For-Profit By Default?

by Nathaniel Whittemore · 2009-03-26 07:57:00 UTC
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An example of a base-of-the-pyramid (BOP) focused business on wheels, from Pedaleadas

There is an interesting expectation switch that seems to be playing out at the Skoll Forum. The default question when someone talks about their social venture is for the person their talking to ask something to the effect of "why not make it for-profit?"

Now this is certainly not universal, but there is an interesting recognition forming that if an organization is providing valuable services, it may be more sustainable in the long run to have the revenue stream be more closely aligned with the people who are recieving the services. An interesting example is a project supported by Innosight Ventures that is basically a washing machine business-in-a-box. The idea is that washermen in India, instead of taking people's clothes, washing them in a river and returning them a week later instead now have access to a washing machine on wheels that allows them to charge the exact same price but take on more clients because their job is now done in about a day. The firm made its money back in six months and is now getting a healthy return.

This doesn't mitigate the need for checks, and there are still lots of organizations who use the nonprofit status to affirm their mission-focus. It could have been a nonprofit, for example, that started that washer business and just plowed the profit into expansion. To some extent, this is the model that the Acumen Fund has taken, I believe. It also becomes a lot more complicated in those instances when the goods or services being distributed tend into the area of rights: health, education, etc.

My instinct is that the field that has dealt the most with this is micro-finance. There are both good and bad nonprofit and for-profit models of microfinance. In my work in Uganda, I've seen for-profit microcredit firms where the "sustainablity" argument (that for-profits are more sustainable) bears out, but I've also seen communities who view some of those firms as fundamentally extractionary and are working to create local alternatives.

Either way, it's fascinating to see so many folks who are asking "why not" be a for-profit rather than the other way around.

Nathaniel Whittemore is the founder of Assetmap. Previously he was the founding director of the Northwestern University Center for Global Engagement.
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