Entrepreneurship is a dirty word for nonprofits.
“Entrepreneurs enrich themselves and leave communities worse off,” one local organizer told me.
“Entrepreneurs are take-take-take, while nonprofits give-give-give,” was how the volunteer coordinator put it.
“Nonprofits have too much work already. We’d appreciate fewer entrepreneurs making things worse, thank you,” the Executive Director said, celebrating her 22nd year at the helm.
A familiar refrain. But is it correct?
A little scrubbing…
Let’s clean off the reputational muck and get a fresh look at entrepreneurship.
According to the Entrepreneurship Learning Initiative (eli), an entrepreneurial mindset is “self-directed problem solving in building value for others”.
Read that again.
Doesn’t that sound a lot like what nonprofits do?
So, what gives?
It’s not as if the sector doesn’t have entrepreneurs.
They’re easy to find.
Like many colleagues, I’ve taken an entrepreneurial mindset to nonprofit and public services for 25 years, launching dozens of new programs, forged countless partnerships, and cut out multiple layers of time-wasting processes and procedures.
Most of this time, I wasn’t “doing entrepreneurship” intentionally or consciously using its principles. I never perceived myself as an entrepreneur, nor knew anyone else to do so.
We focused on outcomes for the communities we served, willing to explore in an open-minded way the most effective ways to achieve those outcomes and eager to connect with people to support those initiatives.
Cutting against the grain, challenging entrenched ways of working, and testing new ideas on a small scale just came with the territory.
Coaching and consulting nonprofits, I hear misperceptions about “entrepreneurship” that obscure seeing its value.
One Executive Director looked aghast at the mention of the word. Smiling with pride, she said, “That’s certainly not the culture here!”
Entrepreneurship has an image problem in nonprofits.
This bad rep doesn’t extend to the principles or the practice. You can’t find out about them if the term itself, entrepreneurship, puts you off.
The stereotypical image of an entrepreneur.
Whatever image just popped into your head, I’m guessing it didn’t match your idea of a nonprofit leader.
If we could overcome the negative perceptions of entrepreneurship, our sector could unleash the full power of entrepreneurial mindsets. We would do nonprofit entrepreneurship with intention, rather than by accident.
Here are the 5 negative perceptions of entrepreneurs:
Perception 1: Accumulators – chasing wads of cash ASAP
Perception 2: Conspicuous consumers – flashy cars, boats, and vacations
Perception 3: Technology-driven – apps and code rather than people and needs
Perception 4: Privileged – diversity ranges from old white male to young white male
Perception 5: Eyeing the exit – success is selling out
Let’s break these perceptions down one by one and see what’s useful to nonprofit founders and startups.
Perception 1 – Accumulators
In the classic stereotype, the entrepreneur’s motivated to make as much money as possible as quickly as possible. Their driving force is getting rich. Where nonprofit passion is helping others, entrepreneurs look to be helping themselves.
Where nonprofit founders want to pick people up, entrepreneurs are indifferent or actively push people down. Both Amazon and Tesla, and their founders Jeff Bezos and Elon Musk, are examples of entrepreneurship known for poor working conditions. Reports have linked Apple to poor labor practices in Asia.
While Bezos and Musk are outliers in terms of financial success, they receive praise in the entrepreneur and startup community as though they are people to emulate. To most nonprofit founders and leaders, these men are hardly model humans. The vast sums they earn daily – which sped up during the pandemic – are incomprehensible to most people and imperceptible to them. Choosing to dabble with personal space travel over putting their wealth to public good confirms their moral framework.
But let’s be honest. Neither Bezos nor Musk are the norm.
Far from it.
Truth is that most for profit entrepreneurs derive wealth from selling all or part of their companies if they become profitable.
And that’s a big if – according to failory.com, over 90% of for-profit businesses fail, 50% in the first five years.
In the meantime, just like nonprofits, they keep as much money in the company as possible to invest in growth.
They will work long hours, wearing many hats, just like nonprofits, until they figure out how everything hangs together in a stable way.
The fastest route to wealth for entrepreneurs in the for-profit sector is to solve a customer problem at a price they can afford while being profitable for the company to deliver. This ideal situation is called “product-market fit”.
Amazon started selling books online at discount prices. Tesla offered a fully electric sporty car. They grew by offering more products to solve similar by different customer problems. Apple has a similar history with Steve Jobs, known for his focus on customer experience.
The nonprofit equivalent would be “program” in place of product and “need” in place of market.
Let’s call it program-need fit.
Nonprofits that achieve program-need fit quickly, and cost-effectively, will not only survive but thrive and be able to share their solution widely. They will grow by extending their programs to serve people earlier or for longer, expand to new communities, and add similar programs that meet slightly different needs.
This growth pattern is universal.
Entrepreneurs need to build value for others — customers and shareholders, not just themselves. Of course, the primary way of measuring for-profit value is in money terms. Nonprofit value isn’t primarily financial.
Nonprofit takeaway 1: The key to survival and growth is programming that meets needs cost-effectively.
Perception 2 – Conspicuous consumers
The stereotypical entrepreneur shows off success by posing in front of an expansive property, with several vehicles parked in front. Or they’re lazing alongside an exclusive pool, waited on hand and foot by attentive staff, surrounded by luxury.
Or blasting into space.
