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
This storm rained electrons, shifted energy from the sun's rays to the magnetosphere, and went unnoticed for a long time.
- An international team of scientists has confirmed the existence of a "space hurricane" seven years ago.
- The storm formed in the magnetosphere above the North magnetic pole.
- The storm posed to risk to life on Earth, though it might have interfered with some electronics.
What do you call that kind of storm when it forms over the Arctic ocean?<iframe width="730" height="430" src="https://www.youtube.com/embed/8GqnzBJkWcw" frameborder="0" allow="accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture" allowfullscreen></iframe><p> Many objects in space, like Earth, the Sun, most of the planets, and even some large moons, have magnetic fields. The area around these objects which is affected by these fields is known as the magnetosphere.</p><p>For us Earthlings, the magnetosphere is what protects us from the most intense cosmic radiation and keeps the solar wind from affecting our atmosphere. When charged particles interact with it, we see the aurora. Its fluctuations lead to changes in what is known as "space weather," which can impact electronics. </p><p>This "space hurricane," as the scientists are calling it, was formed by the interactions between Earth's magnetosphere and the <a href="https://en.wikipedia.org/wiki/Interplanetary_magnetic_field" target="_blank" rel="noopener noreferrer">interplanetary magnetic field,</a> the part of the sun's magnetosphere that goes out into the solar system. It took on the familiar shape of a cyclone as it followed magnetic fields. For example, the study's authors note that the numerous arms traced out the "footprints of the reconnected magnetic field lines." It rotated counter-clockwise with a speed of nearly 7,000 feet per second. The eye, of course, was still and <a href="https://www.sciencealert.com/for-the-first-time-a-plasma-hurricane-has-been-detected-in-space" target="_blank" rel="noopener noreferrer">calm</a>.</p><p>The storm, which was invisible to the naked eye, rained electrons and shifted energy from space into the ionosphere. It seems as though such a thing can only form under calm situations when large amounts of energy are moving between the solar wind and the upper <a href="https://www.reading.ac.uk/news-and-events/releases/PR854520.aspx" target="_blank">atmosphere</a>. These conditions were modeled by the scientists using 3-D <a href="https://www.nature.com/articles/s41467-021-21459-y#Sec10" target="_blank">imaging</a>.<br><br>Co-author Larry Lyons of UCLA explained the process of putting the data together to form the models to <a href="https://www.nbcnews.com/science/space/space-hurricane-rained-electrons-observed-first-time-rcna328" target="_blank">NBC</a>:<br><br>"We had various instruments measuring various things at different times, so it wasn't like we took a big picture and could see it. The really fun thing about this type of work is that we had to piece together bits of information and put together the whole picture."<br><br>He further mentioned that these findings were completely unexpected and that nobody that even theorized a thing like this could exist. <br></p><p>While this storm wasn't a threat to any life on Earth, a storm like this could have noticeable effects on space weather. This study suggests that this could have several effects, including "increased satellite drag, disturbances in High Frequency (HF) radio communications, and increased errors in over-the-horizon radar location, satellite navigation, and communication systems."</p><p>The authors <a href="https://www.nature.com/articles/s41467-021-21459-y#Sec8" target="_blank" rel="noopener noreferrer">speculate</a> that these "space hurricanes" could also exist in the magnetospheres of other planets.</p><p>Lead author Professor Qing-He Zhang of Shandong University discussed how these findings will influence our understanding of the magnetosphere and its changes with <a href="https://www.eurekalert.org/pub_releases/2021-03/uor-sho030221.php" target="_blank" rel="noopener noreferrer">EurekaAlert</a>:</p><p>"This study suggests that there are still existing local intense geomagnetic disturbance and energy depositions which is comparable to that during super storms. This will update our understanding of the solar wind-magnetosphere-ionosphere coupling process under extremely quiet geomagnetic conditions."</p>
The chariot survived ancient eruptions and modern-day looters to become a part of the world heritage site.
