EA - Tips for people considering starting new incubators by Joey

Link to original articleWelcome to The Nonlinear Library, where we use Text-to-Speech software to convert the best writing from the Rationalist and EA communities into audio. This is: Tips for people considering starting new incubators, published by Joey on May 19, 2023 on The Effective Altruism Forum.Charity Entrepreneurship is frequently contacted by individuals and donors who like our model. Several have expressed interest in seeing the model expanded, or seeing what a twist on the model would look like (e.g., different cause area, region, etc.) Although we are excited about maximizing CE’s impact, we are less convinced by the idea of growing the effective charity pool via franchising or other independent nonprofit incubators. This is because new incubators often do not address the actual bottlenecks faced by the nonprofit landscape, as we see them.There are lots of factors that prevent great new charities from being launched, and from eventually having a large impact. We have scaled CE to about 10 charities a year, and from our perspective, these are the three major bottlenecks to growing the new charity ecosystem further:Mid-stage fundingFoundersMultiplying effectsMid-stage fundingWe try to look at every step of our charities’ future journeys, to see how we expect them to fare as they progress. In general, there seems to be enough appetite in the philanthropic community to supply seed funding to brand new projects, and we have been successful in helping charities to launch with the funding they need. However, many cause areas appear to have gaps in available funding for charities who are around two to five years old.Charities’ budgets tend to grow each year; for example, a charity might need $150k for its first year, $250k for its 2nd, $400k for its third, and so on. The average charity might require a seed of $150k for its first year, and mid-stage funding (years 2-5) of ~$2 million over 4 years. Currently, it is much more difficult for highly effective charities to fundraise this much at this stage of their journey than it is for them to get the funding they need at the seed-funding stage. Keep in mind that this mid-stage funding is still too early and small for most major institutional funders (e.g., GiveWell does not recommend organizations that can only absorb $1 million a year as top charities), and governments rarely consider projects this young.Mental health case study: An example that demonstrates this issue well is found in the cause area of mental health. We have identified a number of promising intervention ideas in this area over the past few years, and a solid pool of aspiring entrepreneurs interested in founding mental health charities. Although we expected our seed network would be able to support the first round of funding, we did not have confidence in what came next for these charities. We have since worked to improve the situation by helping launch the Mental Health Funders Circle, but even with that network we are concerned about mid-stage funding in the future.Why is mid-stage the problem?: Instead of seed or late stage? I believe it’s the same donors who consider seed or mid-stage funding, but as the volume of funding is smaller at the seed stage, it is covered much more easily. While some charities may struggle in the late stage as well, less will even get to that stage and the number of options typically expand once a charity is clearly established as a field leader.FoundersAlthough a solid number of people are interested in founding charities, it's only an ideal fit for a relatively small percentage of people. It is a career path that requires a highly entrepreneurial mindset, plus a very strong ethical compass to succeed in. Due to the low number of people who are a good fit, I don’t believe that it is a career path that can absorb a high number of people (my guess would be less than 5% of people are actually suited to founding a nonprofit). It is my opinion that other career paths, like for-profit found...