Why You Should Run Your Charity Like A Business

When it comes to solving social problems, throwing money at them isn't the best solution. Discover the mindset that will help solve humanity's greatest challenges.
Board of Trustee, X PRIZE Foundation
September 12, 2013

Despite what most people think, philanthropy is not about giving money—it's about solving problems. While well-meaning, the idea of writing a check and calling it “philanthropy” is extremely short-sighted and, unfortunately, extremely pervasive.

Instead of simply throwing money at the problem, philanthropists should think like entrepreneurs and consider social challenges to be an opportunity to create large enterprises.

Think of it this way: It’s easy to create a $1 billion company—you just have to solve a $10 billion problem. And most large billion-dollar problems happen to be social problems. That’s why some of the largest business opportunities exist for entrepreneurs interested in trying to solve humanity’s grand challenges.

Entrepreneurial Philanthropy

True philanthropy requires a disruptive mindset, innovative thinking and a philosophy driven by entrepreneurial insights and creative opportunities. In order to disrupt the status quo, drive philanthropy at a tremendous scale and develop long-term economic vitality through giving, we must apply the same models for success in our philanthropic endeavors as we do in business.

In short, philanthropy requires disruption. This disruptive mindset hinges on a practice I call "Entrepreneurial Philanthropy," which is designed to support innovation that creates sustainable, thriving economies in communities with tremendous need. Further, it requires the utilization of several principles rooted in today’s successful enterprises.

As a lifelong entrepreneur, I think of philanthropic organizations as I think of any other business venture. Like startups that accept venture capital money but never turn a profit, a philanthropic venture that doesn't create a self-monetizing, sustainable financial model will ultimately fail because a venture that’s not profitable is not sustainable. Philanthropic funds should be treated as venture capital—money that should only be used to bootstrap a business and to scale the company once the business model has been proven on a smaller scale.

I recently met with a woman who operates a homeless shelter for women in my community. Like most shelters, it is constantly looking for donations. In speaking with me, the woman was seeking advice about how to create a successful operation. I encouraged her to rethink the complete model for the shelter, making it self-sustainable instead of dependent on outside investment.

“What is your product, and who is your customer?” I asked her.

“The shelter is my product, and the women are my customers,” she responded.

“What if you were to think differently and consider the women at the shelter as your product and local businesses as your customers?" I replied. "These businesses certainly need people who can work, and if you provide services that empower the women, you can help provide them with jobs that could help determine their status for residency or other services at your shelter. As surprising as it may sound, sometimes you can create a successful venture relatively easily by taking your current model and completely turning it on its head.”

By creating a thriving community within her shelter, this woman would create a strong and sustainable business model. Sustainability is the root of business—and it should be the root of successful philanthropic endeavors, too.

Dreaming Big

Truly disruptive philanthropic endeavors, much like business ventures, need to think big, targeting tremendously large markets and opportunities. You'll never catapult your business into the league of billions by solving million-dollar problems.

There are many philanthropists and volunteers who act locally, giving tirelessly of their time and money to help the sick, the poor and other individuals most in need. But why stop there? Philanthropic work on the local level is wonderful, but time and again, it has proven incapable of reaching the scale we need to foster economic development and lead to the monumental changes we all seek.

Doesn’t philanthropy deserve, indeed require, the same level of audacious hope and limitless opportunity as our business ventures? Our power to impart positive change goes well beyond our local communities. We can surely think about both—our communities and the world beyond—and act on both at the same time.

Doing Things Differently

To do that, we need to think about scale. There’s nothing wrong with locally testing a product in small markets, but we have to be sure that the solution is scalable once it's proven successful. If we go into a philanthropic endeavor afraid of success on the largest of scales, we do that cause no justice. This requires rethinking the solution and the problem, which generally requires us to convert infrastructure problems into information-gap problems. Our job, indeed our collective goal, is to bridge that gap.

For instance, education shouldn't be about building more schools and maintaining a system that dates back to the industrial revolution. We can achieve so much more, at unmatched scale, with software and interactive learning. Similarly, think about the health-care diagnostics we can address through connected sensors and artificial intelligence without the need for expensive, out-of-date physical infrastructure like hospitals.

While most philanthropists tend to flock together and build their teams with friends, family or others who happen to be retired or who have a lot of free time on their hands, a great entrepreneur knows that success is directly related to the quality and talents of their team. We can't just partner with whoever might be available or willing to volunteer their time. Successful ventures in business and philanthropy are built around great teams who can help us overcome tremendous challenges—and who have the right experiences and relationships to do so.

Entrepreneurial philanthropy is not just a philosophy—it 's a promise that philanthropy is at its best when it is founded on entrepreneurial zest and agility. Investors are right to demand a clear path to self-sustainability from every business they invest in, and I believe we should ask for the same from philanthropy.

There's a direct correlation between fulfilling people's needs as a successful entrepreneur and as a philanthropist. That's why the work of entrepreneurial philanthropists has a compounding impact that can reverberate far beyond the reaches of charity, aid and relief efforts. Money can certainly solve some of the world’s problems, but without an entrepreneurial bent, it will only merit short-lived solutions to long-term problems.

Naveen Jain is a philanthropist, entrepreneur and a technology pioneer who believes time and technology, not money, is what changes the world. Connect with Naveen on his website or on Facebook, Twitter or LinkedIn.

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Photo: Thinkstock

Board of Trustee, X PRIZE Foundation