After about a month — during which we finished the productivity system, the Founder’s agreement, and the funding proposal — we have reached what we think is our first bottleneck of co-founding an AI Safety nonprofit.
As we are both new to starting a nonprofit and unfortunately not (yet?) part of an incubator, we are not sure what’s the best method to get it off the ground.
Thus far, we have been looking mostly at fiscal sponsorships based on CE’s handbook. However, a fellow EA recommended impact-ops.org, which is a very cool service that can possibly help with entity forming and other services.
This was where we learned that the best option (fiscal sponsorship, ops support, or incubation) will depend on one’s circumstances:
Timing: If you’re optimizing for setup time, an ops support provider may be your best bet. You can have your entity registered within a couple of weeks, and you don’t need to align your plans with a cohort of other founders.
Cost: If you’re optimizing for cost, incubation may be the right choice. Although there are fiscal sponsors and operational support providers who can offer services for free, this approach is much more common in the incubation model.
Autonomy: If you’re optimizing for autonomy, an ops support provider is the way to go. You won’t be bound by the policies, processes, or reputation of a parent entity or its projects.
Exposure to other founders: An incubator is the best way to meet other founders and cross-pollinate ideas and strategies. Not only will you learn from others during the incubation program, but you’re also likely to build some long-term relationships that can pay dividends in the future.
Long-term integration: If you’re looking for deep and long-term integration with an existing legal entity, consider fiscal sponsorship. A long relationship with an aligned parent entity can also expose you to a network of relevant people and projects.
Questions we wanted to ask the EA Forum:
From your experience, are there other considerations we should be thinking about?
Do we need a legal entity established before starting fundraising?
Thank you very much in advance for your help! It’s much appreciated :)
Hey! (full disclosure: I work within the Special Projects team at Rethink Priorities which also provides fiscal sponsorship services).
A couple of quick notes from me:
There are different models of fiscal sponsorship. I can recommend this overview from AntiEntropy and this to learn more about that. Different sponsors offer different models (depending on their infrastructure and risk appetite) although A and C are the most utilized and established.
Another thing that your question seems to imply is that these options—depending on how you define them - are mutually exclusive (which they are not) e.g. you can get fiscal sponsorship for tax-exemption and basic financial compliance but also “external” ops support. There are also ways to meaningfully combine incubation with fiscal sponsorship (which unfortunately I won’t be able to lay out here today).
Some funders require a project to have tax-exempt status (either via their own 501(c)3 or because they are fiscally sponsored by another 501(c)3). In those cases you’ll need fiscal sponsorship (beyond ops support) to receive a grant.
Thank you so much Cristina! Thank you for your insights, especially the point about the three options not being mutually exclusive.
I definitely didn’t think that you could combine incubation with fiscal sponsorship.
Having read this, does this mean it’s worthwhile to apply to as many incubators and/or fiscal sponsorships as we can?
(It does sound like we can do “external” ops support no matter what path we take.)
Thank you again for your help!
Got private message feedback
Natural follow-up question becomes: “is setting up an entity is the rate determining step (bottleneck) after all?”
The answer to this is provided in the articles referenced by Cristina Schmidt Ibáñez (https://forum.effectivealtruism.org/posts/zzcWFPHCuNEYCw4kJ/fiscal-sponsorship-ops-support-or-incubation?commentId=uZaukmD4DeXBXPD5z)
In short:
Under model A
Under model C