Why business start-ups should emulate nonprofits

Howard Lake | 23 April 2008 | Blogs

Like Michael Gilbert at Nonprofit Online News, I have an innate distrust of people who tell me that, to succeed, charities should be much more like for-profit commercial organisations. I am biased after nearly 20 years of working in the charity sector, although having spent 13 of those running a for-profit website and consultancy I have no problem with commercial imperatives such as focus, planning, customer service and increasing turnover.
However, I’m pleased that Michael has just introduced me to an essay by Paul Graham who runs Y-Combinator, a small-scale commercial incubator. Entitled ‘Be Good‘ the essay argues that business start-ups should try to behave like a nonprofit if they want to be successful. Start-ups should have two aims: “Make something people want. Don’t worry too much about making money”. Graham concludes: “What you’ve got is a description of a charity”.
Specifically, Graham encourages start-ups to ‘be good’. “Being good seems to help startups in three ways”, he says, basing his views on the number of start-ups he has seen and advised. “It improves their morale, it makes other people want to help them, and above all, it helps them be decisive.”
Astonishingly he thinks that “Google looked a lot like a charity in the beginning”. He explains: “they didn’t have ads for over a year. At year 1, Google was indistinguishable from a nonprofit”.
He argues that start-ups and nonprofits have a lot in common, and it is the start-ups who have something to learn from nonprofits. “If you start from successful startups”, says Paul, “you find they often behaved like nonprofits. And if you start from ideas for nonprofits, you find they’d often make good startups”.
So, being good is good business. I’ll remember that next time the for-profit sector is held up as the best and only model.