- Archeologists recently discovered a first-of-its-kind chariot in Pompeii.
- The ceremonial chariot is decorated with bronze and tin medallions, while the sides sport bronzesheets and red-and-black paintings.
- Given looting activity in the area, it's lucky the 2,000-year-old treasure wasn't lost to the world heritage site.
One dope Pompeian whip<img type="lazy-image" data-runner-src="https://assets.rebelmouse.io/eyJhbGciOiJIUzI1NiIsInR5cCI6IkpXVCJ9.eyJpbWFnZSI6Imh0dHBzOi8vYXNzZXRzLnJibC5tcy8yNTcxOTUzNS9vcmlnaW4uanBnIiwiZXhwaXJlc19hdCI6MTY2MjU3Nzk5MH0.M3HW5tPe17JuKMhLtKgbOlqK4sMbspqYskR_jz6t9sg/img.jpg?width=1245&coordinates=0%2C70%2C0%2C230&height=700" id="497f9" class="rm-shortcode" data-rm-shortcode-id="1bda1a9c489b85c8a56c189eb21706d1" data-rm-shortcode-name="rebelmouse-image" data-width="1245" data-height="700" />
Researchers carefully extract the chariot from the sedimentary rock encasing it.
(Photo: Archaeological Park of Pompeii)<p>In a recent discovery, researchers unearthed a first-of-its-kind chariot at Civita Giuliana, an excavation site north of Pompeii's ancient walls. In Roman times, the site served as a getaway for Rome's elite and wealthy citizens, a serene countryside brimming with villas and Mediterranean farms. So, it's understandable why such an exquisite chariot was found here.</p><p>"I was astounded," Eric Poehler, a professor at the University of Massachusetts Amherst, who specializes in Pompeii traffic, <a href="https://www.npr.org/2021/02/27/972118983/a-lamborghini-of-chariots-is-discovered-at-pompeii-archaeologists-are-wowed?ft=nprml&f=1001" target="_blank">told <em>NPR</em></a>. "Many of the vehicles I'd written about before ... are your standard station wagon or vehicle for taking the kids to soccer. This is a Lamborghini. This is an outright fancy, fancy car."</p><p>Located in a double-level portico, the chariot is a far cry from anything Ben-Hur would have been seen cruising around in. It sports four iron wheels and a high seat complete with arm- and backrest. The sides are adorned with engraved bronze and wooden panels painted with red-and-black figures. And the rear bumps with a register of bronze and tin medallion depicting Eros-inspired scenes of satyrs, nymphs, and cupids. In short, this chariot is slab.</p><p>"It is an extraordinary discovery for the advancement of our knowledge of the ancient world," Massimo Osanna, the director of the archaeological park, <a href="http://pompeiisites.org/en/comunicati/the-four-wheeled-processional-chariot-the-last-discovery-of-pompeii/" target="_blank" rel="noopener noreferrer">said in a statement</a>. "At Pompeii vehicles used for transport have been found in the past, […] but nothing like the Civita Giuliana chariot."</p><p>But unlike a Lamborghini—which serves only to show the owner has more money than sense—this chariot served a social and cultural role. Likely a <em>pilentum</em>, it would have been rolled out in times of ceremony, potentially during festivals, processions, or weddings.</p><p>While similar chariots have been uncovered in northern Greece, this is the first such chariot to be discovered in Italy. Its presence in Pompeii will further help historians understand the people who called the city home, as well as their relation to the Mediterranean world.</p><p>As Poehler added, "This is precisely the kind of find that one wants to find at Pompeii, the really well-articulated, very well-preserved moments in time. And it happens to be in this case an object that is relatively rare despite its ubiquity in the past."</p>
