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Should you be for-profit or nonprofit? Why not both?
Cutting edge social innovators should consider hybrid models
Rich Tafel is founder of The Public Squared, a public policy training program for nonprofits and social entrepreneurs.
For the last decade, Tafel has provided strategic policy advice to nonprofits on a variety of causes, including AIDS programs for Africa, civil rights programs Latin America, and education and health care reform in the United States. He is a guest lecturer in Urban Health and Advocacy at Johns Hopkins University.
Prior to his international consulting, Tafel founded the Log Cabin Republicans in 1993. During his tenure, the Log Cabin Republicans went from an unknown entity to a well-known brand in American political life. At the height of the culture wars, he debated the likes of the Reverend Jerry Fallwell on Larry King Live. He has appeared on most major political TV programs and fought for appropriate AIDS funding and equality for gays and lesbians. He testified before Congress on the need to support the Ryan White Care Act. In 1999, he authored Party Crasher: A Gay Republican Challenges Politics as Usual. Tafel has also been appointed by Governor Weld (R-MA) to manage the adolescent health programs of Massachusetts.
Tafel's work in the public policy arena for social justice causes is inspired by his faith. After graduating from Harvard Divinity School he served at the University Chapel. He is an ordained minister in the Swedenborgian Church. He is a certified coach through Franklin Covey and certified through the International Coaching Association. He's an alumni of the Prince of Wales, Business and Sustainability Program, Cambridge College.
Over the past fifteen years, I've had the opportunity to provide strategy for well over a hundred social change start-ups seeking to make the world a better place. The most common question they ask, "Should we be a for-profit or a nonprofit."
My answer, "Why not consider both?" Let's review the advantages and disadvantages.
The nonprofit optionHuman hands holding polygonal heartHuman hands holding polygonal heart. Love, peace and donation concept. Charity event. Vector illustration for non-profit organisation
The nonprofit option is the most popular choice with over $410 billion given to 1.5 million nonprofits last year alone. Nonprofit leaders report back to me four primary advantages to this legal structure:
- "My donors get a tax deduction."
- "Foundations prefer giving to nonprofit entities."
- "Nonprofits have a good brand in our culture."
- "We don't have to pay taxes!"
They also cite three major disadvantages:
- "I feel like I'm in constant fundraising mode—I'm chasing donors not solving problems."
- "Instead of seeing our impact, donors scrutinize my salary and overhead costs."
- "No matter how much sweat equity I put into my work, I have no financial gain to show for it."
Impact investing for for-profit social ventures
The rise of impact investing into for-profit social ventures makes this is a powerful alternative to the nonprofit model. The Global Impact Investing Network reported that "225 investors, including pension funds, invested $35.5 billion across 11,136 impact investment deals in 2017. That is up 58% from $22.1 billion across 7,951 deals in 2016." That $35 billion is getting pretty close to the $66.90 billion donated by charitable foundations in 2017.
Nonprofit leaders are also looking toward for profit earned income as part of their future as well. A recent Bridgespan Group survey of US nonprofits' executives reported they "believe earned income would play an important role in bolstering their organizations' revenue in the future." According to Echoing Green, a nonprofit with a 25-year record of supporting early-stage social entrepreneurs, the proportion of their applicant pool proposing for-profit and hybrid organizations has grown to nearly 50 percent, compared to 15 percent in 2006.
For-profit social ventures name three primary advantages to choosing this model.
- "I no longer feel like I'm begging donors year in and year out."
- "There's untapped capital out there without sufficient social ventures to invest in."
- "We put in our own sweat equity and as owners, I might get a great long term financial return for my work."
Social ventures also described to me three disadvantages.
- "I don't know how to find impact investors."
- "We aren't able to get funding from foundations or other traditional donors."
- "It's hard to measure and report out both impact measurement and return on investment to investors."
Hybrid models that include both for-profit and nonprofit entities can maximize the advantages of each model, while minimizing the disadvantages. These hybrids come in many shapes and sizes.
