Thursday, May 07, 2009

Nonprofit with Attitude

The other day during the CSU Clean Energy Supercluster Expo, someone said to me: "I can't believe Envirofit is a non-profit. They don't look or act like one." I took this as a compliment for Envirofit, and a criticism of more traditional non-profits in the energy field.

Envirofit is a non-profit, 501(c)3 corporation. But we intentionally try not to act like one. We make and sell products. We define success as making and selling a lot of these products. We have a complex supply chain with large multinationals. We have built a distribution network in India for our stoves, and in the Philippines for our retrofit kits. We offer a warranty on our products, something poor customers aren't use to getting. We care about marketing, and we care about our brand. While we are not yet profitable overall, we do make a profit on each unit we sell. We hope to sell enough volume soon to become a profitable company, and we are on track to have millions of dollars in revenue.

We aren't doing these things to make money for our shareholders (we don't have any). We are doing them because we believe this is the best way for our company to have a significant impact on the environment and poverty, and to do so in a sustainable and scalable way. When we started the company, we couldn't promise attractive returns to investors, but we could offer attractive impact. Since our goal was to clean up the environment, and alleviate poverty in developing regions, we could qualify as a non-profit organization.

My point? Envirofit is a non-profit organization. But it runs as a company. If you decide to start a non-profit, be sure you realize that this is but one decision on your organization's design. It certainly defines some things you can and can't do. (At times, it has been a bit of a bother for us.) But it doesn't have to define your relationship with customers, the types of employees you attract, and the way you conduct business.

Other non-profit BOPreneurs with an enterprising attitude? Kiva, One World Health, Accion and One Acre Fund all come to mind.

In short, don't let your legal form drive your business attitude. Don't let "non-profit" become a mindset.


Oz said...

Well said.

I think that's one of the common misperceptions of nonprofit organizations - that they're disorganized or unprofessional. The best nonprofits combine a strong mission with a sophisticated approach to cultivating their own capacity. These organizations still have a profit for investors/funders - it's just impact on a given issue or population, not more money in the bank!

Joost Bonsen said...

Do you think that if/when Envirofit becomes economically sustainable you would shift over to becoming a for-profit? For example, to seek the investment needed to accelerate deployment or break into new geographic markets or otherwise?

Would not remaining non-profit preclude you from tapping into investment funds and/or capital markets?

I ask because several of our MIT Development Ventures alumni teams are wrestling with for-vs-non status and the basic challenge that even ventures with a for-profit mentality can require a considerable startup period of non-profitability.

Bopreneur said...

When Envirofit started, Kyoto wasn't in effect, and therefore we assumed the value of carbon reductions would be zero.
That has changed, and we are now starting to forward sell carbon credits in the voluntary market.
This has changed our potential profit picture.
As you point out, there are challenges to scaling non-profits.
A Stanford Social Innovation Review article a few years ago listed the largest non-profits; only a few would be considered the size of a significant company.
My advice to start-ups is to go with a for-profit model if at all possible- now with options like B Corp and L3C, you can utilize for-profit funding with for-purpose mission.