08 May Non-Profits vs. For-Profits – A Lesson on Entrepreneurship
I had an interesting call with a friend of Jesse’s this morning – he’s starting a web venture and is debating whether to do it as a non-profit or a for-profit. The idea is similar to Indaba in that it’s a web app for creative artists (not musicians in this case), and so we went through a lot of the same thought process a few years back when starting Indaba.
It’s an interesting conundrum – on the one hand, non-profits can get funding from foundations, grants, etc. and have a clear altruistic motivation. On the other hand, for-profits can involve a wider array of funding options more easily (angels, VCs) and are generally more nimble and market-driven (read: more efficient). I also happen to believe that it’s possible to provide valuable services in a for-profit setting (like Indaba has). After all, if a company isn’t providing something of value, it won’t exist for very long.
This isn’t meant to be a post about the pros and cons of non-profits and for-profits however. As a lesson on entrepreneurship I instead wanted to point out that decisions like these need to be driven by the preferences and objectives of the entrepreneur him/herself. In my call this morning, I asked the founder questions about what he wanted and why he was doing this. There are no right answers here. However, different answers can lead to different choices – if he wanted to build a web app he can sell in 2 years a for-profit might make more sense. If he wants his life’s work to be about helping artists and not necessarily profiting off of that goal, then maybe a not-for-profit makes sense. Or not. The point is this: entrepreneurs are very well served by sitting down and asking themselves this question: why am I doing this?