Facebook is one of the few large technology companies who, as I believe, are for-profit social mission driven organizations. The organization’s repeated public claims to stay true to its mission to impact society at scale and forgive short-term financial wins from its very early days makes it a trendsetter in product and business model innovations on the web today, especially in the light of its $38+ stock price.
But more traditionally, (social) mission driven organizations have taken the non-profit path, and for good reason. Unfortunately, due to social and capitalism norms, mission driven organizations aren’t really poised to scale like Facebook has. This is why we cannot imagine a situation where Facebook would have been able to achieve the nature of impact it has under anything different from its current legal and equity structure. But just to put things in perspective, and a little bit of kicks, let’s go back memory lane when Mark, Dustin and the summer interns moved to the Bay Area and change only one thing about that situation: their legal structure. What if they were a nonprofit? Leave alone getting John Doerr behind them, they would have struggled to get a meeting with a foundation. And even after some struggle if they did get the meeting, and go through their “investment” process, here is what their email response from an ideal foundation may have looked like:
Thanks for submitting a seed grant proposal, after spending 8 months building a relationship with us and applying in the Fall cycle. Some of our board members carefully reviewed your 48-page application, and everyone is very impressed by your work. Good job!
There are, however, some issues we faced with your application:
- We are unable to understand how you are different from your competitors. Hi5, MySpace and Friendster are all doing the same thing as you. You say you are easier to use, but unfortunately, that does not align with the impact measurement metrics we use.
- Your mission ‘to make people more connected’ is extremely vague. As you realize, our portfolio of nonprofits work on social issues in the space of women empowerment, access to technology, healthcare and sex trafficking in Vietnam and Bermuda. You need to focus on some serious social/community challenge, as a website cannot change or improve how people communicate. Telephones and email have been quite breakthrough innovations in this space, and social networking isn’t all that useful, as Nielson’s research has shown that it only helps teenagers with low self-esteem.
- Your entire team is very young and inexperienced. We tend to invest only in organizations who have board members from other larger nonprofits.
- You have told us that you haven’t gotten your 501c3 yet, and your financials only reflect spendings on pizza and housing, and no program related expenditure.
- On the note of your financials, for the nature of operations you intend to run, you don’t seem to have a sustainable revenue model. You hint at being able to sell ads on the website in the future, but we all know that really nobody except for Google has built a real business out of ads.
- We have already invested in a company which allows farmers to share short SMS-sized messages with each other. I think your team should consider working with them instead. It would be hard to justify two similar investments to our board.
Irrespective, we brought our IT team into these discussions and they believe you have an amazing product and some early users on your website. In light of this, we have decided to give you a $150,000 grant beginning in 6 months time, contingent on your ability to raise $25,000 in bake sales from friends and family. This sum total of $175,000 should help you last for the next two years, and will allow you to hire a Director of Development for further fundraising operations, apart from the computer people you were interested in hiring for building your website.
We are excited about this, and congratulations for your grant! Let us get a cup of coffee after I return from my vacation after a couple of months.
John Smith Foundation
And boy, wouldn’t things be different for Facebook? Perhaps, we wouldn’t have heard of them today.
P.s: I run a small nonprofit tech company which has been seeking investment for a short while now. This article has been written in part frustration in navigating the nonprofit funding realm.