A Case Study: Town Stages
A Town Stages production space
A good examples of a hybrid model was reported in Forbes magazine by Carey Purcell. In the article titled, "How a 'Robin Hood' Business Model Supports an Artistic Clubhouse in Tribeca," she tells the story of Town Stages LLC a "female-driven cultural institution and event venue owned by a nonprofit Sokoloff Arts." The founder Robin Sokoloff wanted to provide spaces to work and live for artists like herself to survive ever-rising NYC rent. Town Stages, with space rentals for weddings, bar mitzvahs, and business events, subsidizes Sokoloff Art fellows.
Artists can rent the space at the rate they can afford, and the revenue is used to subsidize other emerging artists. Not only does she provide spaces for artists, but her organization is also focused on the advancement of young women, minorities, and LGBTQ voices. Town Stages has become a home for underrepresented voices in the community and was able to expand its impact thanks to the success of her first artistic hub. Since 2012, they allowed 70,000 people to create almost 900 different works of art.
Social Venture hybrids have some profound advantages, especially when it comes to fundraising and equity. In particular, they allow the social venture to say "yes" to both impact investors and traditional foundations. They allow social entrepreneur teams to be owners and get a financial reward for the unpaid time they invest in the cause.
"Guard Rails" required
Hybrids also have the disadvantage of requiring more well thought out accounting "guard rails" to make sure the organization operates legally — nonprofit money must always serves the public interest, not someone's private interest. Arron M. Fox CPA at the Senior Tax Manager, at Raffa, Marcum's Nonprofit and Social Sector Group describes one way to create a hybrid model called a for-profit subsidiary in his piece "Considerations When Creating a For-Profit Subsidiary."
Rich Tafel is the Director of Raffa Social Capital Advisors - Marcum's Nonprofit and Social Sector Group
Marcum LLP. Rich.Tafel@MarcumLLP.com
After a decade of failed attempts, scientists successfully bounced photons off of a reflector aboard the Lunar Reconnaissance Orbiter, some 240,000 miles from Earth.
- Laser experiments can reveal precisely how far away an object is from Earth.
- Scientists have for years been bouncing light off of reflectors on the lunar surface that were installed during the Apollo era. But these reflectors have become less efficient over time.
- The recent success could reveal the cause of the degradation, and also lead to new discoveries about the Moon's evolution.
A close-up photograph of the laser reflecting panel deployed by Apollo 14 astronauts on the Moon in 1971.
NASA<p>The technology isn't quite new. During the Apollo era, astronauts installed on the lunar surface five reflecting panels, each containing at least 100 mirrors that reflect back to whichever direction it's coming from. By bouncing light off these panels, scientists have been able to learn, for example, that the Moon is drifting away from Earth at a rate of about 1.5 inches per year.<br></p><p style="margin-left: 20px;">"Now that we've been collecting data for 50 years, we can see trends that we wouldn't have been able to see otherwise," Erwan Mazarico, a planetary scientist from NASA's Goddard Space Flight Center in Greenbelt, Maryland, <a href="https://www.nasa.gov/feature/goddard/2020/laser-beams-reflected-between-earth-and-moon-boost-science" target="_blank" rel="dofollow">told</a> NASA. "Laser-ranging science is a long game."</p>
NASA's Lunar Reconnaissance Orbiter (LRO)
NASA<p>But the long game poses a problem: Over time, the panels on the moon have become less efficient at bouncing light back to Earth. Some scientists suspect it's because dust, kicked up by micrometeorites, has settled on the surface of the panels, causing them to overheat. And if that's the case, scientists need to know for sure.</p><p>That's where the recent LRO laser experiment comes in. If scientists find discrepancies between the data sent back by the LRO reflector and those on the lunar surface, it could reveal what's causing the lunar reflectors to become less efficient. They could then account for these discrepancies in their models.</p>
Studying the Moon's core<p>More precise laser experiments could also help scientists learn more about the Moon's core. By measuring tiny wobbles as the moon rotates, past laser experiments revealed that the satellite has a fluid core. But inside of that fluid could lie a solid core — one that might've helped to generate the Moon's now-extinct magnetic field.</p><p>However, confirming that hypothesis will require more precise measurements — and the continued success of laser experiments involving the LRO, or reflecting panels installed on the Moon during future missions.</p><p style="margin-left: 20px;">"The precision of this one measurement has the potential to refine our understanding of gravity and the evolution of the solar system," <a href="https://science.gsfc.nasa.gov/sed/bio/xiaoli.sun-1" target="_blank">Xiaoli Sun</a>, a Goddard planetary scientist who helped design LRO's reflector, told NASA.</p>
Ever wonder why soft hair can dull a steel razor? So did scientists at MIT.
