Why are charities struggling to build and launch digital products?

NESTA audience

NESTA audience

This week I was privileged to keynote at the NESTA Impact Investment team’s Going Digital launch with NESTA’s Katie Mountain and Isabel Newman. Katie & Isabel asked me to speak because of my fairly unusual perspective – a tech entrepreneur who’s actually worked recently on a revenue generating digital project launched by an established charity. Earlier this year I was lucky to spend 4 happy months at vInspired, working with Sam Sparrow, Hannah Mitchell & Damien Austin-Walker getting awesome microworking platform Task Squad finessed and launched.

This blog covers the key elements of my NESTA talk without the personal anecdotes and side stories I included on the night. I should also just add a point of clarification here. This blog is about charities/CICs/social enterprises launching revenue generating digital products and services; it isn’t about making charity core business more digital. You won’t be surprised to hear that I have a view on that as well, but that’s for another day. It’s also not about my specific experiences at vInspired – it’s more generic observations across the whole sector. I’ve been a charity trustee myself for well over 10 years.

NESTA's Katie Mountain

NESTA’s Katie Mountain

At first glance, established charities appear to be ideal environments from which to launch digital products. They are crammed full of bright people with tons of good ideas, despite what they say they have more money to invest in product development than most startup businesses, they have a deep understanding of their target market and there’s lots of goodwill towards them, there’s existing infrastructure in the charity for the project to draw from (finance, office space, marketing & PR, etc) and they have easy access to politicians. So what’s making it so hard?

It’s unfamiliar territory…and there’s baggage

The best startups are said to be those that are “scratching an itch”. The entrepreneur sees a gap in the market and develops a product or service to SELL into that gap. The entrepreneur begs, borrows and steals seed funding and assembles a team focused on getting that product or service built and to market as quickly as possible. Money is frequently the key driver but money also qualifies early market interest in the product. Private sector success is often determined by getting to revenue in lightning speed & “owning” that niche before anyone else does. The founder or co-founders have probably had to put their houses up as collateral to raise the seed funding. The team eats, sleeps and breathes the project. Everyone’s under a lot of pressure. Often an unhealthy amount. Despite this, 80% of tech startups fail in their first 18 months according to Forbes (we’ll return to the 5 top reasons for failure at the end of the blog for anyone that’s interested). Charities simply do not work at this pace – but the private sector SMEs they’re competing against do. That’s a challenge.

The second part of this point is that the startup begins with a blank sheet of paper. For charities, many are creating digital projects to diversify away from dependence on government grants or to simply boost their income when other sources are drying up. This is a different type of driver. They are trying to do something that’s well outside their core business. They say that building a tech startup is like jumping off a cliff and assembling the plane on the way down. You need your team to be focused and on it. In charities, the digital project is often something people in the team are doing as an addition to their original day job. Working on projects part time is far from ideal and just doesn’t work. One of my conditions upon joining vInspired was that I would only undertake activities where I added value to the Task Squad project and did the things that other people in the team couldn’t do at that time. I stayed away from all-staff meetings, writing reports for trustees and so on.

The environment is risk averse…and no-one has any skin in the game

In my experience, many charity CEOs are very entrepreneurial. They’re also swamped with a million different things. Senior teams and trustees can be very risk averse. Back to that 80% failure thing – this is a high risk and uncomfortable place to be where you have to allocate money and time to something that probably won’t fly. Many charities are only engaging with this process because they are desperate to generate new income. Funders and sources of finance like NESTA, the Nominet Trust, the various social angel groups, will invest in certain projects but they expect to see the charity provide match funding, especially if it has reserves. This puts constant additional pressure on the startup project team as they are under non stop scrutiny and find themselves fielding questions from people in their own team unfamiliar with this territory and expecting to see results fast. For the people in that startup project, the “us” and “them” is very tricky. At least in a private sector startup you’re all working on the same project.

Mary McKenna

Mary McKenna

Too much investment can be a curse

In my view the best digital products start out on a shoestring budget. That way the team is more creative and it’s less of a big deal if the project fails.

A few people when they heard I was giving this talk lobbied me to say the issue for charities in building and launching digital products is lack of money and resources. I’m afraid I disagree. A large budget can lead to laziness, excessive outsourcing and maybe a “build it and they will come” product.

Back to the trustees. Often they meet infrequently but they’re the people who approve and sign things off. This doesn’t sit well with agile development, pivots and product iteration. All startup projects pivot. Getting the trustees into a place where they are comfortable with the risk involved and buy into the match funding element is definitely a challenge, but without it projects are not investor ready.

There’s a lot of meetings and governance

I understand the reasons why charities do this but it’s an additional overhead that other startups just don’t have to deal with. In an early stage private sector startup, decision making sits in the hands of one or two people. They have authority to do what they like. It’s their money. Decisions are made quickly and based upon imperfect data and information. Things move at pace. There are no reports to write, the list of KPIs or metrics monitored in the early days is short or non existent, there’s no-one else to keep in the loop, social impact isn’t measured. A charity tech project has to do all of these additional tasks on top of build and ship.

Pace is the single most frustrating aspect of working in a charity that I experienced. That and having to book meetings with people you can see across the room & who you just want to speak to for two minutes – because that’s how things are done. The structured environment slows everything down.

NESTA Panel - Isabel Newman, Mike Dixon, Kieron Kirkland, Emma Thomas and Shreenath Ragunathan

NESTA Panel – Isabel Newman, Mike Dixon, Kieron Kirkland, Emma Thomas and Shreenath Ragunathan

The team is any organisation’s most valuable asset

Charities have great people. Sam Sparrow who leads vInspired’s Task Squad project is one of the most impressive and talented people I’ve ever worked with in any business. There’s been a terrific drive to get a lot of charity team members onto and through accelerator programmes. What charities are bad at doing is allowing their newly trained intrapreneurs to be responsible and accountable and just to get on with things; especially with people that are considered to be “junior”. Structures are hierarchical where they need to be flatter and more matrix or project driven. In a tech startup, the most appropriate person is allowed to get on with what they’re good at within clear and agreed parameters. I’ve found that in charities, the decision making boundaries are sometimes unclear and this is one reason why the CEO and trustees end up as bottlenecks.

