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YC Will Now Fund Nonprofits Too

454 points by pg 13y ago

RKoutnik 13y ago
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_charity_is_dead_wrong.html http://www.ted.com/talks/dan_pallotta_the_way_we_think_about...
- icebraining 13y ago
  He was also in an hour-long episode of Econtalk: http://www.econtalk.org/archives/2013/06/pallotta_on_cha.html http://www.econtalk.org/archives/2013/06/pallotta_on_cha.htm...
- notahacker 13y ago
  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 13y ago
    > 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.
trevorcreech 13y ago
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 13y ago
  Oops, fixed.
Caligula 13y ago
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 13y ago
  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 13y ago
    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 13y ago
      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 13y ago
        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.
jacquesm 13y ago
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 13y ago
  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 13y ago
    Maybe you could drop them a hint about partnering with YC for this? That would be something to watch.
    - jmathai 13y ago
      I've chatted with Chase from Watsi. I'd love to get something more fomalized...
  - dnautics 13y ago
    hey, thanks for this. I didn't know about it, but I think I should apply. I would be super appreciative if you could contact me (info under my heading) if you would be able to provide advice or insight into whether or not this is a good idea.
clicks 13y ago
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.
lincolnq 13y ago
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.)
sethbannon 13y ago
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 13y ago
  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.
- victoriap 13y ago
  YC is doing a great job. Helping people who'll help others is an awesome way to change the world to make it a better space.
dannowatts 13y ago
this is absolutely awesome to hear and can not wait to see how things progress. a truly great initiative!
vishalzone2002 13y ago
can you apply to both the categories..?
- jjsz 13y ago
  Support for L3Cs or B-Companies would be great...but investors don't like them too much.
- pg 13y ago
  Not with the same HN account, but if you have two founders you could submit separate applications under each account.
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e1ven 13y ago
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 ;)
- derefr 13y ago
  I'd love to see a question that addresses the nonprofit's goals from an Effective Altruism perspective. Maybe something like: "who are your competitors, and what is their average cost-effectiveness in DALYs[1]? If they aren't very cost-effective, what makes you think your process will be better?" [1] http://www.givewell.org/international/technical/additional/DALY http://www.givewell.org/international/technical/additional/D...
  - sirclueless 13y ago
    I don't like this question. It's akin to asking a startup, "What is your revenue model, and how will you be cash-flow positive?" Eventually every startup will need to answer that question, but asking it too early is more likely to stunt important and creative ideas that don't come with cookie-cutter business models than it is to reveal a winner. Much better to ask open-ended questions that get at the same thing: What's the potential impact of your idea? Why are you going to succeed where others failed? And if the answer is "We're smart and we have these advantages and everyone seems to like what we do" then it may be OK not to have the cost-effectiveness worked out in detail yet.
bpedro 13y ago
Interesting move by YC as a way of paying less taxes and helping nonprofits at the same time!
- lincolnq 13y ago
  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 13y ago
    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 13y ago
That's a really undeveloped idea of "nonprofits" — "rich people" and "charities."
- tlb 13y ago
  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 13y ago
    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.
mathattack 13y ago
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.
robg 13y ago
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-Foundations/Program-Related-Investments http://www.irs.gov/Charities-&-Non-Profits/Private-Foundatio...) from a ycombinator.org would seem to fulfill both investments in .orgs and investments in for-profits with a mission.
- ngoel36 13y ago
  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.
hosay123 13y ago
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 13y ago
  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.
mikegagnon 13y ago
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
- brackin 13y ago
  You shouldn't think of YC as an alternative to work. It's an accelerator, it should just accelerate what you're already doing. It's not the endpoint for a startup or non-profit. If you've already started a non-profit and would continue to either way then this could add a lot of value.
  - mikegagnon 13y ago
    I agree it could add a lot of value. I am skeptical that the financial contribution will be significant.
- sjtgraham 13y ago
  > In other words, it is sensical for a for-profit startup founder to accept zero salary… *sensible
  - mikegagnon 13y ago
    thanks
- rz2k 13y ago
  Having launched a non-profit and accepted close-to-zero salary for well over a year, I can confirm that it is nonsensical.
angersock 13y ago
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.
- jmharvey 13y ago
  I wouldn't be quite so skeptical. For accelerators with a particular focus, their expertise and organization could be just as helpful to nonprofit organizations as to for-profit companies.
- AltruistLLC 13y ago
  Non-profit management consultant, foundation CEO here. Could not disagree (respectfully) more. The social sector badly needs business culture and acumen wherever it can get it. Lack thereof is the #1 choke point on tens of thousands of great ideas.
- petercooper 13y ago
  To be fair, most companies accelerators invest in never turn a profit, so they're already living the dream.
antidaily 13y ago
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.
marincounty 13y ago
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
- deleted 13y ago
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marincounty 13y ago
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. )
- joshdance 13y ago
  "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?" Sometimes (important word, sometimes) admin costs need to go above 10%. You have to spend money to make money. If a business had an opportunity to spend 1 million dollars to make 2 million dollars, they would do it all day. (Taking into account their rate of return etc.) If a nonprofit had the opportunity to spend 1 million dollars to make 2 million, they might not, because they don't want their admin costs getting "too high".
- sanj 13y ago
  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/139881/ http://philanthropy.com/article/3-Major-Charity-Groups-Ask/1... Data, if you want: http://nonprofitquarterly.org/management/22239-new-study-low-nonprofit-overhead-does-not-greater-efficiency.html http://nonprofitquarterly.org/management/22239-new-study-low...
  - dragonwriter 13y ago
user2 13y ago
This is a game-changing equalizer for non-profits! Thanks YC.
wudf 13y ago
This is awesome and encouraging. I hope it sets a trend.
dylandrop 13y ago
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 13y ago
  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 13y ago
    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 13y ago
      > 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.
    - dnautics 13y ago
      I think you're projecting.
- pg 13y ago
  There is no financial benefit to us. And incidentally a lot of venture capitalists do give a lot of money to nonprofits. E.g. http://finance.fortune.cnn.com/2012/04/25/andreessen-horowitz-to-give-half-their-earnings-to-charity/ http://finance.fortune.cnn.com/2012/04/25/andreessen-horowit...
AltruistLLC 13y ago
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!
- deleted 13y ago
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- philipn 13y ago
  Hmm, $10M/year seems a bit off. This (http://www.ssireview.org/articles/entry/how_nonprofits_get_really_big http://www.ssireview.org/articles/entry/how_nonprofits_get_r...) says the figure is $50M/year in revenue.
  - AltruistLLC 13y ago
    Thanks for the correction on that.
cenhyperion 13y ago
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. :)
andy_adams 13y ago
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.
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soora 13y ago
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 13y ago
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.
studentrob 13y ago
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!
dtby 13y ago
Hooray, pg expands his snake-oiled gaze from the merely avaristic to cover the entirety of the narcissistic! What could possibly go wrong? Yes, I know I am hell-banned; yes, it's exactly these kind of comments.
mceoin 13y ago
Awesome.
louisdorard 13y ago
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!