- Steel is fifty times harder than hair, yet shaving razors dull in a hurry.
- A new study finds much of this is caused by hair cracking razors at points of imperfection.
- The findings may lead to new ways of making razors that last longer.
It surprises me it took this long for a scientist to look at their shaving razors under a microscope.<img type="lazy-image" data-runner-src="https://assets.rebelmouse.io/eyJhbGciOiJIUzI1NiIsInR5cCI6IkpXVCJ9.eyJpbWFnZSI6Imh0dHBzOi8vYXNzZXRzLnJibC5tcy8yMzU1NjY3OS9vcmlnaW4uZ2lmIiwiZXhwaXJlc19hdCI6MTY1NTE0MTkwM30.LSp_rimRO6vHeMMlifEbuKjUS9bcvkSaMzRqh8MyHlo/img.gif?width=980" id="a6de5" class="rm-shortcode" data-rm-shortcode-id="3778bbe9f14500b64391091a5ea08fa4" data-rm-shortcode-name="rebelmouse-image" />
An extremely magnified image of a razor blade cutting hair.
G. Roscioli<p>Lead author Gianluca Roscioli grew his facial hair out for three days before <a href="https://www.smithsonianmag.com/smart-news/why-razors-are-dull-within-weeks-according-science-180975534/" target="_blank">shaving</a>. He then brought his razors into the lab to examine them under an electron microscope. While they expected to see even dulling on the blade edge, they instead noticed strange C-shaped chips missing. Intrigued, they attached a camera to the microscope so they could record the blade cutting the <a href="https://www.sciencemag.org/news/2020/08/your-hair-can-crack-steel-when-it-hits-right-spot" target="_blank">hair</a>. At the same time, they investigated the properties of the razors at the microscopic level.</p><p>This apparatus revealed that, when the razor blade hit the hairs at non-perpendicular angles, small cracks would form in the razor blade. These tended to develop in boundary areas between where the steel was harder and where it was softer due to differences in the properties at each location caused by the manufacturing <a href="https://www.newscientist.com/article/2251202-we-just-figured-out-why-shaving-soft-hair-blunts-steel-razor-blades/" target="_blank">process</a>. Over time, these cracks grew into chips. While these chips are too small to see with the naked eye, they were large enough to reduce the blade's effectiveness.</p><p>Roscioli told <a href="https://www.smithsonianmag.com/smart-news/why-razors-are-dull-within-weeks-according-science-180975534/" target="_blank" rel="noopener noreferrer dofollow">NPR</a>, "The size of the chips are about 1/10 of the diameter of a human hair."</p><p>The chips can be caused by hair of any thickness and appear to be unavoidable in blades with standard imperfections. </p><p>The finding surprised other scientists, who also quickly accepted the explanation. Professor Suveen Mathaudhu of UC Riverside explained to <a href="https://www.npr.org/2020/08/06/898577234/cutting-edge-research-shows-how-hair-dulls-razor-blades" target="_blank" rel="noopener noreferrer dofollow">NPR</a> that he had expected a larger role in the dulling process to be played by corrosion but that the findings made a great deal of sense. Other scientists expressed how impressed they were by the quality of the images and the difficulty of the study. </p>
How can we possibly use this information?<div class="rm-shortcode" data-media_id="ELqsmO1M" data-player_id="FvQKszTI" data-rm-shortcode-id="2295233989512b59279237452c0e0076"> <div id="botr_ELqsmO1M_FvQKszTI_div" class="jwplayer-media" data-jwplayer-video-src="https://content.jwplatform.com/players/ELqsmO1M-FvQKszTI.js"> <img src="https://cdn.jwplayer.com/thumbs/ELqsmO1M-1920.jpg" class="jwplayer-media-preview" /> </div> <script src="https://content.jwplatform.com/players/ELqsmO1M-FvQKszTI.js"></script> </div> <p>The study determined that part of the reason for this chipping is the imperfections in the steel used to make the blades, specifically, the lack of uniformity in the composition of the steel at the microscopic level. At least partly, these imperfections are due to the nature of the production process and can be reduced through alternative methods. This study's research team is also working on a new material with more structural uniformity as a possible solution.