For Non-Profits, There Ain't No Free Launch!

05/01/2015 12:25 pm ET | Updated May 01, 2016

What could be easier than starting a feel-good, do good charitable operation? Especially one that would have universal appeal and which -- in one way or another -- likely affects almost every family in the United States?

Even better, as a 501(c)(3) corporation, see to it that donor contributions are tax-deductible. How attractive is that?

Consider the company you will keep. The Ford and Bill and Melinda Gates Foundations, United Way, Salvation Army, Boy Scouts of America, Habitat for America, and so on. And, look at the revenue they generate -- in 2014, United Way alone gathered in $3.87 BILLION of the estimated $300 billion received by this country's 1 million-plus nonprofits.

Location-wise, it couldn't hurt our fundraising prospects that we are located in New York state and its largest city (we're RIP Medical Debt and we intend to raise $14.4M to buy and abolish $1 billion in personal medical debt -- but, more about that later).

A study by Johns Hopkins in 2010 showed that NY's private sector nonprofits employed more than 1.25 million people, accounting for more than 18 percent of all private sector jobs in the state, and just under half of these jobs are based in NYC.

Granted, the majority of these nonprofit jobs were healthcare workers employed by hospitals, nursing homes and health care services, and that the second largest sector comprised private colleges and universities, but nonprofit jobs nonetheless.

Raising money? Pennies from heaven -- just rely on the ease and promise of crowdfunding. You know, that magical ether world existing as a cloud, somewhere, which rains money. Just hang out your virtual shingle, put a donate button on there, and sit back...

Just One Problem -- Ya Gotta Start at Zero

Ay, and there's the rub. Like many nonprofit startup, we hadn't considered that just to get to the crowdsource starting line requires time, energy and seed money the founders will likely never see returned. Attorneys, website developers, accountants, consultants, office space, collateral materials, oh my! All this long before a donated dime appears. (When they say "non-profit," they mean it.)

Rob Wu, CEO of CrowdVox, is himself no stranger to the travails of start-up. "We bootstrapped from the ground up," he says, and has "tons of case studies and examples" of his clients who barely made it to the starting line -- but are now launched, thanks to the platform he provides.

One of his clients, Never Thirst for Water, vouched for the pre-launch expense pains as well as for the value that platforms such as CrowdVox provides.

Director of Development, Brandon Gossett, reports that their operation had "a very tough beginning." No matter how grand and important the vision -- and theirs is to provide clean water solutions for north Africa and southern Asia and prevent thousands of unnecessary deaths annually -- it's still a grind to raise that first dollar.

In their third year of crowdfunding, they raised in the neighborhood of $300,000 -- above and beyond their usual community and major donor outreach. The costs are reasonable, as well. Website platforms in that sector usually allow ventures to start without a setup fee or contract, while fees are a small, flat percentage of collected donations. You don't get results, you don't pay.

Going for the Deep Pockets, Instead?

In many ways, it is a blessing to have monies from the collective folks on the Internet. When this same visionary entrepreneur seeks larger dollars from individual donors or corporations, there will be restrictions attached.

Vu Li, author of Nonprofit with Balls, is almost pugilistic when he talks about donor expectations and how tight they are with large donations.

"Often funders want to pay for programming, but not for the people or resources that make these programs happen... Who do you think is going to do the work? Do you think unicorns or elves are? We cannot be sustainable when we can't pay our staff a salary they deserve to do this work."

He adds, "The word 'giving' implies that we are taking. How are we takers? We are giving our entire lives to making our communities better. (Donors) are contributing funding, but we are contributing just as much as anyone out there and we need to own this."

So, that's the back story.

RIP Medical Debt will formally launch as a nonprofit over the first weekend in May at The modest goal? To raise the seed monies needed to properly prepare to launch "The Big One" which will take place in June -- the lofty goal of raising $14.4 million and, with these monies locate, buy and ABOLISH $1,000,000,000 (yes, that's billion) in personal unpaid and unpayable medical debt.

Learning from our predecessors, and benefiting from the experience of nonprofits who have gone before us, we know that we have to put the people, processes and technology in place. Or, that lofty goal will never be reached. 300,000-plus families will be depending on us for relief from bill collectors and damaged credit reports. Oh, my.