"If you want to make a positive impact in the world, start a for-profit social enterprise"

5 min read
30 Oct 2020

s opposed to founding non-profits, create social enterprises that not only tackle challenges in society but also make money. This is called transformational entrepreneurship.

This article was written by the original owner of startupguide.com, Ryan Allis, and published on his website in 2012. Read more about why Ryan was happy to hand over his website domain to us here.

If you actually want to change the world, one of the best ways is to start a business.

In my conversations with millennials over the past few years, I’ve found that many believe that the best way to make a positive impact in the world is by building a non-profit organization.

If you want to make sustainable and scalable impact, build a business, not a non-profit. You won’t have to chase after donors, you’ll be able to pay your staff more, and you’ll attract better quality talent.

But the question is, how you can make the most sustainable and most scalable positive impact? By far, the best way to make a sustainable and scalable impact in your 20s and 30s is by building a company that solves a big problem. 

Some perils of the non-profit sector

Many young people who want to make a positive impact choose to build or join non-profit organizations, not realizing that the underlying structure of most non-profits is entirely unsustainable.

In the non-profit sector, in most cases, you’ll be cash-strapped, constantly asking for donations, won’t be able to pay your staff well, and won’t be able to attract the top talent. In the for-profit sector, on the other hand, you’ll have access to angel investors, you can attract talent with equity and you’ll be able to make a more scalable and financially sustainable impact.

By far, the best way to make a sustainable and scalable impact in your 20s and 30s is by building a company that solves a big problem.

Time and again, what I see from my friends who are on the non-profit side of the social enterprise space is that they are struggling to make impact and struggling to scale. They feel like they have to sacrifice in order to make impact.

What I see from my friends who are on the for-profit side of the social enterprise space is that they are making huge impact, hiring the best talent in the world, making a lot of money, and are able to reinvest that money in the areas they are passionate about.

Examples of great for-profit social enterprises

Three great examples of highly successful for-profit social enterprises are Change.org, Bridge International, and CrowdFlower.

Change.org makes impact by enabling the voices of citizens as a global online petition platform. The company makes money by generating leads for non-profit organizations and political campaigns - helping these organizations reach more donors and make more impact themselves. If Change.org were set up as a non-profit it wouldn’t be able to attract nearly the quality of talent it has and would be constantly searching for more donations. It is led by CEO Ben Rattray.

Bridge International is another great example of a company that is making tremendous social impact as a for-profit business. It is based in Nairobi, Kenya and has over 53,000 students enrolled in its 130+ schools across Kenya. They are able to provide better quality and lower cost schooling for tens of thousands of students for just $5 per month. Investment funds like NEA, Khosla Ventures, and Omidyar Ventures have investment. Bridge is led by CEO Jay Kimmelman.

CrowdFlower is based in the Mission district of San Francisco. They’ve raised $13 million to date to become a leader in crowdsourcing judgments. They have more than five million contributors globally (many in Sub-Saharan Africa) who earn money for helping analyze data that humans are better at analyzing than computers.

Six reasons why it’s better to be a for-profit social enterprise

Why is it better to build a for-profit than a non-profit? Here are six reasons.

1.By building a business you can offer equity to your team members and pay fair salaries.
2.By better compensating your team you’ll attract higher quality employees.
3.By better compensating yourself you’ll be able to live more comfortably, take care of your family, and have extra income to make investments in other companies that are making a difference.
4.By taking investment instead of donations, you will have investors who will be more willing to help ensure your success due to their own desire to see their investment grow.
5.By charging customers market rates you’ll get better feedback from them.
6.When you make a profit you’ll be able to use some of it to subsidize the prices for those who can’t afford full price as well as reinvest it into further improving your products and services.

It’s a lot easier to build a company that makes a huge positive impact in the world than a non-profit that makes a huge positive impact in the world.

It’s a lot easier to build a company that makes a huge positive impact in the world than a non-profit that makes a huge positive impact in the world.

Imagine if back in 1998 when Larry Page And Sergey Brin were setting up Google that they would have set it up as a non-profit venture instead of a for-profit venture. Instead of creating 50,000 jobs, attracting the best talent in the world, and actually achieving their mission of organizing the world’s information, Larry would still be walking around Palo Alto asking for $100,000 donations to scale up his server farm.

Yes, there are a number of highly impactful non-profits (Teach For America, EDx, Acumen Fund, Endeavor, and Khan Academy are a few of my favorites). I would argue that many of these organizations would be able to actually be more financially sustainable and have a more scalable impact if they instead converted into for-profit social enterprises like ThinkImpact, Change.org, and Bridge International.

Become a B corporation instead of a non-profit

B Lab is a non-profit organization based in Philadelphia that certifies socially and environmentally responsible companies. As of 2013, B Lab has over 790 for-profit companies that have been certified, including large firms like Patagonia, Warby Parker, Etsy, Method, and Seventh Generation.

By becoming a B Corporation, you make a commitment to the needs of employees, customers, the community, and the environment in addition to your commitment to shareholders. I’ve found that building value for employees, customers, the community, and the environment actually aligns with the creation of long term shareholder value.

B Corporations also enjoy substantial discounts on products from companies like NetSuite, Salesforce, and Intuit. For companies with less than $2 million in annual sales, the cost to become an B Corp is just $500 per year.

Pursue transformational entrepreneurship

In an influential article in Harvard Business Review from April 2012 called Transformational Entrepreneurship: Where Technology Meets Societal Impact, writer and entrepreneur Max Marmer provided a framework for thinking through how to make the most positive impact.

Max states in the article:

“To successfully make the transition to the new socioeconomic era of the information age, we need to learn to focus the enormous power and efficiency of capitalism on the world’s most important problems. To do so will require figuring out how to unite the scalable tools of Technology Entrepreneurship with the moral ethos of social entrepreneurship.

“While social entrepreneurship is promising, its impact has been limited to date as its solutions are rarely devised with scalability and true economic sustainability in mind… Transformational Entrepreneurs earn their name by creating innovative solutions to the world’s biggest problems that are scalable, sustainable and systematic.”

Solving big problems through entrepreneurship

If you want to make the biggest positive impact in the world as you can in your lifetime, build the next Google, Bridge International, Change.org, or D.light. Find a big problem like clean water, education, healthcare, energy, government 2.0, security, human communication and build a sustainable solution to that problem.

If you want to create a clean energy world, start a clean energy company. If you want to educate the world, start the world’s best education company. If you want to end homelessness in your community, start a company that trains the local homeless population in job skills and places them in in-demand jobs. If you want to protect biodiversity, start an eco-tourism and photography company. If you want to end poverty, create a company that creates lots of jobs in the developing world.

The steps to building a company that solves a problem are simple in concept, yet take a few years to get right and to scale your solution.

7.Identify a problem, either in your community or in the world.
8.Talk to a lot of people who have that problem. Develop great empathy and understanding of those who have the problem.
9.Experiment to find a solution to that problem.
10.Build a business to sustainably and scalably solve the problem.

Early thought leaders in the social enterprise space like Bill Drayton (Ashoka) and Greg Dees (Duke/Stanford/Harvard) once argued that being a “for-profit social entrepreneur” wasn’t even possible. Today, they have changed their perspectives and realized that impact can be made across any sector of the economy.

Main photo: Unsplash/ Helena Lopes

*This article was originally published on October 17th, 2018 and updated on December 11th, 2018.