Business can be the most effective form of activism..
Business can be the most expressive form of art..
But we have never been taught to think about it in this way.
Given the political and socioeconomic trends in the world today, citizens need a flexible and financially durable tool to combat the many problems in the world. The concept of business has been much maligned - and for good reasons. However, we the people, can reclaim business for what it was originally intended for: allowing a group of citizens to band together to achieve a beneficial and socially-relevant goal.
In other words: we can fight business with business.
What is Nonprofit Business?
‘Nonprofit Business’ is a form of social enterprise that gives 100% of its profits to charity. This is both a practical and a thought exercise intended to bake ‘ethics by design’ into a company. You can’t just slap ethics on like a bandaid, long after a company’s inception, and hope that it will make your business ethical.
The easiest way to implement a Nonprofit Business: start with a Foundation holding 100% of the shares of a company. The following clauses are then written into both the company and foundation’s statutes:
- ALL decisions and operations, large and small, should be in service of a well-defined social mission
- No investors (no angel, no VC, no impact, limited subsidies)
- No exits (selling the company / acquisition-mergers / IPO)
- Cap on salaries of staff (including the founders and director)
- Any profits (cash that leaves the company as dividends) must go to a specified Charitable Foundation
- Define a maximum amount of cash the company can have in the bank before profits MUST be given (in the form of dividends) to the Charitable Foundation
- Fair working conditions for staff
- These statutes cannot be changed, to undo these restrictions
- A suitably draconian “default” clause - to prevent intentional breach of contract
Much of what is written here (especially #2 and #3) flies in the face of “common knowledge” in business. With #8 and #9, we are also aiming to harness contract law to ensure that a Nonprofit Business actually remains nonprofit.
Business Education Has It All Wrong
We need to redefine what “success” means in business, because the Silicon Valley narrative (VC, fast growth, scale exponentially, exit) is the root of many problems in business.. and the world.
Both venture capital and "exits" (acquisitions/IPO) are means of maintaining control over innovation, since it robs the entrepreneur of control and puts it in the hands of the large and wealthy. This is extra insidious with "impact investment", since it is corrupting social enterprises. Same thing with “intrapreneurship” - it isn’t the same thing as entrepreneurship. You still have a big company controlling your funding, and ultimately what you can and cannot do. Such things kill the joy and love of working for many people. There's not much inherent motivation in working for large interests, to help them to maintain their position and advantage. It's just maintaining the status quo.
Aspiring entrepreneurs need to understand: the owner calls the shots. Investment and "exits" prevent entrepreneurs from being too wayward. This is why tech hasn’t fulfilled its promise and hasn’t benefitted those at the bottom of the pyramid enough. Especially with Venture Capital, the existing biases of society are reinforced - mid-20s, white, male business. And incubators and MBA programs are educating entrepreneurs to buy into this system.
A Methodology for Nonprofit Ventures
We will now attempt to teach you, the aspiring Nonprofit Entrepreneur, how to do things differently.
Act 1: How to get started
- Make sure that you’re not starved for money when starting. If you are, get a part-time job to earn enough money per month to take the edge off your desperation. It’s hard to build something with patience and integrity when you’re financially desperate.
- Understand that no matter how ambitious you are you need to start TINY and grow organically. Growth must always be financed by turnover! (Customer turnover compounds faster than you think.) Attempting to start anything huge is a recipe for disaster, which will lead to lack-of-turnover, which will actually hold you back from growing. Avoid unnecessary overhead (offices, equipment, internal employees) - you won’t need this at the beginning.
- Setup your legal entities using the Nonprofit Business template. This includes all putting of the suggested restrictions (no investors, no exits, etc..) into the Company and Foundation statutes. This is essential if you want to build a “social enterprise” of TRUE integrity! And remember that ethics has REAL market value!
- When trying to figure out where to start operationally speaking: start with the pain in the market. Ask what kindof service(s) you can offer that companies would be willing to pay for. Then get them to put their money where their mouth is. The hardest part in the beginning is getting your value proposition right. This should take much of your time and energy at this stage.
- As long as the requests are ethical, leverage freelancers (and your own “sweat equity”) to fulfill those service(s), who are paid by your first few launching customers.
- Start out doing everything by hand - give everyone involved concierge treatment.
- The secret is pairing producers (freelancers) with consumers (customers). Make sure that both the producers and consumers are VERY VERY happy, and treated like kings! The key to success is finding arrangements that are win-win-win! (WIN for the Producer, WIN for the Consumer, WIN for the Platform). Business is the fine art of getting interests aligned. Business is NOT a zero-sum-game, where someone wins and someone loses. (If that’s how you experience things, you’re doing it wrong!) You don’t have competitors - you have “potential collaborators”. Keep that in mind.
- “Throw lots of things against the wall, to see what sticks.” - perform lots of experiments (MVPs) and see what works. Expect that some percentage of what you try will fail - and that’s okay. Fail, fail again, fail fast - keep trying again with different MVPs until you find thing(s) that work, and that you can actually sell. Just remember.. what you think a-priori will work probably won’t. Life has a way of surprising you - so put yourself out there (get out of the house!), try things, and listen to the whispers of feedback, synchonicity, and support that the universe is giving you!
