Non-profit doesn't mean the company can't make a profit on what it sells or even pay employees a fair salary. It does mean that profits go back into the company, rather than having profits siphoned off by investors and shareholders. Non-profit is pro-reinvestment and therefore pro-scaleup.
>It does mean that profits go back into the company, rather than having profits siphoned off by investors and shareholders.
Why is money going back into the company "good", but investors get the negative connotation of "siphoning" money? What is with the disdain for the people who own the company making money from it?
> Why is money going back into the company "good", but investors get the negative connotation of "siphoning" money?
Because that is exactly what's happening?
If the company produces just enough to break even, the money is distributed fairly.
But if more money is earnt, this entire surplus goes to the investors (or, in recent years, also to management).
This means that while the wages of the workers stagnate with increasing productivity, the profits of the investors go up. The worker is producing an additional vakue, but all of that goes to the capitalist.
I didn't say it was good or bad. Siphoning of money is what happens with investment, that's why people invest -- so they can get some of the profit/growth back for themselves!
Like witty_username pointed out. With a non-profit there are no investors or shareholders. Not only that they will not want to, but investors are not allowed. It doesn't mean the company can't make profits, it just means no one will be taking profits from investment.
It's not good or bad, but it does mean that most of the profit goes back into the company, which is good for growth. It also means there aren't investors which are the primary source of growth for most startups. Non-profits that make profit have to do so directly though sales or donations. And profit made is mostly reinvested.
There was no good or bad judgement there, it is just a different model and some aspects of that model mean more growth and some mean less.
It also means the founders likely won't become billionaires (because the founders don't own a stake), but the company could still be worth billions -- in terms of how much money they have on hand or take in. That profit is supposed to be locked into the company for the purpose of performing the mission of the company. Which can include paying salaries to further the mission.
These are the reasons most "benefit companies" are non-profit. Trying to do good in the world so all donation (rather than investment) and profit goes toward the goal rather than investors and why I was surprised that this company is not.
Without profits investors and shareholders won't invest.
Indeed, you could consider investors and shareholders in a similar manner to workers and lenders; investors provide money and in exchange the company gives them profits.
> Indeed, you could consider investors and shareholders in a similar manner to workers and lenders; investors provide money and in exchange the company gives them profits.
To clarify:
Investors provide money once and in exchange the company gives them (or whomever they transfer the stock to) profits forever.
Is there any model which allows a structure for stocks to expire after a reasonable period (10-20 years but it would vary by industry).
Many. Loans. Or a lot of infrastructure development has been funded through leases where the leaseholder under contract develops or funds development of the infrastructure in return for the right to extract value from it for a predefined time. E.g. a lot of hydro development in Norway happened by offering investors a multi-decades lease on the commercial exploitation of a given waterfall, on the condition that they covered the cost of developing a damn and power plant.
The problem is the level of risk. With something well understood like a waterfall, there was still plenty of risk (dry years etc.; fluctuations in demand and cost; natural disasters), but it is risk that is reasonably easy to quantify within sufficient levels to insurance against part of it, and cover the rest by asking for sufficiently beneficial leasing terms to make it attractive without a permanent share.
But with a startup with a new model, the risk is extremely hard to quantify other than assuming it is high. That'll make investors demand a lot more.
Plenty of companies are funded through bank loans or other forms or debts or leases or have the financial power to demand buy-back clauses, but they're usually "boring" companies where returns are stable-ish or at least very well understood.
(that said, I did once work at a company where we partnered with a German tech company that had been built on the back of bank loans; it took an extreme level of financial discipline - the bank paid out in monthly tranches on the basis evidence they'd stuck to their very detailed plans; basically they'd put in a massive effort to de-risk a business that would normally be too risky for most banks)
