March 2010 Archives
I am often asked, why is Innovations for Learning a nonprofit organization? It sells products and charges for services, why is it not a for-profit company?
Glad you asked, because I can utilize my 25 years of corporate law knowledge (now mostly lying fallow) to answer this.
The form of an enterprise should follow its capital needs. A mature business with enormous capital needs should be a public company. Public company shareholders require quarterly results that put these companies on the tightest of timetables. Companies with goals 3-5 years out can be venture-capital backed, for that is how long the VC will last before requiring a "liquidity event". Companies with multi-generation goals should be family-owned businesses. Nonprofits lie at the very end of this continuum: the "capital" it receives from grants is the most patient capital of all: it NEVER needs to be returned.
Why do education companies need such patient capital? Because the education marketplace is one of the most fragmented industries in America, and the sales cycles are brutally long. Almost all of the customers are themselves nonprofits, with various levels of bureaucracy impeding each sale.
For this reason, even the largest companies serving public education are often nonprofit. The larger for-proft companies have mostly merged or folded.
If we were for-profit, we would have likely folded by now as well. But we are here for the very long term, as are our customers, and as are our philanthropic funders. This alignment of our corporate form with our customers and funders fosters the sustainability we need to make long-term improvements in public education.