
YC Will Now Fund Nonprofits Too - pg
http://ycombinator.com/np.html
======
e1ven
It's interesting to compare the differences between the two applications-

For Profit -
[https://gist.github.com/e1ven/6467215](https://gist.github.com/e1ven/6467215)

Non Profit-
[https://gist.github.com/e1ven/6467309](https://gist.github.com/e1ven/6467309)

Overall, it seems like they've replaced 'company' with 'organization', and
dropped a number of questions relating to making money.

Interestingly, many of the questions have been dropped without replacement,
even when I would imagine the answer would be very interesting to YC!

For instance, 'Who are your competitors' has been dropped entirely. Nonprofit
companies can certainly compete with one another.. But they also often compete
with for-profit companies.

Take for example Wikipedia - They're a 501(c)(3) but they've certainly
competed with Encyclopedia Britannica, Grolier, Encarta, etc. It might be
helpful to keep the questions, but to ask them in a modified way. For
instance, "Who is this going to disrupt?"

Similarly they dropped "How do or will you make money?", without replacing it
with "How do you plan to you raise money?"

"How will you get users", and "Was any of your code written by someone who is
not one of your founders?" were also dropped.

They also haven't (yet) added questions relating to non-profits, such as "Why
do you think you will be able to get a 501c(3) classification?"

It's a really interesting idea, and it'll be interesting to see where they
grow with it.

It really reminds me of the first few years of YC where they were making it up
as they went along, before they started the current cycle of continuous
improvements through validated learning.

Watsi was the MVP, now they're ready for Beta ;)

~~~
pg
We don't know yet what will turn out to be the most important questions for
nonprofits, so we just kept the subset of questions that seemed to apply to
any project whether for profit or not.

~~~
001sky
_We don 't know yet what will turn out to be the most important questions for
nonprofits_

Evergreen funding source/s is (arguably) _the_ definition of success, for any
organization, profit or otherwhise, at least empirically. Competition for
scarce resources is thus a key part of the game.

The CEO of MOMA (non-profit) has a salary approaching $2MM/yr. This is
rationally viewed as a sales comission ($2mm/ on $XXmm in fundraising prowess)
by the trustees. There is no other measure of 'productivity' at that order of
magnitude for a "non-profit" organization (10x the statuatory salary of
POTUS). Similarly, at _non-profit_ universities. Both in the administration
and elsewhere (multi-million dollar salaries for NCAA D1 sports linked with
television contracts). Comparably, also the Clinton Foundation, per this
recent note from the NY Times:

 _Worried that the foundation’s operating revenues depend too heavily on Mr.
Clinton’s nonstop fund-raising, the three Clintons are embarking on a drive to
raise an endowment of as much as $250 million, with events already scheduled
in the Hamptons and London._

~~~
_delirium
You accurately describe the trends, but I'm not sure those are positive
trends. _If_ these CEOs of nonprofits were indeed purely sales agents
receiving commissions, fine, it's a rational ROI to employ them in a role like
Vice President of Donor Relations.

But they happen to also be the CEO, formally in charge of the whole operation,
and further tend to set the tone for that operation. Then you have the
fundraising tail wagging the mission dog. As a result, some nonprofits (and
universities) start to look more like weird corporations that exist to
perpetuate themselves and their top staff, with some kind of mumbo jumbo
relating to public service being an official goal but nowhere near the top of
the priority list. An organization that exists primarily to perpetuate itself
and pay its staff well is perfectly fine, but then it doesn't really have any
business claiming to be a charity...

~~~
001sky
Its worth taking a look at samples of the data.

Education:
[http://www.dartblog.com/images/CHE%20Salaries%20Ivies%20Comp...](http://www.dartblog.com/images/CHE%20Salaries%20Ivies%20Comp1.jpg)

ART/culture:
[http://www.nytimes.com/interactive/2010/04/26/arts/salaries....](http://www.nytimes.com/interactive/2010/04/26/arts/salaries.html)

Sports/NCAA:
[http://www.philsteele.com/blogs/2012/Mar12/DBMar15.html](http://www.philsteele.com/blogs/2012/Mar12/DBMar15.html)

Charities/Misc:
[http://www.charitywatch.org/hottopics/Top25.html](http://www.charitywatch.org/hottopics/Top25.html)

______

sample: Robert J. Mazzuca, Past Chief Scout Executive Boy Scouts of America -
N.O. $987,412

------
mikegagnon
I am very excited for this initiative. However, I think there is a mismatch
between venture-funding models and non-profit funding models.

