Six Ways Your Charity Startup Might Fail -- and How to Prevent That

​Your charity startup just hit the ground running. You are passionate about your cause, you just gave a big talk at a conference, and you've set up a shiny website. All is looking great. Yet your organization might still fail: it might collapse or not have any impact. Here are six ways a charity startup might fail -- and how to prevent this scenario.

1. You picked an ineffective intervention.
2. You chose the wrong co-founder or partners.
3. You don’t understand your beneficiaries.
4. You prioritize research instead of focused implementation.
5. Your fundraising is not working.
6. You transition leadership too quickly.

1. You picked an ineffective intervention

What can go wrong when you select an innovative idea and a cause area you feel strongly about? Potentially, a lot. Innovation and personal passion for your idea are weak indicators of your intervention’s suitability. First, your personal fondness for an idea might make you overlook its weaknesses. Second, innovative ideas are often overrated. There are dozens to hundreds of proven, evidence-based and cost-effective interventions that need to be scaled. And they are just waiting to be implemented, sitting idly in the databases of applied research organizations such as J-PAL, 3ie, GiveWell or Charity Entrepreneurship. Picking one of these sets you up on a path of impact. 

Remember that the intervention, not your implementation skills, is the principal limiting factor of your organization. If you select a poorly-researched and expensive intervention, even having stellar implementation will not get you anywhere. Moreover, as a first-time founder, you can be fairly certain that your operational skills will not be outstanding, so a high-impact intervention area can compensate for that as well.

How can you avoid picking an ineffective intervention?

• Prioritize cause areas in which you can assume high impact based on current and future levels of suffering (e.g. animal welfare, poverty, mental health).
• Prioritize developing countries, where your funds go a long way and rapid population growth takes place. 
• Build on the freely available research of J-PAL, 3ie, GiveWell or Charity Entrepreneurship to pick evidence-based interventions.
• In terms of studies, prioritize randomized controlled trials over weaker study methods.
• Consider not only effect sizes but also cost-effectiveness models, as the cost per impact achieved is what you should optimize for. See GiveWell for sophisticated cost-effectiveness models.
• Triangulate different sources to arrive at conclusions. For instance, back up your findings from randomized controlled trials with an expert survey to confirm your reading of the evidence.
• Be ready to switch interventions if you learn that your path is not evidence based or cost effective.

2. You chose the wrong co-founder or partners

The cliche is correct: you are as good as your team. Working with the right co-founder and partners is critical.

You are setting yourself up for failure if your whole organisation is not aligned on values such as beneficiary focus, lean operations, and an evidence-based approach. Diverging working styles and preferences can also have a detrimental effect. For example, if you like to plan thoroughly and your partners prefer implementing at the last minute, a good working relationship will become tricky. 

When choosing a co-founder or partners, try to list factors for a successful relationship in a spreadsheet to give you some degree of objectiveness and comprehensiveness. However, given the importance of the human element here, also trust your gut as a suitable heuristic. A bad feeling about a relationship can be strong intuition not to proceed.

In terms of picking suitable co-founders and partners, look out for:

• Complementary skill-sets: don’t clone yourself in terms of skill-sets. Look for partners who have different strengths and weaknesses.
• Select for entrepreneurial attributes such as an inclination for proactiveness, a readiness to pivot, and comfort amidst uncertainty.  
• Exclude those who do not align on core values such as following the evidence and opting for cost-effective interventions.
• Use trusted people in your network or an incubation program to look for potential matches; don’t just expect the candidate to find you through a public job posting.
• Be thorough when doing reference checks. Go beyond standard questions by asking for specific responses (e.g. would you rate x in the top 10% of partners you have worked with?).
• Don’t start the relationship as a fully committed, publicly announced collaboration, but set up a trial in the form of a consultancy or limited engagement -- especially if you have certain doubts. You can always promote someone, but demoting is often a recipe for trouble.
• If you cannot find the above, don’t settle. Continue without a co-founder or partner until you find the right match. Having the wrong partner is worse than being on your own.

