If you are considering whether to create a non-profit or a for-profit, what should matter?
What are the key differences between running a for-profit and a non-profit, in terms of style, enjoyment, and execution?
I caught up with my friend Aaron Hurst who founded the non-profit Taproot Foundation, the world's largest pro-bono marketplace, 14 years ago, then turned around and created the for-profit Imperative, which aims to nurture purpose-driven workers, on the key similarities and differences between the two, and what founders should think about when making their choice.
1) What are the big differences between running non-profit and for profit?
"I think one of the things that is very important in non-profits is community building. Early on, you want to get everyone you know of value involved early on. Whereas with a business, you are looking for strategic people but you are much more selective about who you approach. It's not grassroots."
2) What is the key to building a strong non-profit versus a for-profit?
"The key to building a strong non-profit is creating a powerful board of directors; they are really your salespeople out in the world. With a startup, it is a much smaller role, primarily strategic and focused on governance. To illustrate, a typical non-profit board has 15 people, and a typical startup board is 5."
3) Do you attract different types of talent to a for-profit versus a non-profit?
"The talent you are able to attract is very different. For a non-profit, you are able to do more with less money, because of mission orientation. But with startups, you can give upside so you sometimes attract a higher caliber of talent in the leadership."
4) Which do you enjoy more and why?
"I like different things. With the business side, it's easier to think of how to scale it, and I enjoy the shared sense of ownership. I also enjoy that startups have exits, so there is a defined endpoint, whereas non-profits are endless. But with non-profits, I love the board and working with people who are volunteering their time and energy into its success."
"I really enjoy the lack of red tape in a startup versus a non-profit, it's just incredibly refreshing."
5) How do you incorporate the best aspects of a non-profit into a for-profit startup?
"The most successful startups I see begin with a core change they want to make in the world, and profits come second. This is a key part of non-profits. The second is to build key stakeholders in your success.
"Ultimately, with a startup just like a non-profit, people need to feel like they are making an impact. The primary payment is in purpose, not money."