“In a nonprofit model, you have the freedom to focus on pure impact with no caveats.”
This post was originally published in Forbes on May 23, 2017.
When I first started my organization, CommonLit, a free platform for literacy resources and progress tracking tools for grades 5–12, one of the most important decisions I had to make was whether to incorporate as a nonprofit or a for-profit. Many smart people discouraged me from starting a nonprofit. The established tech startup community seemed to view nonprofit corporations as outmoded and foolish.
In retrospect, I’m glad I ignored these people and trusted my gut. In the end, my goal wasn’t to make money; it was to do good in the world.
For starters, goodwill is an unexpectedly powerful asset. Incorporating as a nonprofit can significantly lower startup costs. Lawyers are expensive, and it costs money to start a business. In the early stages of CommonLit, a pro bono legal clinic helped me write and file our articles of incorporation, set up a board of directors, and file a trademark application. They gave me a comprehensive checklist of everything I needed to do to get my organizational ducks in a row. Using this clinic allowed me to focus my time on actually building and piloting my product, which is where a lot of early-stage entrepreneurs get tripped up.
When my organization was in its nascent stages, fifteen graduate students volunteered their free time to amass a library of educational lessons — something that would have been nearly impossible with a for-profit model. Instead of asking about equity stakes or intellectual property ownership, people asked what they could do to advance our mission of helping teachers in low-income schools. Finding volunteers isn’t too difficult. There are a number of websites like Catchafire that match nonprofit organizations with executive level experts in marketing or design who complete projects completely for free. You can also tap your own network. Have you ever looked on LinkedIn? Basically everyone wants to do skills-based volunteering or join a nonprofit board. Fast Forward even launched a Job Board specifically for jobs, volunteer roles, and board positions in the tech nonprofit sector. Doing good unambiguously opens doors.
There is a clear trend in the job market as well. Increasingly, people want to work for companies that make a difference. The UCLA Higher Education Research Institute reported that 2005 marked a 25-year high in students’ belief that it is “essential or important to help others.” Three years into scaling my tech nonprofit, we’ve been able to lure away some of the best engineers and designers from for-profit companies. The bigger we grow our impact, the easier it has been to attract talent.
The freebies nonprofits can get are extraordinarily valuable, and most companies have offered us a nonprofit discount when we asked. The benefits range from software as a service, to Google Adwords, to discounted copyright permissions from authors and publishers. You can use your nonprofit status to get a Salesforce CRM, or offset your hosting costs with Amazon Web Services credits. Our nonprofit status even enabled us to form a partnership with TextHelp, which provides a game-changing assistive technology toolbar for struggling readers. TextHelp, which has developed the single best accessibility toolbar on the market, even wrote custom code so we could embed it in our site. Put simply, for every dollar we have raised, we have received multiples of that value in the form of free products and services. And it’s only possible because we are a mission-focused nonprofit.
I also receive a ton of incredible advice. I’ve been fortunate in that nearly everyone I meet is willing to help me think about how to move my business forward. Highly-paid engineers at some of the largest tech companies have helped us think through how to migrate our servers to meet increased data needs, financial analysts have built fancy powerpoint models to help us chart our future growth, and experienced lawyers have offered us continuing, pro bono legal advice on student data privacy statutes. Beyond that, I have received more introductions to helpful people in the field than I can count.
In a nonprofit model, you have the freedom to focus on pure impact with no caveats.
When I incorporated CommonLit in 2013, I had two major goals. Number one was to make sure everything we were doing was rigorously backed by best-practices research in literacy instruction. We spent almost a year identifying these best practices, and then aligning our product to them. Number two was to make our tool available to the students who need our product the most — like the students I taught in rural Itta Bena, Mississippi when I taught for Teach For America. That’s why we decided to make our product completely free.
Running the thought experiment where we instead incorporated as a for-profit company, I can’t imagine that I could have accomplished either of these goals. Funders of early stage companies want a return on their investment — that’s why they invest. Investors would likely not have looked kindly on my spending a year aligning to research-based best-practices, and definitely would not have accepted giving the end product away.
So when you’re ready to incorporate your startup, remember to ask yourself what matters for your business — reaching the people who need your product most, or maximizing profits? The advantages of being a nonprofit will likely surprise you.