3. You don’t understand your beneficiaries

You know all about the effect sizes and p-values of the research papers in your field. And you have a sophisticated cost-effectiveness model ready to be applied. Yet you have barely spoken to the beneficiaries of your intervention. This is an issue, as even the intervention that appears most cost-effective on paper is not worth much if it is not successfully applied in the field.

“Understand your customer” is the mantra in the business startup world. It applies to the non-profit domain as well, even though the feedback loops are less straightforward: you get your funding from donors, while you serve your beneficiaries. Hence, your beneficiaries are your real customers. Do you really understand their problems and preferences?

The reality is usually more complicated than what one would assume sitting at a faraway desk. There is a myriad of reasons, for instance, for which mothers do not access free vaccinations to protect their children from deadly diseases. While research goes a long way, conversations and testing in the field can be extremely informative and provide answers specific to your context.

To understand your beneficiaries, you could:

• Acknowledge that you cannot find all the answers in research papers and that you need to get out there.
• As a first step, talk to experts who have interacted a lot with your customers.
• Talk to the customers themselves in individual interviews and focus groups.
• Travel and live in the country where you plan on implementing your intervention.
• Test your assumptions; answers to surveys are much less valuable than actual tests (e.g. does someone really use product x that he claims in a survey he would surely use?). Tests should first focus on the beneficiary’s ​ understanding and then on the usage of your product, as the latter requires the former.
• Ideally, embed yourselves in the realities and lives of your customers for a longer period of time, e.g. work at a farm or farm supplier for a few weeks if you plan to roll out an intervention on animal welfare that should be adopted by farmers.

4. You prioritize research instead of focused implementation

Weeks or months into your implementation, your focus remains research. “Let’s just look at the evidence for another 3-6 months.” This intuition might be correct in some cases. However, for the large majority of action-focused charities, at some point you have to arrive at conclusions from your research and start the actual implementation. There will never be an optimal moment for this; just look at the standard request for further research at the end of each academic paper… Yet, unless you are a charity whose core objective is research, you have to go beyond papers sooner rather than later, and start implementation.

Prioritizing implementation over research is not sufficient. You also need to move quickly to keep donors and staff -- and yourselves as founders -- fully engaged. It is difficult to maintain momentum if an organization has not made major progress over 6-12 months. The key here is a focused implementation that prioritizes the most important and urgent tasks. 

The following can help you focus on implementation:

• Compare your intervention with successful charities such as GiveWell’s top charities, and you will see that there are many unanswered research questions in their domains as well (e.g. the academic debate around the impact of deworming).
• Define sufficient research conclusions in advance and stop doing research after that target is achieved.
• If new research questions arise, either postpone tackling them or allocate a specific amount of time in the spirit of ‘time capping’ (i.e. “let’s arrive at conclusions on these new papers over three days, and then move forward”).
• In terms of operations, focus on the tasks with the highest impact and urgency. Define these tasks on a weekly basis. At the end of every week, revisit your success in working on these high-priority tasks vs. lower-priority activities. If your key tasks involve having x conversations with potential donors and securing a Memorandum of Understanding with a state government, and you see that you have spent two days optimizing your logo and website, you have direct feedback to improve. See How to Prioritize Your Time by Y Combinator’s startup school for a great summary of this approach.
• Depending on your team’s natural tendency, either slow down or speed up. In a setting of research-leaning founders, as for instance in effective altruism, you likely should speed up. Adopt an 80/20 attitude on most things, according to which you can get 80% of the results with 20% of the effort. Be more ambitious on your timelines for achieving major milestones. You can always change course if something is not working out, but without any action, you cannot improve.

5. Your fundraising is not working

As a non-profit organization, you operate at a loss by default and therefore rely on constant fundraising. Established organizations might benefit from a one- to two-year runway, but, as a charity startup, you might only have funding for 3-6 months.

