/reading on the subject.

[rectang]

The Apache Software Foundation is a 501(c)(3) non-profit corporation.

The budget is tiny: a little over one million USD annually for ~200 projects, or around $5-6k per project. Running an inexpensive operation is key to avoiding being excessively dependent on sponsors.

The ASF is incredibly valuable and there's no question that there are potential sponsors out there would would be willing to give a lot more money in exchange for more direct influence. Being a tax-deductible 501(c)(3) -- as opposed to a 501(c)(6) -- in fact makes it easier to avoid that influence because it is so cumbersome for a 501(c)(3) to receive and spend direct donations without running afoul of the IRS.

The downside is that the ASF doesn't have a zillion dollars to blow on marketing and so people undervalue it.

[wpietri]

Other examples:

* Grameen Foundation USA: http://www.grameenfoundation.org/

* Kiva: http://www.kiva.org/

* Code for America: http://codeforamerica.org/

I've done work for all of those plus Wikipedia and Mozilla; glad to answer questions.

It's definitely possible to start tech non-profits, but there's a big question of how to fund them. Personally, I favor models like Kiva, where revenue is closely tied to actual value delivered because that creates a core feedback loop that helps keep people focused.

The more common model, though, is pursuing grants, which I think is currently inimical to good startup practices. It's a very long, expensive fundraising cycle and the way you get money is by promising to do very specific things. But if you're doing anything really innovative, then those promises shackle you to a plan that is months or years out of date.

[_m8fo]

Thanks for the response I would love to talk to you in more （perhaps extensive, if you're willing) detail. If you see this is there anyway you could email me? Or would you mind if I emailed you?

[mrmondo]

I work for a 'tech' non-profit that I would certainly call successful. We have been around for 25 years and had many technological 'firsts' in Australia including I believe the first search engine and service directory. But have experienced substantial growth over the past 3-4 years and have in many ways become leaders in many areas both what we provide (products/services) and how we provide them (our internal platforms, build pipeline, automation, performance etc...).

Our slogan is 'Technology for Social Justice'

Our annual report is public as we are a registered not-for-profit & charitable organisation. When I started at Infoxchange 3 ½ years ago our financial turnover was around $3M/yr (after 25 years), we are now looking at around $10M. This growth is for a number of reasons but mainly through a mix of technological improvements (paying down tech debt and technical modernisation) and very positive feedback / recognition from clients that have spread us through word of mouth, advocacy groups etc... We're also winning quite a number of awards including this years 'Google Impact Challenge' amongst others.

I do apologise for our awfully dated website which is shortly to be replaced early next month, while it may look like we perhaps do not practise what we preach so to speak I can assure you that it is, by quite some considerable distance the most neglected part of the org and as you can probably guess I'm quite embarrassed of it: https://www.infoxchange.net.au/resources/annual-reports

Around a year ago I gave a brief talk around my/our journey there over the past few years, while a lot of the content was spoken you can find the slides on my blog here: https://smcleod.net/talk-24-months/

If you have any questions I'll do my best to answer them for you.

[nfc]

I'm in the process of bootstrapping a tech company whose goals are "non-profit". The product is finished although in the webpage http://www.alfiv.com the model and description of the product are outdated and incomplete since I've been too busy with the technical development.

I'm thinking about the possibility of looking for investments. It seems that accepting an investment would force me to give up on the kind of things I want my company to do, what are your thoughts about accepting external investments, was your company bootstrapped or it took investors money?

In my case I want the company to give all its profits to other non-profit organisations, so quite a hard sell for a possible investor.

[mlinksva]

Trade associations (501(c)(6) in the US; Eclipse and Linux Foundations are examples) are another category that may or may not fit your schema, roughly nonprofits governed by (usually) for profit stakeholders.

plos.org archive.org and eff.org are additional direct nonprofit (charities, 501(c)(3) in the US) examples. EFF is an advocacy org but they do more interesting tech work than the vast majority of startups.

Another interesting category maybe worth considering are for profits with normal for profit governance but some non-fuzzy public benefit aspect at the core of their business. In the context of tech a free-software-only for-profit like Red Hat maybe.

You probably want to put a finer point on "social impact".

