Thursday, November 6, 2008, The New Model for Nonprofits?

The first plenary session at the Web 2.0 Summit in San Francisco was with Dr. Larry Brilliant, Executive Director of He was interviewed by John Battelle and Tim O'Reilly.

Brilliant (love the name since I think of beer) was telling the story of how got started by Larry and Sergey before Google went public. They borrowed from's foundation their framework to contribute 1% of Google's equity, profits and employee time.

How Google and differ is that was established as hybrid philanthropic organization (something I learned a while ago from Christine). It is not a 501(c)(3) nonprofit but a for-profit entity. This allows to provide grants as a traditional nonprofit foundation, but also to invest in for-profit ventures that fit into one of their five initiatives.

In 2007, for the first time charitable giving went above the $300 billion mark ($306.39 billion). The other side is that 501(c)(3) organizations hit an all-time high of 1,126,367 (733,790 nonprofits in 1998). This overall growth is continuing and an increased visibility of each cause through the Internet and new online platforms, such as Causecast, has created an intensely competitive market for donor dollars. Some nonprofits have explored creative methods for fundraising, such as a nonprofit IPOs (The Economist, September 11, 2008).

A coming recession, the possibility of an economic downturn of 5 years or greater, and capital gains taxed 20% (from 15%) will have an immediate impact on individual donations, which is 82% of all giving (vs. corporate and foundations). There is the long-term possibility of overall taxes hitting 50%, which will also affect donations (all Western nations with government-mandated universal health care have such tax rates). The nonprofit sector has to be prepared for the worse and will be forced to innovate.

One model to consider is While it is not an operating nonprofit and a grant and investing entity, its structure is something to consider for cause-oriented organizations. Whether becoming a for-profit entity or a hybrid (i.e. for-profit entity within the 501(c)(3)), nonprofit organizations can provide a more attractive option for donors. It will satisfy their hearts and reward them with a possibly upside. These could be for-profit ventures related to a nonprofit or their causes. Of course not all causes are able to develop viable for-profit ventures, but this should be an increasing consideration.

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