What is the right entity structure for your website or mobile app? You have a functional prototype rooted in a strong value proposition. The next step is to turn that prototype into a marketable product. In the nonprofit sector, cost of service is often subsidized by donations. Alternatively, you may generate revenues from paid users and reinvest proceeds to cover cost of service to beneficiaries. Choice of entity structure influences the set of options you have to meet capital requirements, cover cost of service, and reach scale.
Philanthropic Funding and the Challenge of Scaling Technology
While a 501(c)3 has access to philanthropic capital, a C Corp can raise capital from outside investors such as impact investment or social venture funds. For a digital product, it can be difficult to predict future costs in part because your user base has the potential to grow virally. By preparing funders for high growth upfront, your organization can avoid the trap of demand outpacing allocated funding for IaaS costs.
Focus on Systems for Online Analytical Processing
When you move from prototype to marketable product, compatible data structures across systems are foundational to accurate product evaluation. Source grantors or funders prepared to support systems upgrades and integrations to keep data accessible for analysis. Adopting new technologies can unlock vast improvements and long-term cost savings. Consider that a mobile data collection app paired with a novel machine learning prediction model enabled identification of compromised pipes following the Flint, Michigan water crisis. The city observed 70% accuracy in identifications with the technology, compared to 15% accuracy without.
Potential data silos include systems for accounting, manufacturing, production, information, and operations. Unsure how this relates to your organization? Familiar systems for nonprofit professionals have acronyms like CRM (constituent relationship management), DAM (digital asset management), CMS (content management system), and DMS (donor management system) with a variety of web and mobile implementations. Check out our usability research section for a User Story Chart that turns general data processing goals into specific prototype features.
Key People in 501(c)3 Technology Projects
When completing the "People" section of the Proto Nonprofit toolkit, consider including end users, charitable product beneficiaries, donors, nonprofit board leadership, pro-bono legal and accounting services, volunteer labor such as designers and engineers, government program administrators, hardware and software vendors with nonprofit discounts programs, and any others you see as distinct to the 501(c)3 ecosystem. A lawyer can advise on how the 501(c)3 ownership structure relates to governance, reporting, taxation, liability, and fundraising.
Learn more: Read about common issues with nonprofit technology funding at Bridgespan.