Oh boy, do these guys not get it!
According to Aaron Houghton and Ryan Allis, co-founders of iContact and, according to Entrepreneur Magazine, "socially aware college entrepreneurs",
My first piece of advice for college students considering starting a nonprofit is to consider doing it with a for-profit model. The only advantage of having a nonprofit is that you don't pay taxes. The big disadvantage is you can't get investments. You can only get donations. People are much less willing to give a sizeable donation that they are an investment.
Excuse me? Oops, forgot to mention the HUGE so called contributions these guys are making from their profits to "charities" from their $26 million revenue in '09 including:
1. One percent of employee time--two-and-a-half paid workdays per employee--can be used to volunteer with a nonprofit group.
2. One percent of product--the use of iContact's e-mail marketing software for as many as 60,000 subscribers--is donated to qualified organizations in North Carolina.
3. One percent of payroll--in 2009, that was $109,000--is given to 501(c)(3) organizations along with matching contributions made by employees to a maximum of $300 per year.
4. One percent of equity--a 1 percent stake of iContact--has been committed to the iContact Foundation, forming this year.
First, I want to make it clear that yes, these folks are indeed giving something back and that's good and I suppose they are more socially aware than many young entrepreneurs. But PLEASE, they have it soooo wrong in terms of their understanding about nonprofits except that getting investments can be challenging. But let's be clear: nonprofits have missions that are not about putting their profits into the hands of the owners but back into mission. Nonprofits have more or less independent caretakers who ensure mission is pursued and finances are used for mission. Just to begin.
Nonprofits are one form of social enterprise while for profits can take a different form. Both contribute in different ways with different outcomes. Both play a role in making society better.