They can enjoy all the material trappings because, as masters of the universe, they have conquered time and need to work only some minimal part-time schedule.
These images are long shots for most entrepreneurs, but they’re still held up as worthwhile goals. They do not look like worthwhile life goals for most nonprofit folks who would make different choices with such wealth (less Jeff Bezos, more MacKenzie Scott).
Nonprofit folks have already made different choices with their careers.
Our nonprofits play a redistributive function in our economy. We translate private wealth into public good by accepting donations and running programs.
We wish it were different. We envision a time when our nonprofits are unnecessary. But the reality is we rely on the excesses of some to support the needs of others.
The reality, too, is that those with plenty want to give. Our job is to offer them an enticing invitation to contribute to solving the problems we address for our communities.
Nonprofit takeaway 2: despite the stereotypes, wealthy people will give when offered an enticing invitation to contribute
Perception 3 – Technology
Another common stereotype of the modern entrepreneur is their focus on technology.
Not just Jobs, Bezos, and Musk but also Mark Zuckerberg (Facebook, now Meta, with Instagram and WhatsApp), Jack Dorsey (Twitter and Square), Sergey Brin (Google), Bill Gates (Microsoft), Daniel Ek (Spotify), and Evan Spiegel (Snapchat).
In nonprofits, people come first both in terms of problems but also solutions. People help people.
We prioritize people and put less emphasis on data and systems.
We’re not early adopters of technology in either our programs or our operations.
The idea of packaging our programs into apps is meh.
Our default is face to face human contact. Technology wants to get in the way of human contact or replace it altogether.
We don’t look for tech solutions and we don’t look up to titans of tech.
Those tech titans would argue that their tools solve human problems. As we said with the first perception about accumulation, entrepreneurs need to solve customer problems.
People want easy ways to communicate – email, sharing text, photos, videos, and music on social media, then following up with direct messages to individuals and groups.
Successful tech entrepreneurs have solved these customer problems in ways customers are happy to engage and pay for with their time, attention, and money.
We don’t hear about the unsuccessful attempts using solutions that customers didn’t like. The apps that were too clumsy, too many clicks, crashed too often, or otherwise failed to do the job people wanted. Failing entrepreneurs learned, made changes, and tried again or packed up and went home.
For-profit entrepreneurs test their solutions by offering them to customers. Nonprofit programs don’t face the same rigor; we provide what we can fund but don’t normally give the people using our programs the same power and voice that paying customers have. This power imbalance reduces the value of nonprofit programs, a critical issue that warrants a future blog on its own.
Meanwhile, we can agree that technology connects people – isn’t that what we try to do in nonprofits?
Would anyone really choose to go back to snail mail and land line telephones?
Nonprofit takeaway 3: Give the people who use your programs a loud voice in how those programs run and grow so that they better meet their needs.
Perception 4 – Privileged
All the entrepreneurs named share common traits. They’re white, male, and expensively educated.
Most metropolitan areas have networking clubs devoted to women entrepreneurs, black entrepreneurs, Latino entrepreneurs, and so on. While these groups exist with thriving memberships, the stereotypical entrepreneur is white and male.
Older, white, and male like Bill Gates and Jeff Bezos.
Younger, white, and male like Mark Zuckerberg, Jack Dorsey, Daniel Ek and Evan Spiegel.
Nonprofits are intimately familiar with white men who predominate on Boards of Directors and donor databases.
But we don’t want it that way (although evidence proves it’s easier said that done).
This demographic doesn’t reflect staff groups, volunteers, or the communities most reliant on nonprofit programs.
Neither does this demographic have a monopoly on entrepreneurial thinking.
I’d wager that people without means, faced with more immediate problems daily, are more adept problem solvers than those with means, because they must.
I’d further wager that people who work with communities in need are more adept problem solvers than those with means, because they must.
Driven to see change, nonprofits should see “problem solving to build value for others” as intrinsic to their design, rather than a white male preserve.
Are we in nonprofits the natural entrepreneurs?
Nonprofit takeaway 4: Privilege is neither a requirement nor its absence a barrier to adopting an entrepreneurial mindset.
Perception 5 – Eyeing the exit
Building an organization is all about creating value for the people it serves, whether paying customers and shareholders/owners or a community in need and a network of supporters.
As we’ve covered above, however, if your goal is to get rich, your best bet is selling what you’ve built.
LinkedIn has no shortage of profiles with “serial entrepreneur”, those who put their startup-to-exit recipe on repeat.
The idea of “exit” has no equivalent in nonprofit. We don’t build organizations for their financial value as assets. Nonprofits are never for sale and founders have no financial stake, other than a salary.
A “serial entrepreneur” in nonprofits, who founds an organization then leaves to found another, would look like abandoning ship.
However, we under-appreciate the idea of founders preparing for the time beyond their daily involvement. The version of “founders syndrome” that includes making oneself the center of all decisions jeopardizes a nonprofit’s future.
Nonprofit takeaway 5: Looking ahead past their involvement, nonprofit founders should build organizations that don’t rely on their input
Focusing on the yucky bits of the entrepreneur stereotype obscures not just the value of entrepreneurial thinking for nonprofits, but also the degree to which we embody the ideas of problem solving to build value for others.
In what ways are you already a nonprofit entrepreneur?