Y-Combinator is probably the most interesting organisation in the US and EU when it comes to startup funding for digital entrepreneurs. Interestingly enough they have decided to also help non-profit startups. They did an experiment in the last batch with one organisation, Watsi, donation funded healthcare, which apparently turned out well. So Y-Combinator is now taking applications from non-profit teams too as part of their normal application process.
As someone who has been running a successful non-profit digital startup for a number years I thought I’d share some thoughts on some things I think are important to be successful as a non-profit digital startup. Much is the same as running a normal digital startup, so I’ll concentrate on the differences.
First though, for those that don’t know Y-Combinator I’ll let them describe themselves:
In 2005, Y Combinator developed a new model of startup funding. Twice a year we invest a small amount of money ($14-20k + an $80k note) in a large number of startups (most recently 52). The startups move to Silicon Valley for 3 months, during which we work intensively with them to get the company into the best possible shape and refine their pitch to investors. Each cycle culminates in Demo Day, when the startups present to a large audience of investors. But YC doesn’t end on Demo Day. We and the YC alumni network continue to help founders for the life of their company, and beyond.
The Akvo stand at a recent conference, with Peter van der Linde, one of the co-founders of Akvo
Incentives are different
One of the most obvious, and maybe most important, differences with a for-profit company is that you are not doing this to become rich. It may sound obvious, but it changes several important things in an organisation fundamentally.
The people or organisations that invests money in your organisation will still be looking for a return on investment, but often that will return will not be in the form of money. The return can sometimes be hard to define. If you define it well you are well on your way to get investments or grants.
Akvo.org, of which I am a co-founder, has received several million Euros in grants and investments. We haven’t been asked to provide a board seat for any of our investors, neither have any of our investors any shares in the organisation (it is a group of foundations). This means that we have a great deal of autonomy, but it also means that we have to be very careful how we populate our supervisory boards, with a good balance between understanding our business as well as challenging us. This is not that different from a for-profit board, but I’d advice against having only board members with no experience in the non-profit space. Find board members who have crossed over in either direction with experience from both non-profit and for-profit.
Akvo is non-profit, but we are also not-for-loss. In other words: we charge money for the services which we provide, as we think it is fundamentally unhealthy to rely on grants to survive as an organisation. We still take grants, which are mainly investments to build new products or break into new markets. But each product and market is expected to pay for itself in the long run. This has in fact been been critical for our investors decisions to invest or grant us money.
Because it is not primarily about making money and making you or the investors rich you will find recruitment to be quite different as well. The people that come and work with you will be doing this for the passion of the cause, not the money they can make. People have to eat though, so I’d advice you to pay a decent salary. If you do, then your team will passionately stay with you for a long time.
We say that we don’t have any customers, only partner organisations. This may sound like a silly point, but we think it is very important. By always talking about those organisations we work with as partners rather than customers, then we think of them differently. Importantly, our partners also think about us differently. We have a much better relationship with our partners as a result.
We work hard at trying to not duplicate work others have done already. So we use open source software wherever possible, but it is a pragmatic tool, not a religion (i.e. we use GitHub, Disqus etc.). We build all our services as open source software which we run as a service. Most of the services that we operate benefit fundamentally from being run large scale. But our philosophy is that the “door is always open”. If you want to take the software and your data and move somewhere else, you are always welcome to do so. At the same time, the systems are complicated to develop, operate and maintain, and our partners don’t really want to have to do that. They just want to use the systems. As Akvo’s systems gradually are moving into becoming digital governance tools in countries and organisations that use them we fundamentally think it is of critical importance that we supply open source tools. More about that in another blog.
There is definitely competition to our services. However, as we are here to fix a problem, not make money, we are very pragmatic in working together with potential competitors. that see the world like we do. We support each other and try to make sure we don’t overlap in unhealthy ways. We also compete with for-profit companies, which I think is good for both. We keep each other sharp.
Something Mark Charmer, who works with me at Akvo, and I have come up with as a concept to describe how we communicate is: discoverable communications. We work in the emerging digital age, use the tools! Nearly everyone in our 45 strong Akvo team uses blogs, twitter, commit messages, video and more, to communicate. Our communications team is there to support everyone else to communicate well, not to be the gatekeepers of information. As a non-profit your reasons to be secretive are a lot less than for a for-profit. Use this advantage ruthlessly.
Of course there is a lot more that can be said about running a non-profit digital startup and if you think this is useful I’ll write some more.