In Running Like A Startup, Nonprofits Find Success

When Y-Combinator included a nonprofit in its 2013 batch of startups, it was a first for the accelerator. The hypothesis was that many newly funded nonprofits could benefit from the same techniques it used to help startups.

Since then, Mountain View, Calif.-based Y-Combinator has funded 25 nonprofit startups in diverse spaces including global health, poverty alleviation, democracy, and philanthropy itself. Nonprofits get $100,000 of no-equity funding (in the form of a grant) and go through the standard YC program, participating side by side with for-profits. The accelerator helps founders focus on growing a key metric “and on making something people want.”

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The program has even attracted nonprofits that have been around for decades. In 2017, the  97-year-old American Civil Liberties Union (ACLU) made headlines when it participated in Y-Combinator’s program in an effort to more efficiently handle its recent quadrupling of members.

In general, as more investment firms look toward impact investing, we thought it would be interesting to hear directly from some of the nonprofit organizations that have participated in Y-Combinator’s program. All would recommend it to other nonprofits, and each got something unique yet similar from the experience.

Here’s what they had to say.

80,000 HOURS

The most effective way to grow is to improve the product

80,000 Hours provides career advice for young people who want to have a social impact.

Co-founders Benjamin Todd and Will MacAskill founded 80,000 Hours in 2011 while students at Oxford University. MacAskill—now a professor at Oxford—had co-founded Giving What We Can, a charity evaluator that has raised over $400 million in pledged donations to effective charities.

The nonprofit, which ultimately moved its headquarters to Berkeley, Calif., has developed an online career guide, as well as supporting tools and advice. It also offers workshops and links to a global community of others also seeking high-impact careers.

80,000 Hours went through the YC program in the summer of 2015. It had applied once before but was rejected because its “idea wasn’t clear enough,” according to Todd.

For Todd, the experience of going through the program and getting feedback from partners was far different from reading advice online.

“It really helped us start applying ideas to our own organization,” he said.

For one, it took to heart YC’s notion of not hiring too much early on.

“I think many people find that, contrary to other advice they’ve heard, hiring should be one of the first priorities,” Todd said. “But they pointed out the most effective way to grow is to improve the product and answer the big questions of how your organization works. The premise is that hiring slows you down because you’re focusing more on managing people than answering key questions.”

YC also encourages its cohorts to focus on one key metric and growing it every week. At first, 80,000 Hours was focused on growing its newsletter subscribers with the goal of surveying them later. But it ended up focusing on what Todd describes as measuring significant plan change —or someone switching from one career path to another because of the nonprofit.

“We’ve probably grown ten-fold since then,” Todd said. “We’ve seen 1400 plan changes over the last 12 months and 3,000 over our whole history. Back in 2014, before we participated in the YC program, we had just 75.”

80,000 Hours biggest donor thus far has been the Open Philanthropy Project, but it hasn’t really attracted donors as a result of its YC connection. However, the name has helped when hiring.

In general, Todd believes the YC program is less useful for a nonprofit who does advocacy or research.

“It’s better for an organization with some kind of a product or user,” he said. “A bunch of the advice and general mindset is really useful. And I’ve heard of their help on the tech side of things really helping other groups cut their costs quite dramatically.”

New Story Charity

We believe how nonprofits think, their culture, and how they solve problems and use technology shouldn’t be different because you’re a nonprofit

New Story builds homes and communities of homes in the developing world, specifically in Haiti and El Salvador. The San Francisco-based nonprofit will build a 300-home community and charge $6,000 per home. Families pay a no-interest mortgage that goes into a community fund to pay for other initiatives in the community, such as another home for another family.

“It’s a kind of pay-it-forward program,” said CEO Brett Hagler.

The nonprofit has built an online crowdfunding site so donors could see families, their pictures, and read their story. All the money provided by donors goes directly to the family toward building a new home (which is built by local workers). A small group of private donors cover all the organization’s overhead costs. Currently, there are about 30 donors that make up the organization called The Builders. Each donor commits to donating a minimum of $25,000 a year for three years. YC’s grant also went toward hiring and overhead.

“We were able to hire excellent team members to build out new software programs,” Hagler said.

Hagler once ran a for-profit company, so he was familiar with Y Combinator.

“Our narrative is not only to help families in extreme poverty with their basic needs and shelter,” he told Crunchbase News. “We also had the goal of trying to freshen up and modernize how to use technology and innovation as a nonprofit, and that’s what attracted us to Y Combinator.”

New Story wasn’t treated at all differently from the for-profits in the accelerator’s program, according to Hagler.

“That was the best part of it,” he said. “We went through the same programming as Airbnb and Dropoff. We believe how nonprofits think, their culture, and how they solve problems and use technology shouldn’t be different because you’re a nonprofit. That was part of their ethos as well.”

When New Story went through the YC program during the summer of 2015, it built 100 houses in just 91 days. Since then it has constructed 1400 homes in 11 different villages.

Hagler believes that participating in the YC program opened up avenues of capital for the nonprofit.

“We’ve since received funding from the venture capital community or tech executives,” he said. “It certainly opened doors for us although it was up to us how we made the most of initial opportunities.”

New Incentives

The recommendations of the YC partners were incredibly helpful

New Incentives encourages poor mothers in Northern Nigeria to vaccinate their infants against deadly diseases. The San Francisco-based organization gives women small incentives that cover their transportation to the clinic and any loss of income resulting from the visit.

It participated in the YC program in the summer of 2016.

Co-founder Patrick Stadler said his nonprofit considered the YC program “the best program” to help startups scale and it lived up to New Incentives’ expectations.

“The recommendations of the YC partners were incredibly helpful,” he wrote via email. “These are experienced and smart advisors that immediately get to the core of your organization’s challenges. They also teach you how to relentlessly focus on one key progress metric and ignore the many distractions a startup faces.”

Overall, he said the lessons of scaling a company are very similar to those of scaling a nonprofit.

“We benefited a lot from the business advice,” Stadler said. “In addition, we enjoyed exchanging lessons learned with our fellow few nonprofits.”

Specifically, he added, the YC partners encouraged the group to focus on growing its program—allowing it to scale from a few to a dozens of clinics throughout Nigeria.

“The number of clinics and beneficiaries served became our razor sharp focus and all our activities were going towards that goal,” Stadler said.

Participating in the program, Stadler believes, also helped open doors to raising additional capital. The organization has received “substantial” donations from YC, Twitter co-founder Jack Dorsey, and VC Vinod Khosla.

But its main supporter continues to be the charity evaluator GiveWell. That relationship started before New Incentives participated in the YC program.

Stadler would recommend the program to all charities but especially encourages those with evidence-based and cost-effective programs in developing countries “that save the most lives at the lowest cost” to apply.

Moving forward, as more investors look toward putting money into organizations and companies that make a social impact, nonprofits are in a better position than ever to scale and grow in a way similar to for-profit companies. And Y-Combinator has helped pave the way for nonprofits who want to operate like startups.


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