Fundraising is a time- and energy-consuming task for founders, yet there are a few recipes that can help.

• Check whether you can lower your budget. The easiest way to solve a fundraising problem might be to reduce your cost structure. Reasonable budgets might also increase your likelihood of fundraising success, as lean organizations are often appreciated. As a young organization, you often want to be especially lean as it allows you to be more flexible. For instance, switching programs is easier if you don’t have whole teams of staff working on these programs. Of course, there are limits to frugality, and you should not value the founders’ time so little that they have to take care of every nitty-gritty detail instead of focusing on the high-value tasks.
• Get your plan straight. It is much easier to get donors on board if you have clear and exciting deliverables for the next 6-12 months.
• Get into sales mode. Fundraising is, to a certain degree, a numbers game, and you will need to establish many relationships in order for some of them to result in major contributions. If you have spoken to two foundations in your cause area, why not ten? If you have applied to three social entrepreneurship competitions, why not triple that? 
• Be comfortable with rejection, and don’t take it personally. Read some articles by successful salespeople, or check out the failure CVs of accomplished researchers (e.g. Haushofer) to understand how many Nos have paved the way for rockstars.
• Set up an advisory board with experts and trusted operational advisors. This not only helps you steer your organization, it also expands your fundraising network. Asking for advice is usually a good strategy to establish a stronger relationship that can eventually turn into fundraising opportunities. This applies to funders themselves, but also to associated experts who can open their vast networks of donor institutions.
• Be transparent, patient and consistent in your fundraising relationships. Treat your fundraising relationships like good personal relationships. Be honest about your organization’s progress, and keep in touch. Nobody wants to hear from you only when you need them to write a check.
• Explore strategic fundraising opportunities. A one-time donation is great, but a strategic fundraising partnership goes beyond this by setting up a regular funding stream over multiple years. Here, it is key to see the donor as a real partner who will gain something from working with you, from social recognition to tangible support (e.g. if you allow your partner to access your human or technical capital).

6. You transition leadership too quickly

Your charity has successfully tested and scaled an intervention. Expert staff are in place and structures built. You and your co-founder consider leaving the organization to start something new from scratch. This is a high-stakes decision. It can go right if you have built solid systems to steer the organization and replaced yourself with staff who excel in their respective domains. It can also go terribly wrong if you have no high-performing and value-aligned senior staff in place to take over.

Here are a few things to consider:

• Starting a new organization usually takes longer than you expect. Three to five years is a much more realistic timeframe than one to two years. And if you plan to run this for 6-12 months only, then you might want to reconsider.
• While your involvement in all aspects of the organization is key at the beginning, try to set up processes and staff that can replace you eventually, including in key domains. If you don’t make this an active priority, it will likely not take place. The bias of a startup founder is always to get things done her/himself; this is what you excel at and enjoy. So you will actively have to challenge your understanding of your role, and scale as a leader. Envision a scenario where the organization runs just as well, or even better, without you.
• A key ingredient to replacing yourself is recruiting and training the right staff. Fight the natural tendency to spend too little time on recruitment. Daily urgencies are successful at grabbing your attention but less important than dedicating your attention to long-term recruitment.
• Plan your eventual handover and departure months or years in advance. Set up specific protocols regarding what will be handed over to whom. A general culture of well-documented processes in your organization, from employee handbooks to step-by-step instructions, will help your successor hit the ground running.
• Clearly define your future role in the organization to allow your successors to succeed (e.g. part-time role, no role, board role, advisor to CEO role, …). You want to be available for some continued support while not restricting the responsibility of the new leaders.

The six ways your charity might fail are also six ways you can excel and stand out. Keep these points in mind as you tackle your specific challenges, and you will continue the journey toward evidence-based impact. And don’t forget to have fun in the process!

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Author

Patrick Stadler
CE Charity Mentor and Curriculum Developer