HACKER Q&A
📣 eganist

What structures exist to financially reward "investors" in non-profits?


Inspired by this comment: https://news.ycombinator.com/item?id=27859607

I'm worried that binary thinking between free market for-profits solving a challenge v. compelling government regulation is keeping us blinded to other potential solutions, but I'm having a hard time thinking of what solutions exist to incentivize "investment" in non-profits. I put "investment" in quotes because I'm not aware of how returns could be structured while maintaining any form of non-profit status given that the returns would likely be profits anyway, but I admit this is far out of my depth.

Basically, is it even possible to "invest" in a non-profit and see upside without violating the very concept of a non-profit? Do such structures exist? If not, how might such a thing look?

  👤 h2odragon Accepted Answer ✓
For example: Say you run a printing business; starting or assisting a group that, say, talks about your local schools could be useful no just because of ones own interest int he schools, but because that group can be encouraged to distribute a lot of printed pamphlets.

I have seen nonprofits with associated with a for-profit services business that shared directors. An ISP geared to serving the general public doesn't want controversial political customers, so they needed their own ISP. In theory those can be as real a business as any other.

How moral and upright all this is depends on the people involved; there's plenty of examples of outright scummy operations I'm sure; probably mostly the larger and more famous end of the spectrum. There's lots of small organizations full of good people doing good work and making an honest living at it, too.

👤 _ah
It's theoretically possible to structure a debt offering where the investor is paid out over time by the donations of other future donors. This is morally suspect though: since a non-profit doesn't generate positive financial returns, they're really robbing themselves in exchange for larger impact now.

A better model might be the "for-profit charity" which seeks to generate a return but not an excessive one. This might attract investors who are seeking a reasonable (but smaller) market return along with social impact.

👤 tacostakohashi
The middle ground is something along the lines of a co-operative/charity.

These are organizations that can and often do operate as a business selling things, providing services, and paying their suppliers, employees and landlords at commercial / market competitive rates, but don't aim to distribute surplus profits to their shareholders.

For a traditional co-operative, the shareholders are the customers, so the incentive is that they get whatever service they need reliably and without price gouging or increases. The flipside is that the co-operative itself isn't incentivized to increase efficiency or lower prices.

👤 giantg2
Tax write-offs. You won't see actual upside, but this allows people to make an impact in an area they are passionate about instead of paying it to the government.