454 points by pg 13y ago

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_charity_is_dead_wrong.html http://www.ted.com/talks/dan_pallotta_the_way_we_think_about...

icebraining 13y ago
He was also in an hour-long episode of Econtalk: http://www.econtalk.org/archives/2013/06/pallotta_on_cha.html http://www.econtalk.org/archives/2013/06/pallotta_on_cha.htm...
notahacker 13y ago
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 13y ago
  > 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.

trevorcreech 13y ago

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 13y ago
Oops, fixed.

Caligula 13y ago

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 13y ago
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 13y ago
  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 13y ago
    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 13y ago
      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.

jacquesm 13y ago

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 13y ago
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 13y ago
  Maybe you could drop them a hint about partnering with YC for this? That would be something to watch.
  - jmathai 13y ago
    I've chatted with Chase from Watsi. I'd love to get something more fomalized...
- dnautics 13y ago
  hey, thanks for this. I didn't know about it, but I think I should apply. I would be super appreciative if you could contact me (info under my heading) if you would be able to provide advice or insight into whether or not this is a good idea.

clicks 13y ago

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.

lincolnq 13y ago

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.)

sethbannon 13y ago

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 13y ago
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.
victoriap 13y ago
YC is doing a great job. Helping people who'll help others is an awesome way to change the world to make it a better space.

dannowatts 13y ago

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

vishalzone2002 13y ago

can you apply to both the categories..?

jjsz 13y ago
Support for L3Cs or B-Companies would be great...but investors don't like them too much.
pg 13y ago
Not with the same HN account, but if you have two founders you could submit separate applications under each account.