It belongs in a museum (not the black market)<p>Beyond its gilded appeal, the chariot is also special because it survived so we could learn from it. The area where the vehicle was found has been favored in recent years by looters, and illicit tunnels had been dug precariously close to the chariot's resting place. For this reason, the archeological park has teamed up with the Public Prosecutor's Office of Torre Annunziata to protect Pompeii's history and excavate its treasures before they become lost or stolen.</p><p>"The collaboration between the Public Prosecutor's Office of Torre Annunziata and the Archaeological Park of Pompeii has proved itself to be a formidable instrument, not only for bringing finds of exceptional historical and artistic value to light, but also for halting the criminal actions of individuals who for years have been the protagonists in a systematic looting of the priceless archaeological heritage preserved in the vast area of the Civita Giuliana villa, which is still largely buried and to which the recent exceptional findings bear witness," Nunzio Fragliasso, chief prosecutor of Torre Annunziata, said in his joint statement with Osanna.</p><p>Nor is everything that glitters historic gold. Even Pompeii's everyday ephemera can have an outsized impact on history. Pompeian citizens, for example, viewed street walls as a type of "<a href="https://www.thegreatcoursesdaily.com/how-pompeii-graffiti-preserved-the-ordinary-voices-of-ancient-rome/" target="_blank">public advertisement space</a>" and so painted them thick with graffiti. As historians must often rely on the written works of the literate elite, this graffiti gives the ordinary Pompeians their voice back. <a href="https://www.sciencemag.org/news/2018/10/ancient-graffiti-shifts-date-pompeii-s-destruction-back-2-months" target="_blank" rel="noopener noreferrer">One such charcoal tag</a> even corrected the record of Vesuvius's eruption by two months, from August to October, contradicting the traditionally accepted date set by Pliny the Younger.</p><p>"Today, archaeologists try to understand ancient societies by studying the entire material record -- not just the beautiful or luxurious objects, but also the broken bits of cooking pottery, the animal bones thrown into the trash, the microscopic grains of pollen in the soil, and much more," Caitlín Barrett, associate professor at Cornell University, <a href="https://www.cnn.com/travel/article/pompeii-new-excavations-looting/index.html" target="_blank" rel="noopener noreferrer">told <em>CNN</em></a>.</p><p>This ephemera is also at risk. Looters looking for eye-catching treasure and artwork will often destroy everyday objects in their pursuit. And after centuries encased in protective sedimentary rock, the city has again been exposed to the rains, winds, and human blunders that erode. The goal now isn't just to excavate fantastic treasures, but to preserve the world heritage site and learn from it for as long as time (<a href="http://volcano.oregonstate.edu/what%E2%80%99s-most-recent-eruption-vesuvius-and-will-it-erupt-again" target="_blank" rel="noopener noreferrer">and maybe Vesuvius</a>) will allow.</p>
New study suggests the placebo effect can be as powerful as microdosing LSD.
- New research from Imperial College London investigated the psychological effects of microdosing LSD in 191 volunteers.
- While microdosers experienced beneficial mental health effects, the placebo group performed statistically similar to those who took LSD.
- Researchers believe the expectation of a trip could produce some of the same sensations as actually ingesting psychedelics.
