non-profits

So far, these are just notes

There is a lot of nuance to non-profits that many don’t understand. Typically, I see most youth getting involved in non-profits before for-profit as a result of volunteering or extracurriculars.

If you are starting a non-profit, here are the things they don’t tell you:

• People love you at the start. What you are doing is purely altruistic, and people often say they want to support you on this mission. This is, however, not true. Usually they want to feel as if they have contributed to the benevolence themselves—which they have.

  • You need quantifiable results for why what you are doing matters. People won’t bite otherwise.
  • It’s much easier to get social capital than monetary

• Non-profits are expected to be stable, not extravagant.

  Startups are expected to take risks and grow exponentially. They should see what happens by throwing thousands of dollars in marketing. They should talk to customers and pivot constantly with grit. Startup founders are supposed to get filthy rich and buy a yacht at the end.

  In the non-profit world, donors want every single dollar going towards helping the end person. It’s hard to convey the benefit of risks and extravagant spending. Founders are expected to be poor and grinding hard as this is their life’s work, nothing more.

  (Link charity ted talk)

• A lot of your time will be spent on finding money. This job will never really end, and is the most exhausting part of founding a non-profit.

• You can still be wealthy as a non-profit founder, but probably never as wealthy as startup founder.

  • Sal Khan makes 800k a year

• There are lots of financial and organizational models through which to run a non-profit. It is important to consider mixtures of the two.

  • Non-profit first, then for profit (OpenAI, Mozilla)
  • For-profit first, then non-profit (Bill Gates: microsoft → gates foundation)
  • Non-profit has veto power over for-profit
  • Research non-profit (mid journey, stable diffusion, FROs)

• Most successful non-profits begin with virality, however most viral non-profits end up dying.

  • Khan Academy
  • Mozilla
  • InternetActivism
  • EcoYOLO

• Tech non-profits are specifically hard because engineers are expensive, and they will naturally take a pay-cut if working with a non-profit. This can be a good and bad thing. You may not be able to attract great talent. If your organization still becomes successful, then you may get the best talent; Khan Academy is home to great engineers with lucrative pasts (including the first hire at Google) because they no longer care about compensation and are more altruistic.

  • Getting free engineering resources is important:
    • A lot of companies have programs where engineers can get paid to work on non-profit initiatives (Google 20)
    • Leveraging power of open-source is a must

• Secondly, the nature of fundraising for a tech non-profit is backwards compared to regular non profits. - Regular: donations are instantly correlated with value ($50 will feed a child for a year). - Tech: there are upfront costs to building tech which doesn’t have any promised impact until launch. Even then, things could go wrong and it could have all been a waste of money. Generally this can be avoided by using a product-focused startup mindset with constant market and customer research as well as iteration.

• Contrastingly, the potential for tech non-profits is very high. There is high scale, speed, and great dollar efficiency when helping people (see Internet Activism). It is just getting over the initial barriers that is hard.

• It’s worth noting that this is a very difficult road personally. Your peers will be basking in success and financial glory while you work insane ours barely being able to pay yourself. According to YC, every single non-profit founder they accepted has burned out.

• It is foolish to expect exponential scale with non-profits. Sometimes, yes, it is possible, but it is purely a function of available capital which is can’t be counted on as a non-profit. How big would Uber be if they weren’t constantly raising? What about OpenAI? Non-profits have natural incremental progress by nature—but if you are feeling high scale then you must immediately capture capital through it by either:

  • Transitioning to for-profit and finding investors
  • Convincing a rich donor for a large sum
  • Create a paid product to capture revenue

• The reason that capitalism is a good system is that companies must provide value or they die. This maintains focus in startups on value creation. There is an explicit exchange of value (money for product) between the consumer and the company.

  In the non-profit world, it is very easy to do things without truly creating value or helping. Finding the right statistics may convince donors to give more money, but that doesn’t necessarily mean that what you are doing is important or providing value.

  • I think this is called the white mans burden, but I’m thinking of the problem where non-profits are doing something and saying it’s helping but it isn’t truly helping and could just create more problems. Like the toms shoes donation program. Or in my case, safety concerns with TakeShelter.

• Usually, investment in non-profits is a function of the current economy. If you are in a bubble, wealthy individuals will feel charitable and altruistic and be happy to give money to your cause. In a recession, everyone hoards there money.

• This is why it is important to have some sort of product or revenue stream.

  • So there is still some exchange of value occurring which will keep your organization focused
  • So you have a hedge against a recession.

• I heard this wild story about how governments are required to pay non-profits 10% of what they can pay for-profits. Need to confirm this.

• Do you get where I’m going with this? Great non-profits have:

  • Sustainable revenue streams
  • Some sort of value exchange to keep themselves focused
  • Tendencies to take large risks and spend extravagantly for a great reward

• Good non-profits are basically startups! There are just some implementation details that are different:

  • No taxes
  • Easy social capital and trust
  • Harder to raise money
    • Hard to scale and get talent

• Some of my favourite non-profits:

  • Khan Academy
  • Mozilla
  • OpenAI (not fully non-profit anymore)
  • Red Cross
  • Berty

Open questions

• Is it easier or harder to gain trust as a non-profit? Generally, it seems like most of the popular tech non-profits aren’t even referred to as such. When I tell people that Khan Academy is a non-profit, they seem surprised.
  • Maybe it changes overtime: easier at start, doesn’t matter later on.
  • Maybe it matters on person: easier/harder for partner orgs, doesn’t matter for general society.