Bjelkeman's travel notes

Travels with the cloud in my pocket.

Advice to Y-Combinator non-profit startups – part 2 – Core success factors

This is part of a series of blogs called Advice to Y-Combinator non-profit startups. Of course it has wider application than that. Part 1 was some general advice to get this started

#Akvo RSR developer team meeting at Villa Kakelbont
Part of the Akvo RSR developer team, meeting this autumn

There was a discussion on Hacker News about how to make money on open source software, where I chipped in a bit about how we at Akvo do it. I wrote enough to actually make a coherent blog post out of it.

For quite a long time there has been this idea going around that organisations who create open source software should make money on providing software support. This has proven to not be very lucrative for most businesses that try this and other models have been tried, some of which are described in the above discussion.

We took a somewhat different approach with http://akvo.org

We noticed the really poor use of Internet systems in international development aid. More than $120 Bn is spent yearly on this, and nobody really has a clue where the money goes. There is no useful overview. So we started building tools to fix that and supply them as a paid for service.

Everything we build is open source software. We have 45+ people working on this, with paying partners such as the World Bank, UNICEF, Liberian government, Mars Chocolate and many hundreds more. It is not your ordinary business model, but it works and we are growing. You can make open source software and earn a decent living.

Core success factors

We believe that our success comes out of a few core things:

  • We brought together domain experts as equals, i.e. people working in international development, water and sanitation issues (our starting market), network organisations, computer software and services, computer software marketing and communications, to solve a problem. This is fairly unusual in both the software and the international development industry.
  • We say our team is a three legged stool. Partner team (more about that below), software team and communications team. If we don’t treat all three equally the stool falls over. We go so far that we think it is imperative to not have an organisation run by the tech or the international development side, but by both sides. So we have until know had two directors of the organisation, one from each domain. Working very closely with the comms director.
  • Maybe most importantly though, we have a very experienced partner team. They have worked in this market for decades. They know “everyone”. We literally have connections to thousands of organisations through our networks and we understand how to talk to those organisations. Our partner team know where all the gremlins are and how the processes work. They know how to get the required startup and expansion investments as well as how to get the big organisations to use our tools.

Non-traditional sales and marketing

About the partner team. We don’t consider us having any customers. We treat all of the organisations that work with us as partners. They then treat us as partners too and it completely changes the relationship when you are trying to solve a problem. Of course it helps that we are a non-profit foundation. We are also not-for-loss. We have a functional business model. This is obviously critical.

In a traditional company our partner team would consist of strategic sales people, account managers, project managers, consultants, trainers etc. We have a partner team that fulfils all those roles, but they are a _partner_ team. Sales are not done on a quota, no bonuses are paid (which often drive really crappy sales in a s/w company) etc.

We have no marketing and PR team. We have a communications team. Most of our staff communicate. Everyone is in fact encouraged and empowered to speak for the organisation. The communications team just supports everyone learning how to communicate well. We hardly do any PR. We may need to increase it, but it mostly does itself based on our peoples open communication.

No bespoke development

Some open source product organisations try to supplement their income by doing bespoke development on top of their product. We don’t as we find that this only distracts you from building a good product. Our revenue comes from hosting, training and implementation consulting services, but not technical implementation services, but implementing the tools themselves within the organisation.

We avoid technical implementation services, as most organisations we work with have a really low internal technical knowledge. If we then take the responsibility for implementing the technical side, we find that they don’t take the ownership of the bigger issues. These are things like learning to publish open data and the changes in culture which this implies in the organisation. Then their failure to embrace the change needed in the organisation is projected as our failure to implement the technical side.

We have technical account management, but require for our partners who implement our tools to either have in-house the required technical skills or hire in the required skills. If they don’t do this, take ownership of the bigger issues and hire competent technical project management and help, we don’t do the projects, as they are very likely to fail. This may sound obvious, but often it isn’t to the partners we work with.

I could write a lot more, but we are creating the Akvo Handbook, which will outline all of this, and be available under an open content license. You can read it all there then. But don’t hesitate to ask any specific questions you may have.

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Filed under: Open source, Startup, ,

Advice to Y-Combinator non-profit startups

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.

#wwweek activity in the @Akvo and the @washalliance stand

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.

Not-for-loss

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.

Recruitment

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.

No customers

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.

Open source

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.

Competition

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.

Discoverable communications

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.

Filed under: Open source, Startup