</p><p>These findings may one day lead to longer-lasting razor blades. Given that Americans throw out two billion blades each <a href="https://www.usatoday.com/story/news/nation/2019/08/07/landfill-waste-how-prevent-disposable-razor-plastic-pollution/1943345001/" target="_blank">year</a>, such a discovery's environmental impact would be tremendous.</p>
You're always in control of your breath.
- Anxiety is triggered environmentally and emotionally, but a physiological response quickly follows.
- Calming breathing techniques help to tamp down the physiological response of anxiety.
- The following four exercises are known to help calm anxiety and develop focus.
Stressed? Use This Breathing Technique to Improve Your Attention and Memory, with Emma Seppälä<span style="display:block;position:relative;padding-top:56.25%;" class="rm-shortcode" data-rm-shortcode-id="ac308f8ef7490814bcb4c1841725cf35"><iframe type="lazy-iframe" data-runner-src="https://www.youtube.com/embed/NrJZu6bGyHg?rel=0" width="100%" height="auto" frameborder="0" scrolling="no" style="position:absolute;top:0;left:0;width:100%;height:100%;"></iframe></span><h3>Alternate Nostril Breathing</h3><p>Emma Seppälä, Science Director at Stanford Center For Compassion And Altruism Research And Education and Co-Director Wellness at Yale Center for Emotional Intelligence, says American culture values intensity yet undervalues calmness. We never shut off. While intensity has its place, every animal in nature inherently knows the necessity of rest in order to store up energy for when it's actually needed. Americans are careless with our energy reserves, which is why so many of us are chronically tired, overworked, and stressed out. </p><p>Seppälä knows that breathing changes our state of mind. She recommends a popular yogic breathing technique, <em>nadi shodhana</em>, also known as alternate nostril breathing. </p><p>Place the index and middle fingers of your right hand on your forehead. Use your thumb to close your right nostril while inhaling through the left nostril, then close the left nostril with your ring finger and exhale through your right nostril. Repeat this for at least two minutes, then sit quietly for another minute or two, breathing normally. </p><p>There are many variations of this technique. My favorite is a four-cycle breath: inhale for a count of four through one nostril, retain your breath for a count of four, exhale for four, hold your breath out for four. If you're new to this breathing technique, retention might initially create more anxiety than it relieves, so try the basic inhale-exhale pattern until you can last for at least five minutes before moving onto breath retentions.</p>
Mind Hack: Combat Anxiety with This Breathing Technique<span style="display:block;position:relative;padding-top:56.25%;" class="rm-shortcode" data-rm-shortcode-id="0cd55bb6ac6c7dd5daab3c29b7a82843"><iframe type="lazy-iframe" data-runner-src="https://www.youtube.com/embed/7xalaT2FwS8?rel=0" width="100%" height="auto" frameborder="0" scrolling="no" style="position:absolute;top:0;left:0;width:100%;height:100%;"></iframe></span><h3>Power Breath</h3><p>Game designer and author of <em>Superbetter</em>, Jane McGonigal, recommends the Power Breath: exhale for twice as long as you inhale. She says this will shift your nervous system from sympathetic to parasympathetic tone—you'll calm down. Simply sit comfortably, close your eyes, and begin by inhaling four a count of four and exhaling for a count of eight. </p><p>This is also a popular yoga breathing technique. As with <em>nadi shodhana</em>, it can initially kick up rather than diminish anxiety. If you find long exhales challenging, begin by inhaling and exhaling at an even rate: a count of four in both directions. Then try to slowly increase your exhale to a count of five, six, and so on. Longtime practitioners can inhale for a count of four and exhale for a count of 50. As with any muscle, you can train your breathing. The benefits are immense. </p>
