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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
The virus is unlike anything many people have ever experienced.
- The public Facebook group, Survivor Corps, is a place where long haulers and survivors congregate.
- Months after recovering from COVID-19, some are suffering from joint pain, hair loss, and cognitive issues.
- These cautionary tales are important in a county where many remain skeptical over the dangers of this virus.
Coronavirus - The Latest: The Covid-19 'long-haulers'<span style="display:block;position:relative;padding-top:56.25%;" class="rm-shortcode" data-rm-shortcode-id="73d1813a9b48841241c01857476e48b4"><iframe type="lazy-iframe" data-runner-src="https://www.youtube.com/embed/kUyKpu-djdc?rel=0" width="100%" height="auto" frameborder="0" scrolling="no" style="position:absolute;top:0;left:0;width:100%;height:100%;"></iframe></span><p><strong>I've been out of the hospital</strong> from COVID-19 for four weeks now and started having severe pain in my big toe, almost like I stepped on a piece of glass or have a severely ingrown toenail—I don't and there's no cut or intrusion. Now my toe is really swollen and red. It hurts to walk or put any pressure on it. Is this what's called COVID toe, and what's the protocol?</p><p><strong>I am on 18 days in bed</strong> with COVID. Luckily, I've been able to manage this horrible beast from home (so far). I actually thought I was feeling better yesterday, and then today I'm going in another direction. I'm having terrible pain when I breathe (right side), and I'm exhausted. I just finished Augmentin, and a week prior, a Z-Pak. I have an inhaler. Today, my doctor wants me to start a Medrol Dosepak (steroids). Has anyone else tried this and has it helped? I'm desperate to try anything right now as long as I can get better. Please give me your thoughts on the steroids; I'm seeing mixed reviews in here.</p><p> <strong>I've been sick with COVID symptoms</strong> for 22 weeks. I'm not getting better. My original symptoms haven't gone away, and I just develop new ones every few weeks. I read an article on three immune responses to this virus. 1) Overactive immune response 2) Normal immune response 3) little or no immune response.</p><p>I am having little or no immune response to this virus.</p><p>It's taking over my body slowly. My primary doctor can't help me. My family and husband don't believe my symptoms and I have nowhere to turn. </p><p>I am so frightened.</p><p><strong>How many of you are experiencing hair loss</strong>, especially hair loss after 5 months? I'm shedding like a dog. </p><p><strong>I had COVID in June</strong>. At least 15 straight days in bed. No smell, no taste except certain spices. I've been diagnosed with two eye conditions now. Fatigue won't go away. Simple things like unloading the dishwasher or taking a shower exhaust me; I need to sit down. Has anyone recovered from these symptoms? If so, how long did it take?</p><p><strong>Has anyone experienced increased joint pain</strong>, specifically in your hands, after COVID? I've had some joint pain in the past, but never this much. It's been four months since I had the virus and the pain seems to have increased since then. [<em>147 comments on this, nearly every one verifying joint pain, especially in hands, ankles, and elbows</em>.]</p>
Medics wait to transport a woman with possible Covid-19 symptoms to the hospital on August 07, 2020 in Austin, Texas.
Photo by John Moore/Getty Images<p><strong>I had COVID symptoms for 2.5 weeks</strong> in March (could not get tested). I was a lot better for two months and then started the whole ordeal again 70 days ago (and am still sick). I have been to the ER twice and told that they think I have COVID. My clinic nurse said the same thing, as did my friend, who is an Urgent Care doctor.</p><p>I have had weeks where my fever went away and other symptoms decreased. But several times now, it comes back full force with a vengeance. The roller coaster is depressing. </p><p><strong>I was fortunate enough to be accepted </strong>into the Mt. Sinai post-COVID treatment program and was really happy to have some experts keep an eye on my long-term effects. Four months after COVID, my EKG came back normal, my antibodies high, and my bloodwork normal. My next tests were a lung function test and CT scan to see if there's long-term damage from the pneumonia. I just got a letter from my health insurance company, Oxford, rejecting the cost of the CT scan. I'm so disappointed. Is anyone else having their COVID treatments rejected by health insurance?</p><p><strong>I'm new here and it looks I'm one of the youngins</strong> in the group (19 btw). I got COVID about a month ago, and I got out of quarantine about a week-and-a-half ago, and I still have yet to see any of my friends. I wouldn't say I'm super popular but I do have a lot of friends, so I thought most of them would want to see me. I was super wrong. The stigma around COVID, especially with the younger demographic, was a joke before I got it in my friend group. Every single one of my friends didn't take it seriously and thought it would never appear in anyone they knew. When I got the virus it sent them all into shock and a couple of them hated me saying it was all my fault telling me that I shouldn't leave my house for a couple months and to not talk to them until next year. Now that I'm fully recovered I thought some friends would want to see me, but actually nobody does. </p><p><strong>Rapid heart rate when standing</strong> (160s-170s). Advice on how to deal with it? Twenty-three days from a positive test. Fever is pretty much gone but I'm trying to get back on my feet, literally. I'm kind of at a loss—whether this is temporary or I should ask my doctor for certain tests. My heart rate is elevated even when lying down (and is tolerable) but even more elevated when sitting. Seems like this isn't just "fatigue."</p><p><strong>My husband recovered from COVID</strong> last month but has been in a lot of pain. Weak and tired all the time. He gets tingly fingers and hands and feet and his ankles feel weak, like his bones are brittle. Has anyone else had this? He's rolled his ankles two or three times since and this has never happened before. His body just feels worn out and exhausted all the time, like he's a 70-year-old man, and he's only 34.</p><p>--</p><p><em>Stay in touch with Derek on <a href="http://www.twitter.com/derekberes" target="_blank">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>
Researchers are using technology to make visual the complex concepts of racism, as well as its political and social consequences.
- Often thought of first as gaming tech, virtual reality has been increasingly used in research as a tool for mimicking real-life scenarios and experiences in a safe and controlled environment.
- Focusing on issues of oppression and the ripple affect it has throughout America's political, educational, and social systems, Dr. Courtney D. Cogburn of Columbia University School of Social Work and her team developed a VR experience that gives users the opportunity to "walk a mile" in the shoes of a black man as he faces racism at three stages in his life: as a child, during adolescence, and as an adult.
- Cogburn says that the goal is to show how these "interwoven oppressions" continue to shape the world beyond our individual experiences. "I think the most important and powerful human superpower is critical consciousness," she says. "And that is the ability to think, be aware and think critically about the world and people around you...it's not so much about the interpersonal 'Do I feel bad, do I like you?'—it's more 'Do I see the world as it is? Am I thinking critically about it and engaging it?'"
President Vladimir Putin announces approval of Russia's coronavirus vaccine but scientists warn it may be unsafe.
A new coronavirus vaccine on display at the Nikolai Gamaleya National Center of Epidemiology and Microbiology in Moscow, Russia.
Credit: Alexander Zemlianichenko Jr/ Russian Direct Investment Fund via AP
Medical workers draw blood from volunteers participating in a trial of a coronavirus vaccine at the Budenko Main Military Hospital outside Moscow, Russia.
Credit: Russian Defense Ministry Press Service via AP
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