[worldadventurer]

We're another example of a non-profit tech startup: https://www.engageSPARK.com . We're a slightly different model in that while we focus on selling our engagement platform (think "Twilio for non-techies") to non-profit customers globally, we have lots of commercial customers who use our platform for marketing purposes. Having a diversified revenue stream helps greatly with sustainability.

Check out Fast Forward, an accelerator focusing exclusively on non-profit tech startups: https://www.ffwd.org . Y Combinator now also has a track for non-profits - https://www.ycombinator.com/nonprofits/ and for example funded https://watsi.org/ .

Feel free to ask questions. I volunteered at Grameen Foundation and have been exploring this space for a while.

[cdcarter]

Awesome looking product. I'm a non-profit tech consultant, and I definitely will be keeping you guys in mind for a certain type of client. Have you considered Salesforce integration? The donated licenses and the growing NPO ecosystem is causing me to see a lot of orgs moving to SFDC for core database needs.

[_m8fo]

I would love to ask questions, but think I have too many to post as a comment, could I email you (or you email me at [email protected] if you don't want to post your email publicly)?

[nfc]

Does Fast Forward accept applications from non-US organisations?, I couldn't find an answer after skimming their website.

[caseysoftware]

What does "success" in this context mean?

- An entity that drives resources towards solving a particular problem?

- An entity that does the above and is self-sustaining?

- An entity which reduces the size/scope/people impacted by a particular problem?

- An entity which solves the particular problem once and for all? (And then dissolves after, I assume.)

[jeffmould]

I believe that social impact investing is on the rise in the last few years. In particular you have accelerator programs like Tumml for example that are seeing growing success. There is growing trend in social impact for companies to form as Public Benefit Corporations. While there is a bit of skepticism around the basis for forming companies in this manner, I think that many are truly in it to make an impact. From a traditional investor perspective it is tough. The goals are not entirely aligned. Traditional investors expect to make monetary returns, while a social impact investment may not have a huge cash payday, their impact on the other hand could be significant.

For more research you could check out groups like the Case Foundation, Tumml (Julie and Clara that run the accelerator are super nice and I think have a great grasp/direction on social impact investing), Wharton Social Impact Initiative (https://socialimpact.wharton.upenn.edu/) is part of the Wharton School of Business and has done some great research in this area, and while he has not written much about social impact investing even Jason Calacanis has been involved in investing in social impact companies (i.e. HandUp).

[ShakataGaNai]

The last category, specifically Kickstarter is actually a "Public Benefit Company" [1] which is fairly new in most areas and an interesting concept. It's basically "make money but do good things" legalized. Sounds like what you're talking about.

[1] https://en.wikipedia.org/wiki/Public-benefit_corporation#Uni...

[daniel-levin]

Yes, I say so by way of example: Sama Group [1]. They run several non-profit businesses.

>> Established in 2008, Samasource is a non-profit business that connects marginalized women and youth to dignified work via the Internet

>> Launched in 2012, Samahope is the first crowdfunding platform for medical treatments.

>> Samaschool (previously SamaUSA) prepares people for success in the digital economy.

[1] http://samagroup.co/

[anuj_nm]

Change Heroes isn't a non-profit, but a technology social enterprise for sure. We help charities fundraise better through video outreach + microgifts. So far we've helped fundraise over $2.86m, and we're just getting started.

Our charity partners love us since we give them an immediate ROI that's way better than traditional channels. Our users love us since we help them create real world impact that they can be immensely proud of.

Our team is made of devs, designers, PMs and non-profit veterans. I'd feel incomplete if I didn't shamelessly mention that we're hiring: https://boards.greenhouse.io/changeheroes/jobs/125117

[anton_tarasenko]

It's better to start with a problem and understand how to address it. For-profit companies would be an optimal solution for most human problems. Strong funding and control over business leave you with more resources.

If only non-profits work with your problem, then ask them what tech solutions they need. In some cases, they don't need technology at all, but rather funding or government support.

I would avoid "feeling good" non-profits that spend grands on noble but futile activities. Most useful solutions are those that people buy, instead of getting for free.

I'd be glad to point at non-profits in the area you're interested in.

[worldadventurer]

A non-profit doesn't necessarily mean that they give stuff away for free. A non-profit can (and there are many that do, for example, ours - https://www.engageSPARK.com ) sell stuff to customers to generate revenue and have profits. The difference is that instead of shareholders extracting the profits, all profits are used to have more impact.