Breathing Techniques to Help You Relax<span style="display:block;position:relative;padding-top:56.25%;" class="rm-shortcode" data-rm-shortcode-id="56511aaa4d1c06cc65077b8daf7670fb"><iframe type="lazy-iframe" data-runner-src="https://www.youtube.com/embed/RHpTR2wRc8c?rel=0" width="100%" height="auto" frameborder="0" scrolling="no" style="position:absolute;top:0;left:0;width:100%;height:100%;"></iframe></span><h3>Focus Word Breathing</h3><p>Lolly, a Mind-Body Specialist at the University of Maryland Heart Center, offers what she calls Focus Word Breathing. Traditionally, this is known as Mantra meditation. Choose a word that has meaning to you—<em>calm</em>, <em>grace</em>, <em>ease</em>—and repeat it during every inhalation and exhalation. As your mind wanders, the word becomes a sort of flagpole that you've mentally planted to bring you back to this moment. </p><p>As a former sufferer of anxiety disorder, I remember how important my thoughts were when having a panic attack. The power of the physiological symptoms increased when I dwelled on negative thoughts. This spiral felt like being sucked into a vortex. By contrast, when I was able to redirect my thinking, the symptoms lessened. </p><p>Mantra meditation never completely worked during an attack. By that point, my physiology had been hijacked. But as a regular practice, this breathing technique is powerful. Think of it as training for the big game of life. You teach yourself to focus on beneficial words. Your attention goes where thinking leads you, but you also have control of your thoughts. By integrating a mantra with breathing, you're priming your mind to focus at will.</p>
How to do Viparita Karani (Legs Up the Wall) w/ AnaMargret Sanchez<span style="display:block;position:relative;padding-top:56.25%;" class="rm-shortcode" data-rm-shortcode-id="6ebcd48808f1ef73d5d35b9b4f58e8e8"><iframe type="lazy-iframe" data-runner-src="https://www.youtube.com/embed/YHxoiq1YivE?rel=0" width="100%" height="auto" frameborder="0" scrolling="no" style="position:absolute;top:0;left:0;width:100%;height:100%;"></iframe></span><h3>Deep Belly Breathing</h3><p>This exercise is commonly used by yoga instructors to bring their students into Corpse Pose (Savasana). Place your hands over your stomach while lying down and focus your attention there. Take deep, even breaths into your hands. As with the last technique, focus your mind there. Relax the muscles at your extremities: your toes, fingers, and forehead. Allow yourself to melt into the floor. </p><p>I love doing this breath while in <em>Viparita Karani</em>, otherwise known as Legs Up the Wall posture. The video above explains how to enter this pose; a blanket or pillow under your lower back makes the posture comfortable. Once there, I practice deep belly breathing. This technique always calms me down. I've recommended it to friends suffering from insomnia; they all responded with positive anecdotal feedback. </p><p>--</p><p><em>Stay in touch with Derek on <a href="http://www.twitter.com/derekberes" target="_blank" rel="noopener noreferrer dofollow">Twitter</a>, <a href="https://www.facebook.com/DerekBeresdotcom" target="_blank" rel="noopener noreferrer dofollow">Facebook</a> and <a href="https://derekberes.substack.com/" target="_blank" rel="noopener noreferrer dofollow">Substack</a>. His next book is</em> "<em>Hero's Dose: The Case For Psychedelics in Ritual and Therapy."</em></p>
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