Venture capital economics is premised on founders accepting low initial
salaries based on the hope for long-term big payoffs. Which makes it OK for
seed funding to be very small (on the order of tens of thousands).

However, non-profits have no hope for long-term big pay offs and therefore
have no financial incentive to seek small amounts of seed funding.

In other words, it is sensible for a for-profit startup founder to accept zero
salary (or close to it). However, it is nonsensical for a non-profit startup
founder to accept close-to-zero salary.

I believe the YC non-profit initiative could still be beneficial to non-
profits for the sake of mentorship, networking, etc. But I don't think many
non-profit founders will drop their day-job salaries to launch YC non-profit
startups.

Edit: s/sensical/sensible/g

~~~
wiwillia
It seems like you're implying that these non-profit founders put a lot of
weight in salary as a consideration to whether or not they pursue their
vision. That's something I'd disagree with (though admittedly my opinion off
is based off the folks behind Watsi).

The non-profit startups that are going to fit YC are going to be the ones that
aren't in dire need of a market salary, who don't need the potential of a huge
cash windfall to keep on grinding.

The sacrifices here will be made in the pursuit of 'success' (however you
define that), and the pursuit of watching your organization be large enough to
make a difference (these are also primary motivators of for-profit startups in
my experience).

~~~
tsunamifury
Did you just take 200 words to say "Only wealthy individuals who don't need
money can do this?"

Also in tech, its almost impossible to sell workers on the idea of a options-
based windfall in favor of lower pay -- let alone the vague promise of
'success'.

~~~
rhc2104
You don't have to be wealthy (of course, that helps). Sometimes, people are
willing to forsake money to start a non-profit.

[http://www.coca-
colascholarsfoundation.org/quest/relentlessl...](http://www.coca-
colascholarsfoundation.org/quest/relentlessly-striving-to-give-everyone-a-
fair-chance/#.UiouX2RgZvY)

Samasource's founder was sleeping at a friend's couch for a while, while being
a SAT tutor.

Note: I'm an ex-Samasource employee

------
sethbannon
So proud of YC for doing this. There are so many lessons the nonprofit world
can learn from the world of startups. If YC can help great causes scale
faster, the world will be better for it.

~~~
namenotrequired
In fact, I'm sure there are many things both worlds can learn from each other.
More diversity within the groups will be a good thing by itself, even if just
for the for-profit's sake.

That said I'm also excited about it being non-profits particularly - this way
YC can help solve problems in which there's no money to be made.

------
RKoutnik
This is a great move for YC. They've never been about making ludicrous amounts
of money which is one reason they've been able to be so successful. I loved
that they funded Watsi and agree wholeheartedly that non-profits can benefit
from YC/startup advice in general.

As a side note, I think that we've as a culture have been approaching non-
profits entirely wrong [0]. Instead of letting them build structure to
actually maximise the help they can give, we require them to be stripped-down
organizations so their metrics can show they're giving as much money away as
possible. This is why we've seen such a surge in for-profit-but-that's-not-
the-main-point companies like Tom's Shoes lately. It's simply the best way to
do the most good.

[0]
[http://www.ted.com/talks/dan_pallotta_the_way_we_think_about...](http://www.ted.com/talks/dan_pallotta_the_way_we_think_about_charity_is_dead_wrong.html)

~~~
notahacker
With _donor funded_ nonprofits the "product" is _fulfilling the donors ' wish
to see money spent on X_, so the litmus test for spending the money for donor-
funded organizations should be _if donors knew we were spending on this, would
they change their mind about the donation_. Rational, reasonable people won't
mind some of their donation being spent soliciting further donations, but they
will mind _nearly all_ the money being spent on fundraising activity, to the
point where it's essentially a marketing matrix giving little more than an
"image rights" fee to the good causes.

Profit making companies like Tom's Shoes that see philanthropy as a core brand
value, are a different matter. There's room for more of them irrespective of
how the charitable sector organizes itself.

~~~
dragonwriter
> With donor funded nonprofits the "product" is fulfilling the donors' wish to
> see money spent on X

I disagree. With donor funded nonprofits, the product can be to fulfill the
donors wish to see their money _achieving_ outcome X, not seeing their money
_spent on_ outcome X (it can also be as you present; different donors have
different motives.)

I don't think that necessary challenges your conclusions, but I think it is an
important distinction.

