What are the secrets to nonprofit startup success?

Lourdes, a Kiva loan recipient based in Paraguay. Photo by: Brandon Smith

OXFORD, United Kingdom — This week, delegates of the Skoll World Forum on Social Entrepreneurship are gathered for their annual meeting in Oxford; and one of the big questions that social entrepreneurs bring each year is how they can scale their impact.

For the past five years, Kathleen Kelly Janus, author of Social Startup Success, has traveled across the United States to visit founders and funders, and capture their answers to that question.

“The power of proximity is what allows an idea to get off the ground or not,” she told Devex in Oxford on Wednesday.

In each of the five chapters of the book — which deal with testing ideas; measuring impact; funding experimentation; leading collaboratively; and telling compelling stories — many of the examples she highlights work well because the nonprofits involved are close to the problems they aim to solve.

“These strategies are teachable,” she said. “The problem is we aren’t teaching them.”

The founders and funders who attend conferences such as Skoll are used to sharing best practices, but not everyone has access to these networks, and nonprofit staff often miss out on the opportunity.

Janus was inspired to write the book after her experience of co-founding Spark, an organization that funds solutions to issues impacting women through a network of donors. “We were growing like a weed for the first several months,” she said. “We were doubling our revenue every month; we were getting more and more donors; we grew to network of 10,000 people. But it was just when we hit our stride that we hit a wall.”

She started hearing a similar narrative from other organizations, who were often in a position of making ends meet rather than of making impact — so she took on the project to figure out what makes nonprofit startups succeed.

What was exciting about the findings, she said, was that “the strategies these organizations were using to lay the foundations for success were not expensive, nor did they require significant resources. They were strategies that any organization with any level of resources could implement today.”

The book identifies five key strategies for success. The first is testing ideas by engaging stakeholder, and framing failures as learnings. The second is measuring impact, tracking outcomes, and leveraging that data. The third is experimenting to find an effective funding model that is true to your goals.

According to Janus, while organizations are often comfortable experimenting with product design, the same approach of testing and learning needs to be brought to fundraising. “There is no one-size-fits-all funding model that will work for every organization,” she said. “You have to try out different sources of funding. And you can do rapid prototyping at low cost to get to the answer.”

Kiva, the San Francisco-based crowdfunding platform, serves as the example for the fourth strategy: leading collaboratively. The organization allows employees to manage their own success metrics, an example of creating an environment where people feel empowered and appreciated.

The fifth strategy is to tell compelling stories to share the work that you’re doing. One example Janus points to is Room to Read, another San Francisco-based organization focused on improving literacy, which has found a way to get others to raise money on their behalf by connecting donors with the individuals their money is supporting.

“I won’t name names, but there are a lot of organizations out there that have a lot of sizzle, and very little substance,” Janus told Devex. “The problem in the nonprofit sector is that the customers — the beneficiaries — are different from the people who are paying for those services. So in the for-profit sector there’s a very easy weeding mechanism. If customers don’t like the services, they don’t buy them, and the companies go out of business. That’s not the case in the nonprofit sector.”

Not all nonprofits are as effective as they could be with the resources they have, she said — and the “dirty little secret” in the social sector is that not all nonprofits should exist.

“But more often than not, there are super effective organizations that just aren’t telling their story,” she said. “I’m less worried about spending my time putting the sizzle organizations out of business, and more worried about how to put the right tools in the hands of the substance organizations so they can be more effective in raising the money they need.”

While she acknowledged that the lines are blurring between for-profit and nonprofit models of addressing social problems, “the reality is that we cannot use market solutions to solve problems of market failures,” she said. The need for nonprofits will not go away, but many of them need to change the way they work, including when it comes to fundraising.

“Don’t just see people as dollar signs. That’s where your motives are going to be transparent. You need to genuinely approach donors as partners,” Janus said.

She described philanthropy as a broken system, echoing some of the themes discussed at the Skoll World Forum this week, such as a session on “Proximate Philanthropy: Exploring Power and Privilege in the Funding Landscape.”

“We have this strange power dynamic. Even think about the language. The grantors and the grantees makes it sound like it’s people handing down from the mountain when in fact everyone has something to bring to the table,” she said.

“We need to shift those dynamics. That starts with the nonprofits. That starts with actually approaching these relationships with funders as partnerships,” she said.

“The good news is philanthropy used to be about writing a check and walking away. It is now about writing a check and rolling your sleeves up and leaning into it. And that’s a real opportunity for nonprofits.”

Editor's note: Devex traveled to the Skoll World Forum with the support of the Skoll Foundation. Devex retains full editorial independence and responsibility for this content.

About the author

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    Catherine Cheney

    Catherine Cheney is a Senior Reporter for Devex. She covers the West Coast of the U.S., focusing on the role of technology and innovation in achieving the Sustainable Development Goals. And she frequently represents Devex as a speaker and moderator. Prior to joining Devex, Catherine earned her bachelor’s and master’s degrees from Yale University, worked as a web producer for POLITICO and reporter for World Politics Review, and helped to launch NationSwell. Catherine has reported from all over the world, and freelanced for outlets including the Atlantic and the Washington Post. She is also the West Coast ambassador for the Solutions Journalism Network, a nonprofit that trains and connects journalists to cover responses to problems.