Hospitals, universities, credit unions, financial companies (e.g,. Vanguard), and insurance companies (e.g,. Blue Cross and Blue Shield) are often revenue-generating non-profits or mutual companies (where all profits are shared by the customers).

As @oneJob points out in another comment here - All that "non-profit" means is, from Wikipedia, : "A non-profit organization is an organization that uses its surplus revenues to further achieve its purpose or mission, rather than distributing its surplus income to the organization's shareholders (or equivalents) as profit or dividends."

[sharp11]

This is a huge and growing space. Random NYT article from today: http://www.nytimes.com/2015/11/20/business/dealbook/buffetts...

Check out B-Corps (For benefit corporations). Read Amory Lovins' Natural Capitalism.

[drallison]

Take a look at Benetech (http://www.benetech.org) in Palo Alto. They have been at it since 1989. The CEO, Jim Fruchterman, is approachable and helpful. Their Wikipedia page is also worth reading: https://en.wikipedia.org/wiki/Benetech.

[LyndsySimon]

I was the first dev hire at the Center for Open Science, and only recently moved to a for-profit startup. COS has been quite successful, and I expect it to continue to be so for the foreseeable future.

http://cos.io/

I'll ping their cofounders, I'm sure one of them will jump in to answer questions if you'd like.

[jeffspies]

Thanks, Lyndsy. I'd be happy to answer any questions.

[corysama]

There is also Kickstarter - a Public Benefit Corporation

https://www.kickstarter.com/blog/kickstarter-is-now-a-benefi...

https://www.kickstarter.com/charter

[huac]

Maybe http://www.bayesimpact.org/ (one of the nonprofits supported by YC)

[oneJob]

All that "non-profit" means is, from Wikipedia, :

"A non-profit organization is an organization that uses its surplus revenues to further achieve its purpose or mission, rather than distributing its surplus income to the organization's shareholders (or equivalents) as profit or dividends."

There are plenty of ways to raise capital that allow an organization to abide by such restrictions. A nonprofit is not strictly restricted on who it can hire or what products it can make or services it can offer. So, unless your definition of "successful" requires that you distribute surplus revenues to shareholders, then yes, it is possible to start a successful tech non-profit.

You can pay your employees massive salaries. You can raise massive amounts of debt to fund your expansion. You can employ ruthless business practices.

Many businesses do not distribute capital to shareholders until well after the business has matured, reasoning that the capital is better used growing the business. Meaning, the investors have a long investment horizon. Meaning, their initial smaller amount, often accompanied by additional rounds of funding, was enough to get a successful business going. Capital sources can include endowments, public and private grants, or payment for goods and services.

Personally, I believe that non-profits have gotten a bad wrap. There are some amazing companies out there that do not aim to return money to shareholders, that prioritize their product, their cause, or their customers. I'd highly, highly recommend checking out YouTube videos about Patagonia and it's founder, along these lines. You can even mis-use non-profit status. Many people don't realize that IKEA is a non-profit, and that the profits are extracted from its activities through some tax and legal loopholes.

Typically, the relevant issues are related to the raising of capital. But think about how that often turns out. Many founders raising outside capital lose control of their company or see their share diluted, that is if the company is even successful. And if it is, and they maintain control and their share of ownership, it could be a long time before there is any surplus revenue.

On the flip side, you can start a private company and be help accountable to no one but yourself. You can raise all different sorts of capital. And you can determine what social / environmental impact you make. You pretty much only lose the tax breaks.

So you see, it's really a matter of capital management, not of business management. You can reduce your options for raising capital from the get go, or you can choose to deal with taxes and possibly even make those go away, like GE magically does. But there are no impediments to you delivering a product or service to make the sort of impact you are hoping to make.

[cdcarter]

I'm guessing the GP was specifically referring to the US categorization of non-profits known as a public charity, formed under section 501(c) of the Internal Revenue Code. There are specific limitations of the types of organizations that can or cannot be 501(c)3 (the most common type of non-profit in the US), and there are restrictions on how revenue streams are balanced.

That said, "So, unless your definition of "successful" requires that you distribute surplus revenues to shareholders, then yes, it is possible to start a successful tech non-profit." is very salient and I agree wholeheartedly.