------
jacquesm
I really love the concept of an early stage investor formalizing their
commitment to improving the world by explicitly creating room for non-profits.
Now all we need is a later stage fund to structurally commit follow on
investment to these non-profit start-ups. YC deserves big props for this and
for not just chasing the buck, if not with all their investments at least with
these the mission really is to change the world and for the better at that.

Watsi was an experiment waiting to be repeated, looking forward to see which
non-profits will make it through here.

~~~
jmathai
The Shuttleworth Foundation does this. They provide fellowships that are the
size of an angel or seed round. Primarily for non-profit projects but they do
for-profit as well (in my case).

An amazing group/experience is a big understatement.

[http://shuttleworthfoundation.org/](http://shuttleworthfoundation.org/)

Disclaimer: I'm a 2nd year fellow.

~~~
jacquesm
Maybe you could drop them a hint about partnering with YC for this? That would
be something to watch.

~~~
jmathai
I've chatted with Chase from Watsi. I'd love to get something more
fomalized...

------
lincolnq
YC is really demonstrating thought leadership here.

It would be super exciting if we started to see overlap between Y Combinator
and the effective altruism movement
([http://en.wikipedia.org/wiki/Effective_altruism](http://en.wikipedia.org/wiki/Effective_altruism)),
which is people who are trying to make the world a better place in the most
effective way.

(I do for-profit startups but am also involved in the EA movement. Please
contact me if this is interesting to you.)

------
hosay123
I'd love to apply to this, but most people around me are off having stable
jobs, wives, mortgages, children and other such craziness. Is there much hope
for accepting a solo founder with a non-profit idea?

~~~
pg
We'll probably treat single founders the same as we usually do. We don't
automatically reject single founders, but we have a higher threshold for them.

------
trevorcreech
Hey pg, the date on the apply page
([https://news.ycombinator.com/apply](https://news.ycombinator.com/apply)) is
still from the summer term. Cheers.

~~~
pg
Oops, fixed.

------
marincounty
They need to ask:

1\. At what percentage will your entity spend on administration costs?

2\. Will you agree to keep it to less than 10%, if we give you funds?"

3\. Flat out ask the future non-profit, "How much money do you feel you will
need to run the non-profit. Would you agree to take only what the standard
cost of living in the county you reside--if it succeeds?"

4\. Will your BOD contain any family, friends, or relatives?

5.(Sorry if I sound callous; I live in a county where starting a non-profit is
a career move. Some of the salaries are mind boggling.)

6\. (Note to any future non-profit. I applaud your efforts if they are honest.
Just a reminder--if you ever close down the 501(c)3 you can't keep any assets
--not even a paper clip. Nothing belongs to you. )

~~~
sanj
Though it is tempting to try to capture the entirety of the "efficiency" of a
non-profit with a single number, it isn't really helpful.

In particular, it turns out that "administration" doesn't scale linearly. A 4
person nonprofit still needs their ED to spend ~50% of time fundraising;
there's likely >15% of your salary right there.

Information from folks that have done this for a while:
[http://philanthropy.com/article/3-Major-Charity-Groups-
Ask/1...](http://philanthropy.com/article/3-Major-Charity-Groups-Ask/139881/)

Data, if you want: [http://nonprofitquarterly.org/management/22239-new-study-
low...](http://nonprofitquarterly.org/management/22239-new-study-low-
nonprofit-overhead-does-not-greater-efficiency.html)

~~~
dragonwriter
> Though it is tempting to try to capture the entirety of the "efficiency" of
> a non-profit with a single number, it isn't really helpful.

Even when it would be, "ratio of total spending to administration spending"
probably is almost never the right single number.

~~~
marincounty
Yes--there's no real number on administration costs. Maybe that's the problem?
Just keep giving--we're complicated! I guess I keep giving to the nonprofits
that sound good? The one's that advertise on T.V.?

Any nonprofit founder, should be able to answer a few questions; "How much do
you, the founder expect in salary-- present and future. If we decide to fund
your initial nonprofit, would you agree to work for these amounts?

If you want to make a large salary--start a for-profit business. There's
nothing wrong with wanting to make a good living, but don't hide behind a
nonprofit entity.

Oh yea, Obama is hip the nonprofit dance, but hasn't done anything. A few
years ago, he wanted to separate legitimate nonprofits from just money making
businesses. As far as I know, nothing has been done?

------
clicks
This is a wonderful initiative.

I'm someone who's generally very skeptical about the VC ways of doing things
(difficult to really describe my feelings here, let's just say some just seem
a bit too unapologetically mercenary in my eyes), so this move really sets
apart YC from all the other startup-incubators/VCs.

