Non-profits And For-profits

During today’s roundtable, we had a lot of discussion around non-profits and for-profits.

Foundups
Michael Trout, from Fukui, Japan, pitched Foundups, which he claims will be a platform for Open Corporations. He talked about everything from raising funding for pre-seed entrepreneurs to get them to the seed stage, crowd funding, social media marketing and open source. It’s the kind of pitch that makes your mind spin. You can’t tell what the company does. And Michael said himself that he has a hard time explaining what he does in three minutes.

To me, this is symptomatic of a much larger problem. Michael does not have enough clarity on what he is doing with his venture. In the same breath, he said everything he offers is free, like Open Source in the mid-nineties. I reminded him that commercial open source is a classic freemium model, where the free software comes with paid customer support and training. Without that, the only other way open source companies can survive is by being non-profit and raising charity money, which some have done.

So, which one are you, I asked. We had a lot of back and forth, but to my satisfaction, Michael was unable to answer that question. All he could say was that if someone would give him $100,000, he could make it all work.

Folks, this is EXACTLY how NOT to try to raise money.

SolSolution
Soren Harrison, from Boston, Massachusetts, presented SolSolution, a solar electricity venture whereby his company places solar panels on the roofs of schools, generates electricity, sells it to the schools, as well as back to the grid, and takes advantage of the federal rebates, incentives, etc.

Again, the issue of for-profit versus non-profit came up. Who funds the solar panels? Who funds the operating costs? Soren’s answer is ambiguous, even though his value proposition and business model are relatively clear and well thought through.

In general, it is difficult to make non-profits sustainable and scalable. It is certainly not my area of expertise. What is very clear to me, however, is that a lot of entrepreneurs seem to be caught in the FREE movement right now. Everything needs to be free. And as I said earlier, the only way you can sustain that is through foundation money.

If that’s the route, then Michael’s option is potentially working with the Kauffman Foundation or the Blackstone, two of the largest entrepreneurship focused philanthropic organisations out there. And Soren could work with Google Foundation. Google certainly has a very significant clean energy agenda, and they may be willing to fund his project.

You can listen to the recording of today’s roundtable here. As always, I would very much like to hear about your business, so let me invite you to come and pitch at one of our free 1M/1M public roundtables. We will be holding future roundtables at 8:00 a.m. PDT on the following dates:

Thursday, October 27, Register Here.

Thursday, November 3, Register Here.

Thursday, November 10, Register Here.

Thursday, November 17, Register Here.

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