On Thursday, February 28, Melanie Rieback, founder of the worlds first non-profit computer security company Radically Open Security, came to The Spindle to address how social impact can be scaled from the bottom up by adopting a ‘non-profit business’ mindset. During this in-depth three-hour lecture “How to raise sustainable income streams” Melanie led us through the ins and outs of non-profit businesses. She presented her vision about the importance of income-generating activities and illustrated financial constructions to achieve this, in order to support activism and make more impact.
According to Melanie, NGOs should not be dependent on investors and grants but we should work towards recurring cash streams and covering our own expenses from day one. They have to avoid falling into the ‘subsidy trap’, in which they will become dependent on this financial stream and are not allowed to make revenue on their own.
Covering expenses and focussing on financially self-sustaining cash streams should be a priority. Why? It would give us greater control, more freedom with regard to funding structures that may hold us back and it would help us to make smarter decisions. Most importantly, it would help create something of true value and integrity. How? By having a closer look at other financial constructions. Alternatives for subsidies which have already been put into practice include social procurement and B2B crowdfunding. The former refers to contracts for goods and services that are bought from social enterprises and NGOs by companies and government institutions with the ultimate aim of maximising efficiency and impact. As a new approach, Melanie mentioned the FFI (Fiscaal Fondsenwervende Instelling) as a possible construction which would allow for to set-up a spin-off venture able to generate a self-sustaining cash flow.
Businesses should be social businesses that, in the worlds of Muhammad Yunus, are ‘no dividend businesses for solving human problems’. In Melanie’s view, ‘post-growth’ should even be embraced, which entails no investors, no dividend and no exit strategy. MGOs should not aim for exponential growth and an exit, as the Silicon Valley model often prescribes, but thrive based on true value. More information about this can be found in this TED talk by Kate Raworth.
Melanie also dove into the topic of ethics stating that every enterprise should architect ethical supply chains by design and work together from the bottom up to create responsible ethical ecosystems. In designing ethical supply chains, the biggest challenge lies in reliable business-models (interesting book in this regard is Paul Hawken’s Drawdown). If we all work together on ethical ecosystems we can collectively take over the world.
Business should be critically evaluated, but looked at in a new way, as a tool to be leveraged on the way towards more social impact. In the vision of Melanie, Business can for sure be one of the most effective ways of activism.
Food for thought!
Also, you can have a look at her presentation here. The video recording of the presentation is also available online. Follow-up about ways of funding such as impact bonds, social franchising, result-based finance etc. are coming soon!