On top of this, there’s a Europe (world?) wide shortage of digital skills, developers and people with good commercial skills and there’s a great deal of competition to attract the best talent. Because these skills are in short supply, the people taking important decisions may not be properly equipped to do so – especially about digital. This results in poor commissioning and bad management of suppliers.

Here’s my presentation slides from the night:

I’ve probably just scratched the surface here and am very conscious that I’ve put forward an awful lot of challenges without many useful solutions. Fortunately, on the night there was an expert panel present (Kieron Kirkland of Nominet Trust, Mike Dixon of CAB, Emma Thomas of YouthNet and Shreenath Ragunathan of Google) all of whom were able to voice their own very practical advice on how the sector can improve in this space.

For anyone who’s wondering about the top 5 reasons startups fail – here they are:

  1. Lack of deep market knowledge – know your audience!
  2. Lack of USP or the ability to properly articulate it – market test your idea, work on your messaging and remember that some ideas are just bad ideas.
  3. Failure to communicate and lack of clarity
  4. Leadership issues – not so much for a charity – this one is more to do with flaky founders or personality clashes amongst co-founders that lead to the startup imploding
  5. The business model is wrong or underdeveloped – this one is KEY – spend as long as you need to getting your business model right

As always I am very much looking forward to your comments on this rather long blog. I hope we can have some useful and positive narrative about what we can all do to make this better because frankly, we really need to. If you have any questions for me about any of the above then please get in touch with me or post your questions up in the comments section for everyone to read and I’ll do my best to answer them.

5 immediate improvements we can make in the charity sector


At #UKGC14 - my first outing in a vInspired t-shirt telling the Task Squad story (Photo by David Pearson)

At #UKGC14 – my first outing in a vInspired t-shirt telling the Task Squad story (Photo by David Pearson)

Friday marked the completion of my first 4 weeks working in a charity – ever.  In the course of my long and varied career I’ve so far worked in local and central government, been a freelance consultant, temped in a trade union, spent time in countless (and many pointless) private sector organisations, done a bit of quango-hopping and I’ve worked in or founded 5 start-ups.  On 20 January I joined Task Squad as its first ever CEO.  Task Squad is a brand new social innovation project from national well known volunteering charity vInspired.  Our mission is to get young people into paid employment by matching them to entry level micro working opportunities.

I thought 4 weeks in might be a good time to reflect upon and write down my experiences so far before I lose them.  It would also be good to get feedback from others at this early milestone – if I’m truthful I’m seeking reassurance that I’m progressing in the right direction and haven’t missed or misinterpreted anything.

Some of you will know me as a tech entrepreneur and one of Learning Pool’s co-founders.  Many, many people have asked me why I’ve chosen to work in a charity at this time instead of rushing off to start another private sector business.

The reality is that charities and social enterprises are doing a lot of innovative and interesting things.  In the past 4 weeks I’ve been introduced by Task Squad team members and funders to loads of wonderful projects bunged full of enthusiastic and motivated people who work hard and are as committed as any startup team.  What the projects I’ve been interacting with so far have in common is they’re all using tech for good and they’re all being run by teams of social entrepreneurs.

Anyway – it goes without saying that charities and social enterprises exist for good reasons and to do good things.  However, these are the 5 things that have bugged me a bit in my first month.

1.       There’s so much duplication within the sector.  What I mean is there’s so many projects doing what appears to me to be the same thing.  Government and the big funders are partially to blame by funding similar projects in isolation instead of forcing teams to merge and work together.  It would be useful if there was a matching service for small charities or social innovation projects that want to merge to save money and cover more ground.  Maybe there is?

2.       The entire sector is gripped by “accelerator” fever.  The prevalence of and participation in social accelerator programmes is reaching epidemic proportions.  Every which way I turn I uncover another one.  There has to be a better way for the sector to learn.  Also – who is paying all for all these growth accelerators and is that a good use of money.

3.       The working environment seems very formal and structured to me – even in a charity that’s relaxed and informal in many ways.  A lot of internal meetings take place and a lot of time is spent on governance type activities…what I describe as doing things the right way rather than doing the right things.  I wonder if there are ways to improve productivity whilst preserving integrity and just getting on and doing more “stuff”.

4.       Trustees appear to me to be underutilised by many charities and I don’t know why this is.  I’m a trustee of a couple of not for profit organisations.  I joined because I wanted to help them make a difference and they were looking for someone with my particular skill set.  I want to be useful.  I don’t want to be distant and see only the senior team at quarterly board meetings.  I’m sure this must work better in some places and I’d be interested in finding out who does this well and how they’ve made that happen.  Please send me any good examples you have of charities or not for profits who’ve got a great relationship with their trustees and who are getting the best out of them.

5.       Why isn’t there a central directory of all social funders and investors where they publish all their live funds?  This would make it easier for charities and social innovation projects to find and compare them and it would also significantly improve their dealflow.  Again – maybe there is and if so I would be grateful if someone can point me to it.

Apologies if I’ve dwelled upon too much of the negative in this first blog on this topic.  I don’t mean to be harsh as there’s so much good work happening generally and I personally feel completely elated to be working at Task Squad.  My interest is in helping everyone help each other to cover more ground with the limited resources we all have at our disposal.

I need your comments more than ever.  Let’s get some conversations started!