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
New research establishes an unexpected gut connection.
- A study provides further confirmation that a prolonged lack of sleep can result in early mortality.
- Surprisingly, the direct cause seems to be a buildup of Reactive Oxygen Species in the gut produced by sleeplessness.
- When the buildup is neutralized, a normal lifespan is restored.
We don't have to tell you what it feels like when you don't get enough sleep. A night or two of that can be miserable; long-term sleeplessness is out-and-out debilitating. Though we know from personal experience that we need sleep — our cognitive, metabolic, cardiovascular, and immune functioning depend on it — a lack of it does more than just make you feel like you want to die. It can actually kill you, according to study of rats published in 1989. But why?
A new study answers that question, and in an unexpected way. It appears that the sleeplessness/death connection has nothing to do with the brain or nervous system as many have assumed — it happens in your gut. Equally amazing, the study's authors were able to reverse the ill effects with antioxidants.
The study, from researchers at Harvard Medical School (HMS), is published in the journal Cell.
An unexpected culprit
The new research examines the mechanisms at play in sleep-deprived fruit flies and in mice — long-term sleep-deprivation experiments with humans are considered ethically iffy.
What the scientists found is that death from sleep deprivation is always preceded by a buildup of Reactive Oxygen Species (ROS) in the gut. These are not, as their name implies, living organisms. ROS are reactive molecules that are part of the immune system's response to invading microbes, and recent research suggests they're paradoxically key players in normal cell signal transduction and cell cycling as well. However, having an excess of ROS leads to oxidative stress, which is linked to "macromolecular damage and is implicated in various disease states such as atherosclerosis, diabetes, cancer, neurodegeneration, and aging." To prevent this, cellular defenses typically maintain a balance between ROS production and removal.
"We took an unbiased approach and searched throughout the body for indicators of damage from sleep deprivation," says senior study author Dragana Rogulja, admitting, "We were surprised to find it was the gut that plays a key role in causing death." The accumulation occurred in both sleep-deprived fruit flies and mice.
"Even more surprising," Rogulja recalls, "we found that premature death could be prevented. Each morning, we would all gather around to look at the flies, with disbelief to be honest. What we saw is that every time we could neutralize ROS in the gut, we could rescue the flies." Fruit flies given any of 11 antioxidant compounds — including melatonin, lipoic acid and NAD — that neutralize ROS buildups remained active and lived a normal length of time in spite of sleep deprivation. (The researchers note that these antioxidants did not extend the lifespans of non-sleep deprived control subjects.)
Image source: Tomasz Klejdysz/Shutterstock/Big Think
The study's tests were managed by co-first authors Alexandra Vaccaro and Yosef Kaplan Dor, both research fellows at HMS.
You may wonder how you compel a fruit fly to sleep, or for that matter, how you keep one awake. The researchers ascertained that fruit flies doze off in response to being shaken, and thus were the control subjects induced to snooze in their individual, warmed tubes. Each subject occupied its own 29 °C tube.
For their sleepless cohort, fruit flies were genetically manipulated to express a heat-sensitive protein in specific neurons. These neurons are known to suppress sleep, and did so — the fruit flies' activity levels, or lack thereof, were tracked using infrared beams.
Starting at Day 10 of sleep deprivation, fruit flies began dying, with all of them dead by Day 20. Control flies lived up to 40 days.
The scientists sought out markers that would indicate cell damage in their sleepless subjects. They saw no difference in brain tissue and elsewhere between the well-rested and sleep-deprived fruit flies, with the exception of one fruit fly.
However, in the guts of sleep-deprived fruit flies was a massive accumulation of ROS, which peaked around Day 10. Says Vaccaro, "We found that sleep-deprived flies were dying at the same pace, every time, and when we looked at markers of cell damage and death, the one tissue that really stood out was the gut." She adds, "I remember when we did the first experiment, you could immediately tell under the microscope that there was a striking difference. That almost never happens in lab research."
The experiments were repeated with mice who were gently kept awake for five days. Again, ROS built up over time in their small and large intestines but nowhere else.
As noted above, the administering of antioxidants alleviated the effect of the ROS buildup. In addition, flies that were modified to overproduce gut antioxidant enzymes were found to be immune to the damaging effects of sleep deprivation.
The research leaves some important questions unanswered. Says Kaplan Dor, "We still don't know why sleep loss causes ROS accumulation in the gut, and why this is lethal." He hypothesizes, "Sleep deprivation could directly affect the gut, but the trigger may also originate in the brain. Similarly, death could be due to damage in the gut or because high levels of ROS have systemic effects, or some combination of these."
The HMS researchers are now investigating the chemical pathways by which sleep-deprivation triggers the ROS buildup, and the means by which the ROS wreak cell havoc.
"We need to understand the biology of how sleep deprivation damages the body so that we can find ways to prevent this harm," says Rogulja.
Referring to the value of this study to humans, she notes,"So many of us are chronically sleep deprived. Even if we know staying up late every night is bad, we still do it. We believe we've identified a central issue that, when eliminated, allows for survival without sleep, at least in fruit flies."
We must rethink the "chemical imbalance" theory of mental health.
- A new review found that withdrawal symptoms from antidepressants and antipsychotics can last for over a year.
- Side effects from SSRIs, SNRIs, and antipsychotics last longer than benzodiazepines like Valium or Prozac.
- The global antidepressant market is expected to reach $28.6 billion this year.
Data from LinkedIn suggests soft skills will be the most in-demand as the economy begins to rebuild and 2020 grads look for work.
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