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e1ven 13y ago

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 ;)

derefr 13y ago
I'd love to see a question that addresses the nonprofit's goals from an Effective Altruism perspective. Maybe something like: "who are your competitors, and what is their average cost-effectiveness in DALYs[1]? If they aren't very cost-effective, what makes you think your process will be better?" [1] http://www.givewell.org/international/technical/additional/DALY http://www.givewell.org/international/technical/additional/D...
- sirclueless 13y ago
  I don't like this question. It's akin to asking a startup, "What is your revenue model, and how will you be cash-flow positive?" Eventually every startup will need to answer that question, but asking it too early is more likely to stunt important and creative ideas that don't come with cookie-cutter business models than it is to reveal a winner. Much better to ask open-ended questions that get at the same thing: What's the potential impact of your idea? Why are you going to succeed where others failed? And if the answer is "We're smart and we have these advantages and everyone seems to like what we do" then it may be OK not to have the cost-effectiveness worked out in detail yet.

bpedro 13y ago

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

lincolnq 13y ago
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 13y ago
  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 13y ago

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

tlb 13y ago
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 13y ago
  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.

mathattack 13y ago

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.

robg 13y ago

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

ngoel36 13y ago
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.

hosay123 13y ago

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 13y ago
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.

mikegagnon 13y ago

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

brackin 13y ago
You shouldn't think of YC as an alternative to work. It's an accelerator, it should just accelerate what you're already doing. It's not the endpoint for a startup or non-profit. If you've already started a non-profit and would continue to either way then this could add a lot of value.
- mikegagnon 13y ago
  I agree it could add a lot of value. I am skeptical that the financial contribution will be significant.
sjtgraham 13y ago
> In other words, it is sensical for a for-profit startup founder to accept zero salary… *sensible
- mikegagnon 13y ago
  thanks
rz2k 13y ago
Having launched a non-profit and accepted close-to-zero salary for well over a year, I can confirm that it is nonsensical.

angersock 13y ago

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.

jmharvey 13y ago
I wouldn't be quite so skeptical. For accelerators with a particular focus, their expertise and organization could be just as helpful to nonprofit organizations as to for-profit companies.
AltruistLLC 13y ago
Non-profit management consultant, foundation CEO here. Could not disagree (respectfully) more. The social sector badly needs business culture and acumen wherever it can get it. Lack thereof is the #1 choke point on tens of thousands of great ideas.
petercooper 13y ago
To be fair, most companies accelerators invest in never turn a profit, so they're already living the dream.

antidaily 13y ago

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.

marincounty 13y ago

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marincounty 13y ago

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. )

joshdance 13y ago
"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?" Sometimes (important word, sometimes) admin costs need to go above 10%. You have to spend money to make money. If a business had an opportunity to spend 1 million dollars to make 2 million dollars, they would do it all day. (Taking into account their rate of return etc.) If a nonprofit had the opportunity to spend 1 million dollars to make 2 million, they might not, because they don't want their admin costs getting "too high".
sanj 13y ago
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/139881/ http://philanthropy.com/article/3-Major-Charity-Groups-Ask/1... Data, if you want: http://nonprofitquarterly.org/management/22239-new-study-low-nonprofit-overhead-does-not-greater-efficiency.html http://nonprofitquarterly.org/management/22239-new-study-low...
- dragonwriter 13y ago

user2 13y ago

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

wudf 13y ago

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

dylandrop 13y ago

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 13y ago
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 13y ago
  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 13y ago
    > 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.
  - dnautics 13y ago
    I think you're projecting.
pg 13y ago
There is no financial benefit to us. And incidentally a lot of venture capitalists do give a lot of money to nonprofits. E.g. http://finance.fortune.cnn.com/2012/04/25/andreessen-horowitz-to-give-half-their-earnings-to-charity/ http://finance.fortune.cnn.com/2012/04/25/andreessen-horowit...

AltruistLLC 13y ago

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!

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philipn 13y ago
Hmm, $10M/year seems a bit off. This (http://www.ssireview.org/articles/entry/how_nonprofits_get_really_big http://www.ssireview.org/articles/entry/how_nonprofits_get_r...) says the figure is $50M/year in revenue.
- AltruistLLC 13y ago
  Thanks for the correction on that.

cenhyperion 13y ago

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. :)

andy_adams 13y ago

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.

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soora 13y ago

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 13y ago

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.

studentrob 13y ago

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!

dtby 13y ago

Hooray, pg expands his snake-oiled gaze from the merely avaristic to cover the entirety of the narcissistic! What could possibly go wrong? Yes, I know I am hell-banned; yes, it's exactly these kind of comments.

mceoin 13y ago

Awesome.

louisdorard 13y ago

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!