Is your startup just a non-profit in disguise?

A good plan violently executed is better than a perfect plan executed next week

- Paul Graham

No revenue vs no profit

Chris Anderson has some very well-publicised – and criticised – views on a “Free” business model.

While “Free” effectively describes a revenue model [or no-revenue model for the free stuff, to be precise], I’m sure most businesses willing to give away free stuff do so with an eventual profit intention.

Okay, so there’s the contradiction to that line of thought – here Paul Graham talks at Startup School ‘08 about the strange, almost comical, similarities between startups and non-profit organisations. Take what you will from it, but it’s a good viewpoint just to think about if nothing else.

His main rationale? Startups primarily do two things:

1. make something people want; and
2. don’t worry too much about money or the business model [at the beginning anyway].

and these are the key characteristics of a non-profit.

Do no evil Do some good

Paul’s main topic is benevolence – the desire to help others – which he uses as the basis for his case.

All startups, even the most successful, come close to death at some point, if not a few times.

Here are some of the other points worth noting from the video:

• There are ideas that – to be done right – need to be done as companies [as opposed to as organisations].
• Very successful startups often act like non-profits.
• If you act benevolently towards people who have money and make them love you, you might get some of the money.
• There are three ways that benevolence helps startups:

1. Improve morale – the fact that you’re helping someone keeps you working even when you feel doomed.
2. Makes others want to help you – they believe they are contributing to a good cause.
3. Makes you be decisive – decisions are easy when you know what the main objective is [to help others].

My view?

I do agree with the benevolence bit – why bother at all if you’re not going to make a difference? After all, why settle for a fortune when you can change the world!?

However, the bit I disagree with is the business model part – I think you need to have a vague idea in mind as you develop the product/service. After all, if its not viable and sustainable, you’re just heading for problems later when you have to shut down the business and upset a whole lot of people because you can’t find a way to make it work.

I’m sure there are many that would disagree with me – I can see why, but hear where I’m coming from. I just mean have an idea of how to make it work. You don’t need the exact plan – it’ll most certainly change along the way anyway. Just have an inkling that it’ll work as a business.

What would you say is the best approach for a young startup to adopt?

You can see more of the Startup School ‘08 videos here

Photo – “Roll the dice” by magerleagues’, via flickr

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