In 2013, Y Combinator made its first nonprofit grant to Watsi. Since then, we've funded 25 nonprofit startups in diverse spaces including global health (Noora Health, New Incentives), poverty alleviation (e.g. No Lean Season, New Story, Zidisha), democracy (vote.org, ACLU), and philanthropy itself (80,000 Hours, Centre for Effective Altruism). Y Combinator backed nonprofits have gone on to be funded by GiveWell, the Open Philanthropy Project, DRK, and others.
The premise of the program is simple—we treat nonprofit startups almost exactly like for-profits. Nonprofits get $100k of funding and go through the standard YC program, participating side by side with for-profits. We help the founders focus on relentlessly growing a key metric and on making something people want.
Many people have asked us: how do you choose nonprofits to fund? We consider four key factors:
- Big problem + big solution
- Provable or promising program
- Y Combinator fit
Read on for more details—and if you think your organization is a good fit, apply to the next batch.
Great nonprofits are built by great teams. What we look for here is exactly the same as for for-profit startups.
2 Big problem + big solution
We fund teams that are working on solutions that will reach a large number of people and do a large amount of social good for each of them.
This means you need to be working on a big problem! You also need to have unique insight on how to address the bottlenecks that prevent that problem from being solved.
One frequent bottleneck is fundraising. Fundraising for nonprofits is hard, so try to need to do less of it. Be vigilant about cost-effectiveness. If you're creating economic value for your beneficiaries, try to capture some of it as revenue so you can reach more people.
Bottlenecks are often not obvious. If you're working on a problem that already receives a large amount of attention, it might mean the problem is harder than it appears. What is unique about your solution that will help you succeed where others have not? Alternatively, working on overlooked problems can be a great way to maximize your reach.
3. Provable or promising program
For for-profits, usage and revenue serve as strong indicators of impact. For nonprofits, measuring impact is a lot harder. Measuring nonprofit outcomes can take years—often through long-term A/B tests of the program, conducted with the help of experts in the area.
Unfortunately, it turns out that when rigorously tested, many nonprofits have no impact at all. David Anderson at The Coalition for Evidence-Based policy estimated that at least three quarters of social programs have weak positive effects—or none at all!
For this reason, we first look for nonprofits that have a program already tested with rigorous studies. For example, No Lean Season (W17) gives farm workers $20 for a bus ticket to travel to the city for temporary work in the time between planting and harvest. Studies by economists at Yale have shown that grantees end up earning $200 more than those who didn’t receive the grant.
However, these studies are expensive and take years, so we also fund nonprofits running a program that’s plausibly more effective than what already exists, and who have a credible plan to test their program. For instance, New Incentives (S16) took a known promising program—conditional cash transfers—and are running their own randomized controlled trials to find the most cost-effective ways to apply this idea.
Lastly, some ideas have potentially huge upside but are prohibitively hard to prove. For example: it could take 10-20 years to conclusively prove whether an education program is working. Nevertheless, we funded Dost Education (W17) due to their novel and potentially high-reach approach that takes advantage of mobile phone penetration in poor communities in India. Nonprofits in this category should still be obsessed with metrics that are leading indicators of long term impact.
4. Y Combinator fit
Y Combinator's program is most valuable to groups who are building a tangible product or service that we can help you measure and improve. We are even more able to help groups that are fundamentally based on technology, though we don't see this as a hard requirement.
We're also best able to help nonprofits that already have progress and traction, rather than groups that are waiting to get started. Again, it's not a strict requirement, but we love to see efforts already underway.
Lastly, culturally we believe the best nonprofits will be transparent, and that this transparency will speed up innovation across organizations. For example, we love that Watsi makes all of their financials public.
Should we apply as a for-profit or a nonprofit?
Great question! Before applying as a nonprofit, you should really ask yourself why you can't be a for-profit. For-profits have many unfair advantages over nonprofits: accelerating growth via revenue and a robust ecosystem of fast moving funders. If you can solve a social problem as a for-profit, that's almost always a faster path! We'd love to fund you in that case too: as an investment instead of as a grant.
How much do you grant?
We give 100k per nonprofit as a (no equity) grant.
Do all founders have to be in the Bay Area for 3 months?
The YC program just plain works better when everyone is participating in person. But we also understand that the work of many nonprofits is outside of the United States. You can keep one founder in the country where your programs run, but the rest, including the CEO, have to live in the Bay Area during the 3 month funding cycle.
Do you fund programs within larger organizations?
Yes - No Lean Season, for example, is a program within the larger organization Evidence Action.
What program areas are you especially excited by?
We list some ideas well suited to nonprofits in our request for startups, including global health, food and farming, diversity and improving democracy.
Right now, we think startups within global health are especially able to meet our criteria, since lots of proven programs exist in the space, as well as large funders willing to scale the best ones up.
What does it mean to be a founder in the context of a nonprofit?
For nonprofits, there isn't a simple definition (unlike in for-profits, where we can use equity).
Founders should be people who are fully dedicated to the organization, and are going to be key decision makers and leaders in the organization for the foreseeable future. Founders do not need to have been with the organization from inception.
Do we have to be a 501c3?
No. In fact, we can help you get set up as one.
You do need to be able to become a 501c3 or have a 501c3 fiscal sponsor. We are not making grants to 501c4s or B-corporations (though, for B-corps, you can apply as a for-profit!)
How do I apply?
Fill out this application! We fund two batches of startups per year - the next application deadline is October 3 for the Winter 2018 program.
What if my question wasn't answered here?
Try the general YC FAQ.