What Nonprofits Can Gain From a Startup Mentality

by Sean Ross

3 min read

Nonprofit organizations may have plenty to learn from for-profit startup companies about thriving in the modern world. Even if NPOs don’t have to chase profits and make pitches to venture capitalists, they still have to build a supportive base and stay on top of new technologies to maximize their effectiveness. If your nonprofit wants to reach as many people as possible, you should consider adopting a startup-like mentality.

Raising Money Like a Startup

Startups, particularly startups in crowded fields such as technology and health care, live in an extremely competitive investor market. The most successful startups tend to be the most skilled at raising money, a skill that every NPO could put to good use. Consider how startups raise money, and then contrast it with how the average NPO operates. Startups ask investors for a very specific amount of money to accomplish a very specific goal. For example, a startup may need $20 million to manufacture its first batch of products and ship them to distributors. Fundraising for startups takes place in highly structured spurts. NPOs, on the other hand, tend to ask for donations constantly. Most donations aren’t tied to specific objectives. They’re loosely associated with vague goals, such as helping the sick. When the use of the funds is less clear in the mind of the donor, donors tend to feel less connected to the mission. To better raise money like a startup, consider asking for set amounts for specific goals, and then deliver progress reports to those who gave money. Thanks to smartphones and social media, such updates are easier than ever. Target your donors strategically and make a professional pitch: who is most likely to give, and why?

Cost-Effectiveness and Other Financial Lessons

Unless you just started your nonprofit, battling the restrictions of a budget isn’t anything new to you. Even so, margins take on less importance in the NPO world than among startups. Most startups have to produce big results, fast, and with limited funding.NPOs need to have the basics covered: bookkeeping and accounting practices, cost-benefit analysis, and revenue focus, even if revenue isn’t the number one consideration.

Experimentation and Constant Improvement

Startups, especially tech startups, are great at experimenting with user experience. Tech-driven data is very responsive and adaptive, and startups can use A/B testing to perform scientific analysis on virtually every action they take.When you experiment on small scales, you quickly, and cost-effectively, learn whether something improves or worsens your progress. Over time, you can aggregate these lessons to dramatically upgrade operations. These are the principles behind the “lean” management revolution and the Kaizen operation philosophy, and they can be applied to the NPO space too.

Examples of Nonprofits That Already Act Like Startups

Some notable NPOs already employ startup practices to great effect.

  • BRAC, a Bangladeshi nonprofit, is a case study in good performance measurements. Its operations reach more than 100 million people in over a dozen countries.
  • Health care fundraiser Watsi boasts helping 12,000 patients in 25 countries and a 22,000-donor strong backing. Watsi designed its fundraising model around tech startups, and once raised $3.5 million in a single financing round.
  • Life Sciences Ontario, a nonprofit focused on understanding and assisting all living organisms, established its strategy in part on the Israeli startup scene’s constant focus on innovation and entrepreneurship.

The unfortunate reality is that a lot of nonprofits fail or don’t go anywhere. The startup sector is a never-ending testing ground for new survive-and-thrive tricks, and a whole lot of NPOs could afford to incorporate some of that creative energy.

References & Resources

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