Watsi is fantastic in every way I can think of. I hope more people are
encouraged to create nonprofit companies to solve some real problems (read:
non-first-world-problems) in a true hackerly fashion.

------
cenhyperion
As someone working for a nonprofit this makes me very happy. The world of a
starting non-profit is surprisingly similar to that of a startup. :)

------
AltruistLLC
The only true difference between a for-profit and a non-profit is the tax
status.

Cosmic level blessings on Paul Graham for doing this. Badly needed. The entire
sector needs catalytic infusions of entrepreneurial energy and expertise.

Only 150 non-profits have grown past $10M in revenue since 1970. North Korea
has better business acumen. Love to see efforts like this.

Thank you Y Combinator!

~~~
philipn
Hmm, $10M/year seems a bit off. This
([http://www.ssireview.org/articles/entry/how_nonprofits_get_r...](http://www.ssireview.org/articles/entry/how_nonprofits_get_really_big))
says the figure is $50M/year in revenue.

~~~
AltruistLLC
Thanks for the correction on that.

------
dylandrop
Does anyone know what the financial motivation of YC to do this is? Is it to
diversify the types of companies they invest in? As much as I love to think
that venture capitalists give money to nonprofits out of the goodness of their
hearts...

~~~
dnautics
because they like to help nonprofits out of the goodness of their hearts, but
sometimes what a nonprofit needs is not just money, but infrastructure and
connections - and here the ycombinator folks have the opportunity to provide
access to those less tangible resources using an organization that doesn't
have to be built from scratch.

~~~
dylandrop
When I said "like to help nonprofits out of the goodness of their hearts" I
was being sarcastic. I'm skeptical that this is just a charitable action. I
was wondering if anyone has any ideas how this might benefit them financially.

I don't want to seem like I think this can only have bad intentions, but
finance people and investors aren't typically known to be charitable.

~~~
cdcarter
> I don't want to seem like I think this can only have bad intentions, but
> finance people and investors aren't typically known to be charitable.

That's incredibly false.

------
robg
Really awesome to see this.

pg - Can you explain your reasoning on a charitable donation to the "startup"?
It seems that if these .orgs are successful one great way to literally pay it
forward is into a separate fund that could grow more .org's.

Program-related investments ([http://www.irs.gov/Charities-&-Non-
Profits/Private-Foundatio...](http://www.irs.gov/Charities-&-Non-
Profits/Private-Foundations/Program-Related-Investments)) from a
ycombinator.org would seem to fulfill both investments in .orgs and
investments in for-profits with a mission.

~~~
ngoel36
Although there's no financial incentive for YC here, the financial cost for
the few non-profits they decide to fund is nominal as well.

YC has the money to fund many more companies than they do. But not the
bandwidth.

Y Combinator is not selling their capital, they're selling their time,
expertise, and network. A separate fund would defeat that purpose.

------
angersock
Aaaaaand now we'll start to see a lot of accelerators throwing non-profits in
with their other companies, because YC did.

I don't think that--in the vast majority of cases--this will be particularly
helpful.

~~~
petercooper
To be fair, most companies accelerators invest in never turn a profit, so
they're already living the dream.

------
Caligula
hi pg, Any update on when you will update your 'startup ideas we'd like to
fund'?

[http://ycombinator.com/ideas.html](http://ycombinator.com/ideas.html)

~~~
unono
That would be a good idea for an android app. I thorough list of hundreds or
thousands of ideas we'd like to fund. Aspiring startups can go through the
list, select which ones they like, max of 5, and submit an application to YC
right then and there. I wonder if PG's thought of doing that.

edit: what's with the downvotes? that's puzzling

~~~
jmduke
Maybe this is oversimplifying things, but I think a startup/prospective
founder for which the current YC application is too time-consuming/difficult
is probably not an ideal one; the application process is a filtering
mechanism, after all.

~~~
unono
There might be a lot of capable founders, such as older people with a lot of
experience in other industries, who are filtered out by that. You might be a
50 year old guy who doesn't get computers but are a killer sales guy, making
it easier to select an idea and proceed might be a good bet for YC. Maybe even
match up that killer sales guy with a young programmer type.

~~~
thedufer
If YC is in the business of matching cofounders, I am unaware of it.

Without that, you're still suggesting that they fund a team that is so
uninspired that they can't spend a little time on the application. YC does not
have unlimited resources with which to filter applicants, so increasing the
number of applicants and decreasing their average quality (an argument that
this wouldn't happen would be interesting if you have one) seems like a lose-
lose situation.

