You want to start a non-profit? Please don’t

Lori van Dam is CEO of the Hult Prize.

Given my years of experience in the non-profit sector, raising and distributing significant funds for organisations like Susan G. Komen and One Fund Boston, I often get asked by people who want to start their own non-profit for advice. 

Unfortunately, they don’t usually like what I tell them.  Which is: “Please don’t.” 

While their desire to make a difference is admirable, the non-profit sector simply isn’t best positioned to address society’s biggest challenges.  

The hard truth is that we’ve spent decades trying to fix existential problems using a system that isn’t built to deliver effective solutions.

Too often, we’ve looked to charities and non-profits to “fill the gap” – stepping in where governments have stepped back to tackle challenges like climate change, equity and access in education, healthcare, and poverty. 

And while the non-profit sector has delivered meaningful progress, it is fundamentally fragile. Most non-profits rely on government contracts or the goodwill of donors, which means their futures often hinge on forces outside of their control.  

As one example, only last year education non-profit Oregon Humanities lost nearly half its budget overnight when a major grant was abruptly rescinded. 

The sudden funding cut forced it to scramble for alternatives. Years of momentum knocked out overnight. 

The fragility is widespread. 

A recent survey found that 86% of non-profits in the United States anticipate funding cuts, and more organisations ended last year in deficit than at any point in the past decade. 

Chronic underfunding and financial uncertainty make it difficult for non-profits to grow, plan long term or deliver sustainable impact. 

Then there’s the issue of fragmentation. 

Take breast cancer as an example; in the U.S. alone, there are nearly 7,000 charities dedicated to breast cancer programmes, advocacy and research. 

This kind of overlap creates competition for donors and grants, diverting energy and resources away from mission delivery and towards fundraising. Instead of building collective momentum, the sector ends up siloed, inefficient, and stretched thin. 

Of the 1.5 million non-profits in the U.S., more than 70% operate on annual revenues under $50,000. 

Meanwhile, the challenges we face are growing more complex and urgent. We need solutions that are durable, scalable, and self-sustaining.  

Mixing purpose with revenue

This is where social enterprises come in. 

These businesses are built to make a profit – and a difference. By integrating purpose with revenue, they aren’t at the mercy of donors or shifting political priorities. 

Consider the more than 10,000 B Corps worldwide, all certified for meeting high standards of social and environmental performance, including companies like Patagonia. 

Or social enterprises like Korion Health, which has built an affordable at-home electronic stethoscope and guided app that helps users monitor their own heart and lung sounds. These for-profit, for-good businesses attract top talent, generate their own income, and reinvest profits to scale their impact. 

Korion Health is the 2024 winner of the Hult Prize – a social impact startup competition for students looking to tackle issues like food insecurity, health inequities, and climate threats – all while paying their own way. This isn’t just innovation for innovation’s sake; it’s a movement redefining how we solve problems.

Some people flinch at the idea of mixing money with mission – as if profit somehow contaminates purpose. 

I believe the opposite is true: profit can protect purpose. A revenue-generating model shields social enterprises from political interference and funding freezes that can cripple charities. It gives them the independence and speed needed to grow – and to meet the scale of the challenges they’re built to solve. 

This year alone, more than 200,000 participants from 130 countries got involved in our programme, generating 15,000 startup ideas, with each one aligned to at least one United Nations Sustainable Development Goal. These young founders are showing the untapped potential of the private sector to advance the missions we’ve long associated with non-profits. 

In September, we’ll award $1 million to the winning team at our Global Finals at the Tate Modern in London. This year’s semi-finalists include an AI-powered technology for forecasting wildfires, and a solution using microbes to break down bioplastics into fuel.   

In 2023, Banofi Leather, developed by students at Yale University, won the Hult Prize with a sustainable, plant-based leather made from banana crop waste. The product helps reduce environmental harm while boosting income for Indian farmers. 

Since the win, Banofi has expanded internationally with more than 50 global companies now trialing their materials. It’s a powerful example of how impact-led startups can deliver both meaningful solutions to our shared challenges and market traction.  

As we face the defining issues of our century, we can’t rely on fragile institutions built on short-term funding and donor priorities. Solving complex, global problems requires ventures that can stand on their own, move quickly and scale sustainably.

So, here’s my challenge: If you’re passionate about making change, resist the instinct to start another non-profit.  Instead, build a social enterprise. And if you’re a funder, invest in businesses with impact at their core. These are the models that turn good intentions into lasting change – and prove you truly succeed by doing good.