Small Nonprofits are Like Tech Startups

Small nonprofits and tech startups have a lot in common. It sounds like the punchline to a bad joke, doesn’t it? Well, they do – minus the potential to get rich doing it.

The world economy is increasingly dynamic and hostile to businesses and nonprofits that are stagnant. This is due, in large part, to the advancement of technology coming out of the startup world.

Pardon the cliche, but entrepreneurial tech startups see the world as their oyster. You should too, because it is.

You can increase the success of your nonprofit by seeing and embracing the similarities between nonprofits and tech startups. Besides being cool geeks and having a knack for recruiting top talent, startups solve real world problems, are determined, and use processes that you can benefit from. Put on your social entrepreneur hat and let’s consider the two.

Pent Up Demand + Dispersed Supply = Startup or Social Entrepreneur

There are a lot of smart people in the startup world that are looking for problems to solve. They look for pent up demand for a dispersed supply of a product or service. Then they look for a solution to unlock the supply for the pent up demand to purchase.

The two latest and sometimes infamous examples of this tech startup formula are Airbnb and Uber. Uber connects people who want a ride somewhere to people who want money for providing rides. Airbnb connects people who want to rent a place to stay overnight with people who want to rent a place temporarily for extra cash. Both unlock supply for demand by reducing the transaction costs between the two. ()

If you look around you will see many tech companies following this formula. If you happen to look at your nonprofit you will see that you are probably following it as well. You solve a societal problem that has pent up demand and a dispersed supply of problem solvers, aka donors. You reduce the transaction cost between your clients (or cause) and donors.

For example, if you run a food bank, you connect the pent up demand (hungry people in need) with the dispersed supply of donors. Hungry people in need have a hard time finding a supply of good food. Your nonprofit reduces the amount of time, money, and calories they spend finding food; that is how you reduce their transaction costs.

In the same food bank example, you reduce the transaction costs for your dispersed supply of donors. You reduce the time and amount resources they spend finding hungry people. They know they can send in a check or give you food and it will help feed hungry people.

Are you a middleman? Yes. However, you are a valuable middleman that makes both the donors and hungry people better off.

Romance of Mission

When you listen to tech giants like Bill Gates, the late Steve Jobs, and Larry Page they all have a similar message for aspiring startups: “you can make the world a better place.”

When in startup mode, it’s the love of their mission to change the world that gets them through the difficult times. They beat their heads bloody against a wall until they solve the problem, or fail.

Your nonprofit mission has worldwide or community-wide aspirations as well. You strive to make the world a better place.

There’s no doubt that you’ve faced difficult times. Most likely it was your commitment to the mission that kept you banging your head against the wall to provide a solution.

Funding Rounds

Unless the startup has a lot of cash on hand, either saved or in profits, they are usually looking for funding. They look to venture capitalists, angel investors, or incubators for funding to get them through the dip between starting up and turning a profit. Startups face stiff competition to get funding from these sources.

Generally speaking, the startup goes through rounds of funding. They get a dose of capital that lasts them a period of time. When that dose of funding is almost used up, they look for more to keep them going. This cycle happens until they succeed in creating a company or fail.

Your nonprofit has a similar cycle between fundraising campaigns. The main difference between you and the startup, is that your donors give instead of lending or taking equity. You donors truly are angel investors. They invest in your mission and ask only that you strive to make your mission a reality. (See 3 New Ways to Think About Saying Thank You)

The economy is increasingly dynamic and your small nonprofit will benefit from embracing the your startup mentality. Bedsides being a cool geek, it will help you build a more nimble, determined, and successful nonprofit.

Do you think small nonprofits should embrace the idea of being a startup? I'd love to hear what you think in the comments below.

Brian is a Co-Founder, Author, Writer and Lead Content Strategist for Nonprofit FunderLand. His first coauthored eBook, Everyone At Your Nonprofit Is A Fundraiser – Whether They Know It Or Not; Fundraising the Nonprofit FunderLand Way is available on all major eBook retail sites.