- Treat these early jobs as MVPs (ala ‘Lean Startup). Collect validated learning. Pivot as the market requests different things. Remain flexible. And remember that what potential customers say matters less than what they will actually pay for.
- Rely upon word-of-mouth and “evangelism” (conference talks, workshops, media coverage, etc..) for marketing. If what you’re doing is TRULY ethical and valuable, this is the only advertising that you’ll ever need.
- Start to refactor out processes when you see certain manual activities happening frequently. This activity is financed by margin on your turnover.
- Start to automate processes that you see happening frequently, when you have enough volume to justify it. This is financed by margin on your turnover.
- The automation gradually starts to turn into a supporting IT platform / SW product.. over time. When you’re patient, you’ll discover that you’re building an entire platform of code + processes + staff. ALL of this development is financed by margin on your turnover!
- The more infrastructure you have in place, the smoother things will go - and the larger your margin on the turnover will become. This is your nonprofit companies’ engine - it will continue to generate turnover (in a compounding way), as long as you’re providing something of TRUE value, and everyone - both producers and consumers - are happy!
- Focus on quality and stability - NOT on growth! If things are high quality and stable, you will grow without really trying to. And that growth will compound over time.. ESPECIALLY if you’re not really trying.
- Once you have sufficient staff (paid for by turnover from customers), you can delegate more and more of your responsibilities to others, to create room for strategic thinking and creative projects on your side.
- If you’re patient and allow growth to remain organic (and you pivot to stay directed toward pain in the market when you see something not working), then the critical mass of what you’re building will slowly increase over time. The money from paying customers compounds - and one day, you’ll wake up and find that your progress suddenly isn’t so slow anymore! I personally believe that - by architecting things organically in this way, your nonprofit business can even outpace venture funded companies. And over time, you will (slowly) start to see yourself displacing the (less socially inclined) market leaders. :-)
- Don’t even think about exiting. (If you setup your Nonprofit Company right, your statutes SHOULD make it impossible to do this anyways!) If at some point, you are bored of your company, simply delegate more and more of what you’re doing to your support staff until you’re no longer needed, and then decrease your hours (or leave completely) if you want to focus on something else. See this as a good thing. Congratulations.. you’ve built a business of integrity and TRUE positive social value that will live on for a long time after you’re gone. (Both literally and figuratively). Realize, proud of yourself, that this is how we can leave our legacy in this world. And if enough of us do this, and we do it together, we can change the world. Because “startups are the new government”. :-)
Act 2: Do you want to be a “Serial Nonprofit Entrepreneur”?
Here’s the next steps….
- Think about your next steps: what nonprofit passion project can you start, that is a logical extension of your current business? Can you couple that with a commercial service, grounded in the pain of the market? Can you get it launching customers? That will get the ball rolling with your new Nonprofit Business.
- The best thing is - your original company will help to support your new one. That makes things easier. (Important: make sure that your new nonprofit company is good bizdev for the old one. That’s how you can justify their working together.)
- Go through the bootstrapping process again - your old business will continue growing (aided by support staff), and you can spend some of your time and energy bootstrapping the new initiative(s).
- Rinse and repeat! Don’t forget to also take time off when you desire it. Even heros need rest sometimes. :-)
What Kinds of Nonprofit Companies Can We Create?
Here’s a few ideas, that are by no means exhaustive:
- Nonprofit SW Development Consultancy
- Nonprofit Music Streaming
- Nonprofit Carbon Offsetting
- Nonprofit Circular Waste Handling
- Nonprofit Groupon for Tiny SMEs (group buying security testing, or other services)
- Nonprofit Accountacy Firm
- Nonprofit Law Firm
- Nonprofit Childcare Platform
- Nonprofit Vegetarian/Vegan instant supermarket meals
- Nonprofit Incubator and/or Services for Creatives (artists, musicians, etc..)
- Nonprofit Banks
- Nonprofit Insurance
- Nonprofit Company providing a Universal Basic Income (UBI)
This is just a few examples. The possibilities are endless…
Appendix A: Example Statutes
Here are the statutes of Nonprofit Ventures, to use as an example:
Please bear in mind that these are a Work In Progress.
Please also send any questions / comments / criticisms to: firstname.lastname@example.org
Appendix B: Helpful Reading
- The Lean Startup - Eric Ries
- Reinventing Organizations - Frederic Laloux
- Platform Revolution - Geoffrey Parker, Marshall Van Alstyne, Sangeet Choudary
- Building Social Business - Muhammad Yunus
- Winners Take All - Anand Giridharadas
- The Tao of Leadership - John Heider
- Dare to Lead - Brene Brown
- Sacred Economics - Charles Eisenstein
- 4 Hour Work Week - Tim Ferriss
- The Artists Way - Julia Cameron
- TEDx: Start With Why - Simon Sinek
- Why Garbage Men Should Earn More Than Bankers - Rutger Bregman
- TED: A Healthy Economy Should Be Designed To Thrive, Not Grow - Kate Raworth
- Entrepreneneurial Thought Leaders Podcast Series - Stanford University eCorner