~~~
unono
PG has stated multiple times that they key to success is being relentlessly
resourceful and pivoting. There are a lot of people with that mindset, most of
whom are not Stanford/MIT graduates. Encouraging more applicants from a wider
selection pool might increase the quality of YC batches.

PG is always innovating, I'm sure the current process he's created is not the
global maximum. He might be interested in matching founders, giving initial
ideas, codifying more of his process into apps - anything that might increase
ROI he will try as a rational businessman.

------
louisdorard
According to Eric Ries, "a startup is a human institution designed to create a
new product or service under conditions of extreme uncertainty". "Institution"
is broad enough to include nonprofits, which are explicitly mentioned in the
Lean Startup book. After all, they do face similar challenges to those that
companies face, as they also try to discover new sources of value and to
grow... Looking forward to seeing the future YC nonprofits!

------
studentrob
Great idea! I'd love to see more data-centric nonprofits. The recent This
American Life episode "I was just trying to help" discusses this with
GiveDirectly. GiveDirectly points out that many many nonprofits are soliciting
donations based on anecdotes and are reluctant to produce more data on their
impact. I can only imagine that YC-selected nonprofits (and NGOs? Could this
go global?) will be more data centric than the rest. Good luck!

------
andy_adams
I've been helping a family friend bootstrap her nonprofit, and let me say that
it is darn near the _purest_ form of bootstrapping to start a nonprofit. Not
only did she have no income to start, but she has no expectations of personal
financial gain. She bootstrapped for pure love of her cause.

Funnily enough, in her struggle to get her nonprofit off the ground, I got my
idea for my "startup". Bravo to YC for taking an unorthodox step here.

------
mathattack
Great idea. Non-profits frequently run into two challenges: financing and
scaling. This helps on both fronts. Providing initial seed capital, mentorship
on growth and an audience of rich people (many of whom have committed to
giving part of their legacy towards non-profits) will increasing the
likelihood of their success. If YC takes on 5 non-profits and even 1 scales,
this will be a venture worth doing.

------
antidaily
Nonprofits are notoriously non-technical; run by people who just aren't able
to use tech to advance their cause. So I think this makes sense.

------
soora
I am interested to see how this turns out. The amount of money a person
donates each year is roughly fixed. Each non-profit is competing for a splice
of that donation. So in some ways having multiple non-profits in the same
batch is like funding multiple companies which are direct competitors with
each other.

------
Michael_Murray
Great idea. Think it's a phenomenal idea to apply some of the same mechanisms
for building high growth engines to the charitable space. It's a space that
needs that type of growth.

------
user2
This is a game-changing equalizer for non-profits! Thanks YC.

------
wudf
This is awesome and encouraging. I hope it sets a trend.

------
dannowatts
this is absolutely awesome to hear and can not wait to see how things
progress. a truly great initiative!

------
vishalzone2002
can you apply to both the categories..?

~~~
pg
Not with the same HN account, but if you have two founders you could submit
separate applications under each account.

------
mceoin
Awesome.

------
bpedro
Interesting move by YC as a way of paying less taxes and helping nonprofits at
the same time!

~~~
lincolnq
Um. "Paying less taxes" is unlikely to be a motivator here, because you still
end up with more money if you don't give it away at all :)

~~~
bpedro
I'm not sure I understand your argument. I never said that the motivator was
ending up with more money.

But yes, they will pay less taxes.

So, if their tax rate is 35%, every donated dollar costs them only 65 cents.

------
davidy123
That's a really undeveloped idea of "nonprofits" — "rich people" and
"charities."

~~~
tlb
You could turn that comment into something constructive by proposing some
particular kinds of nonprofits you think we should fund but might not have
thought of.

~~~
calibraxis
You could contact people like these (and many others), and beg them to advise
you, or recommend advisors:

* [http://www.zcommunications.org/zcontacts.htm](http://www.zcommunications.org/zcontacts.htm)

* chomsky@mit.edu

* [http://www.iww.org/contact](http://www.iww.org/contact)

Have you considered looking at groups who've really "disrupted markets" (in
the most literal sense, like sex slave and child labor markets, even markets
in general); break unjust things, and are _real_ risk-takers who risked
poverty/jail/beatings? You know, serious hackers.

------
marincounty
They need to ask:

1\. At what percentage will your entity spend on administration costs?

2\. Will you agree to keep it to less than 10%, if we give you funds?"

3\. Flat out ask the future non-profit, "How much money do you feel

