Should Your Start-up Be For-Profit or Nonprofit?

There once was a time when “start-up” clearly referred to a new venture that sold a product, looked for investors, and aimed to turn a profit. A nonprofit was a completely different kind of enterprise—one that was funded through the largesse of donors, gave away its offerings, and had relatively few similarities to a traditional business. In recent decades those lines have blurred. Many nonprofits now provide products or services that compete with those of the best for-profit companies. Meanwhile, for-profit start-ups, often backed by “impact investors” who care about more than financial returns, can do as much good as traditional charities. As a result, when a socially minded entrepreneur starts an enterprise today, it’s often unclear whether it will ultimately be for-profit or nonprofit.