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What I’ve Learned Working with Start-ups and Non-profits
11.27.10

 

Over the years, I've had the good fortune of working with a number of start-ups and non-profits -- sometimes formally (board of directors, advisors, etc.) and sometimes informally (just phone calls / emails getting my opinion on something or asking me to test out a beta version of their product). I find it to be a real privilege and intellectually challenging because the issues raised are issues that are important to the start-up or non-profit. Figuring them out is a little like a puzzle -- only there are no definitively right and wrong answers, but likely better and worse answers.
 
I first started working with non-profits. I was at amazon.com at the time and it dawned on me that there were a lot of great non-profits out there but non-profits are typically started by someone with great passion and determination for a cause but not always the business experience to go with it. Non-profits, while non-profit, is still very similar to a business in terms of the day to day and long-term issues that it deals with. Over the years, I've worked on consulting projects, organized a program that would match business executives to non-profits with specific needs, and even served on the board of a non-profit and a philanthropic organization. However, I'm sad to say that I broadly do very little by way of non-profits these days.
 
I've been slightly colored by my experiences -- I just think it broadly wasn't a great fit for what I like to do and what these particular non-profits were looking for. I've noticed that most non-profits are broadly defined by one criteria: the need to raise money. This dominates nearly every discussion that I've been in. Raising money is an extremely important skill set and frankly, the lifeblood of a non-profit. Most non-profits don't have a conventional revenue stream that most businesses have -- they depend on donations and grants which have wild swings making it very difficult to plan. I've found that most non-profits that I've worked with (or have asked me to join their board) basically look at their board as a piggybank. They need $X and they actively use their board members to either contribute directly, recruit others who will contribute, or organize events that will raise a substantive portion of it.
 
There was this one non-profit that asked me to join their board (and while not a very large non-profit, I did view them as excellent at what they do and they had the support of many well-respected philanthropic organizations). I mentioned to the Executive Director some of my (general) concerns in terms of joining a non-profit board -- that board members are looked upon primarily to raise money and that their vote on issues raised to the board are largely perfunctory, that there is little, if any, dissension. To his credit, this Executive Director directly confirmed my suspicion -- he said that all board members have specific fund-raising targets and nearly all board votes were unanimous. I thanked him for his candor and we parted friends.
 
I'm not primarily a money man. I like to think of myself as an operations person -- someone who likes to get into the nuts and bolts and figure out how to improve things. This is broadly, the area I've found that most non-profits seem to have the least interest in talking about. There's almost an unspoken assumption that the non-profit is the expert in operations and the board just needs to get them the money to do their job. I frankly stopped engaging with non-profits on this level once I learned this was consistently the case. I still work with non-profits, but on a very specific basis. They'll usually ask to discuss with me a specific operational issue (e.g. help them evaluate their marketing efforts and make recommendations about what they should change) -- I'll come in, do my work, and get out. 
 
I have a somewhat limited view of non-profits. It's not tiny -- I've probably talked with or worked with a few dozen non-profits -- but it's not expansive or representative of every non-profit out there. But here's where I think is a failing of non-profits. There should be a balance. They need certain individuals for their contacts, fund-raising ability, or willingness to write a check. Perhaps they even need to give up a board seat in return for that. I understand that. I'm not necessarily supportive of it, but I understand it.
 
However, the point of a board is governance. And presumably the point of an advisory board is advice and operational expertise. Use these boards for their intended purpose -- not as a quid pro quo piggy bank. Businesses grow and they scale. Giving up board seats in exchange for $ has a natural, limited ceiling. Getting people who can help a non-profit grow should, over the long-term, be more beneficial than someone who can solve a short-term financial hole.
 
In working with start-ups, I've found almost the opposite approach. Whereas non-profits have little interest in talking about operations, start-ups I've found focus almost exclusively on operations. They have a tremendous hunger for figuring out how to do things -- sometimes it's large issues like the strategic direction of the company, other times it's very nitty gritty things like how one runs a focus group. In both cases, there's a shared commonality -- they don't know how to do something, they need to figure it out, and they want some help. Money and financing are of course important to start-ups. However, most start-ups I know seem to have this figured out. Maybe it's partly a result of existing networks, but partly it's just money is raisable. There are a lot of venture capitalists and angel investors out there who are willing to put money in if there's a good team and an interesting idea.
 
Most start-ups I've seen are fairly disciplined with respect to their boards. Their board of directors have the founders or senior executives, a few investors (typically venture capitalists), and potentially one or two outside directors (usually senior executives of well-known companies). With younger companies and smaller boards, it might just be senior management + investors. There's more wiggle room with advisory boards. I've certainly seen my share of advisory boards where well-known people are on the board primarily to lend some brand oomph to the company. However, many advisory members usually either have domain expertise (e.g. if you run a fashion start-up, you might have the editor of a fashion magazine on your advisory board) or fundamental operational expertise. 
 
I'm not saying that start-ups do it right -- but I do like this model. The reason is because the core purpose of the board of directors is preserved -- corporate governance. The core purpose of the advisory board is also largely preserved -- advice. The need for advice is not always apparent, but usually valuable on some level. After all, it is what it is -- just advice. The senior management team doesn't have to take it -- but it's one more data point for them to evaluate. Every day, there are a lot of decisions to be made. For someone making a decision for the very first time, even for something innocuous, there's always some benefit to getting perspective or leveraging experience from a trusted source that has done it before. Typically, things I do a second or third time, I'm better at than the first time I do it. In my daily life, if I'm trying to learn something new and I know someone that's good at it, I love to get the benefit or their experience and advice. This is where I think advisory boards really earn their keep and hopefully someplace that non-profits can leverage more in the future. 
 
On a separate note, I hope to one day engage much more deeply with non-profits. I'm always searching for the non-profit whose mission I feel passionate about and wants to engage with me on an operational basis. I hope I can add a lot of value there -- I just know that there's not a lot of value I can add with the ones who only care to engage with me on a fund-raising basis.

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