Psychedelics: The scientific renaissance of mind-altering drugs | Sam Harris, Michael Pollan & more<span style="display:block;position:relative;padding-top:56.25%;" class="rm-shortcode" data-rm-shortcode-id="92360c805fe66c11de38a75b0967f417"><iframe type="lazy-iframe" data-runner-src="https://www.youtube.com/embed/5T0LmbWROKY?rel=0" width="100%" height="auto" frameborder="0" scrolling="no" style="position:absolute;top:0;left:0;width:100%;height:100%;"></iframe></span><p>Published in <em>eLife</em>, the team recruited 191 citizen cosmonauts to microdose either LSD or a placebo over the course of several weeks and note the psychological effects. Volunteers were already microdosing LSD, so there was no true control. Each volunteer was given instructions on creating their own low-dose gel capsules, some containing LSD, others not. Then they mixed the capsules in envelopes so they didn't know if they were taking the real thing or not.</p><p>The trial design was ingenious: each capsule featured a QR code that was scanned after the addition of ingredients but before they were placed in the envelope so that researchers knew what they were ingesting.</p><p>The problem: volunteers sourced their own LSD. Lack of quality control could have had a profound effect on the results. </p><p>The results: LSD microdosers reported feeling more mindful, satisfied with life, and better overall; they also noticed a reduction in feelings of paranoia. </p><p>The catch: the control group felt the same thing, with no statistical difference between the groups. </p><p>Lead author Balázs Szigeti comments on the findings: "This suggests that the improvements may not be due to the pharmacological action of the drug but can instead be explained by the placebo effect." </p>
Photo: Alexander / Adobe Stock<p>Psychedelics are notoriously difficult to control for given the intensity of the experience. Yet there is precedent for the above findings. A <a href="https://link.springer.com/article/10.1007/s00213-020-05464-5" target="_blank">2019 study</a> found that 61 percent of volunteers that took a placebo instead of psilocybin felt some psychedelic effects, with a few volunteers experiencing full-on trips.</p><p style="margin-left: 20px;">"Several stated that they saw the paintings on the walls 'move' or 'reshape' themselves, others felt 'heavy. . . as if gravity [had] a stronger hold', and one had a 'come down' before another 'wave' hit her."</p><p>The Imperial team believes the expectation of a trip might have been enough to produce similar results. Senior author David Erritzoe is excited for future studies on the topic, believing they tapped into a new wave of citizen science that could push forward our knowledge of psychedelic substances.</p><p style="margin-left: 20px;">"Accounting for the placebo effect is important when assessing trends such as the use of cannabidiol oils, fad diets or supplements where social pressure or users' expectations can lead to a strong placebo response. Self-blinding citizen science initiatives could be used as an inexpensive, initial screening tool before launching expensive clinical studies."</p><p>As investments into the psychedelics market explode, with one company <a href="https://www.bloomberg.com/news/articles/2021-03-03/thiel-backed-magic-mushroom-firm-atai-hits-2-billion-valuation" target="_blank">reaching a $2 billion valuation</a>, a recurring irony appears in the long arc of psychedelics and research: the power of our minds might be enough to feel greater life satisfaction and a deeper sense of mindfulness. If that's possible with a placebo, we have to question why the rush to create more pharmacology is necessary. </p><p>This is, mind you, a separate conversation over the role of psychedelics and rituals for group bonding. The function of group cohesion around consciousness-altering substances will continue to play an important role in many communities. </p><p>Of course, we should continue to explore the efficacy of psychedelics on anxiety, depression, suicidal ideation, PTSD, and addiction. <a href="https://bigthink.com/surprising-science/antidepressant-effects" target="_self">Pharmacological dependence</a> is a stain on the psychiatry industry. Whether or not psychedelics can be prescribed for daily use remains to be seen, but we know a moneyed interest is expecting a return on investment—the above company, ATAI Life Sciences, raised $157 million in its Series D round. </p><p>When it comes to wellbeing, some things money just can't buy. How we navigate the tricky terrain of mainstreaming psychedelics remains to be seen. </p><p>--</p><p><em>Stay in touch with Derek on <a href="http://www.twitter.com/derekberes" target="_blank">Twitter</a> and <a href="https://www.facebook.com/DerekBeresdotcom" target="_blank" rel="noopener noreferrer">Facebook</a>. His most recent book is</em> "<em><a href="https://www.amazon.com/gp/product/B08KRVMP2M?pf_rd_r=MDJW43337675SZ0X00FH&pf_rd_p=edaba0ee-c2fe-4124-9f5d-b31d6b1bfbee" target="_blank" rel="noopener noreferrer">Hero's Dose: The Case For Psychedelics in Ritual and Therapy</a>."</em></p>
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