Giving 10% without money still loses on some of the signal. Not sure how big of a deal this is, but there is less of an incentive to choose those carefully if you’re not giving any money.
Not sure how hard it is to not be affected by bias, but for the seal of approval/signal boost problem, I'd say that the categories would stay the same. $5000 would correspond to "Seal of confirmation that we would give them $5000 if they asked, but they didn't ask". The same for $10k and any other sum. You would judge the application as if they are asking for money, but then just don't give them money.
You can do this blinded. Ask applicants just wanting a seal of approval to say how much money they would want. Then rank all proposals, while not knowing which ones actually want the money, then go through them until you run out of money.
With science funding evaporating in the US I’m left wondering if there’s some private ways to seek it.
ACX grants are really great to see and it’s been interesting to have followed these for the past few years.
I’m a grad student. I think my research is beneficial to humanity but perhaps not so obviously so that I felt it would qualify for this sort of thing. (As these grants seem particularly geared toward the most high impact projects).
Does anyone perhaps have advice of anywhere someone might look for this sort of thing? I’d be very happy to hear it :)
Do you give grants to people outside the US? Because in many (most) countries, there is very little venture capital. Even in my own, Denmark, who ranks just below the US on the Freedom of Doing Business Index, it's just not very common. I'm sure many startups could appreciate your help
I'll write a more detailed comment on this but yes, Tornyol (anti-mosquito drones) is based in France and we couldn't have got the support from ACX Grants from a local VC.
Yes, there is, and it would have the added bonus of beeing more of a signal. A small SAFE would be the ideal, so as not to choke the cap table when the valuation is so small. (We have that in France, as a BSA-AIR).
My main point is that VCs, like potential employees or clients, have reading grids to evaluate pitches. The great thing I found about ACX Grants is that the grid is different, and encourages different kinds of projects. Founder obsession for a problem seems to be encouraged in ACX Grants, although it's clearly discouraged for very early VC funding. VCs like very well made slides, communication abilities, and beautiful people in general, while I've found no such bias for ACX Grants. Being based outside the US is a big minus for American VCs, but ACX Grants almost seems to be favoring it. VCs tend to think a lot by analogy (the Uber for X, the Cursor for Y ...) while I found ACX Grants to be much more thinking from first principles than the median VC I met.
I'm not criticizing the VC reading grid. It obviously comes from experience and it tends to work financially for them. But you have to remember that a large part of the decision comes down to the potential for a quite early (3-4 years) and billion-dollar exit option. Not all projects fit that and it's a good thing to support the other. The other advantage of it is that it selects founders that can go through the hoops of making their project fit the grid. That proves VCs the founders are capable of adapting their message to their interlocutors, which is highly necessary when raising further money, recruiting or discussing with any partner. That's something ACX Grants does not seem to value much.
All in all, ACX Grants is great in that it provides funding with a very unique reading grid, so it helps projects that could get no help anywhere else. That was our case a year ago, and is something I'm very grateful for now. Thank you again, ACX Grants, for your help.
If an entrepreneur is interested in a forprofit company that has a charitable side-effect, that entrepreneur isn't going to be at home neither with VC Capital (full for-profit) nor with traditional NGO funding (full charity).
The ideal should be an agreement like OpenAI, where there's a charity that "owns" shares in a for-profit company.
I think the question of nonfinancial grants should be a grant minimum of, say, $500 for individuals and $2,500 for organizations. (Or maybe higher?) Organizations and individuals can use the money, it preserves the grant structure, and in my experience it's very rare that when pressed people don't think they would have more time or be more effective with a bit more money. At the very least, that structure would cover the expected opportunity costs of applying for groups that could use the signal boost, but are effective and fully financed otherwise.
But even if you don't put in place a minimum, and allow signal-only grants the cost-benefit calculation should assume a cost of evaluators time and overhead - if the benefit if $100, the cost isn't zero, for an infinite return on investment, it's at least $100 for the time to consider and write up the grant, making it at best neutral. (This doesn't need to be accounted for explicitly for most grants, but the edge case changes things.)
I recommend against mixing investments with donations, since the legal structure get messy, and misaligned incentives are really tricky. (This would likely be different if you weren't doing well financially anyways, or planned to use the profits to start your own VC business.)
So I think the for-profit invest/donate issue is a chance for VCs to tell you if they think the opportunity is marginal for profitability but likely to succeed, or potentially profitable but higher risk then they'd invest in. At that point, they should either tell you they thin you should donate the money, or you can try a co-investment structure where you donate $1 for every dollar they invest. (If you want, depending on the distribution of outcomes they expect, this could be tied to a gentleman's agreement that the VC support future grant rounds with some proportion of the profits if the business makes them a large profit. I wouldn't try to formalize it, though, because that gets really messy.)
There's an existing procedure for returning the money if things don't work out; clout-only applicants could become an alternate form of that, though it might be necessary to make a clear formal distinction between the two. Perhaps returning it same-day, plus an extra 10%, so whoever was next down the list can benefit from the actual cash.
It sounds quite essential to make a clear distinction because "I got grant money but had to return it because it didn't work out" sounds like the polar opposite of a positive endorsement ;)
I've got no knowledge on this, but hell if that'll stop me.
1. I don't know what the definition of "charitable aims" is here, but if it meets them, sure, do it.
2. I'd say invest, less so to make money and more so to keep more control over the use of the grant. Easy for a for-profit to decide something else would be more profitable. Sounds like it's a legal nightmare for some reason, but hey, I'm not the one doing it.
3. No further actions. You're not trying to make money, you're trying to get ideas running, and this is basically asking what happens if an idea gets running too successfully. The answer is, you give a polite golf clap and move on.
4. My take is, make them clear the grant, and then give the money to the next-highest contender. If ten people would get grants but No. 11 just wanted prestige, well, they didn't make the 10 grants, better luck next year. But if No. 5 just wanted prestige, give them the prestige, and give 5's money to No. 11.
5. Complicated web of lies, because I don't understand what you're asking and my policy is "when confused, confuse others."
For the seal of approval question, to solve the "getting 5k becomes easier than getting 0" problem: if you have determined some level of money equivalent to giving them the seal of approval, why not add that to the amount sought by every proposal? Getting 0 is evaluated as asking for 10k, getting 5k is evaluated as asking for 15k, etc., and your evaluation process is monotonous in the amount of money requested again.
A nonprofit company doesn't exactly have equity to give, as least as a 501(c) under the laws of every state i am aware of.
You could get a board seat, or shares in a nonprofit that has shares, but you could not get dividends on those shares.
Also, a nonprofit subject to 501(c) can't simply decide later to become a for-profit.
Finally, if and to the extent ACX is structured as a 501(c)(3), dividends received from an investment would be Unrelated Business Income and subject to tax.
Reg. 2: If you give forprofit companies money, I really think you should donate. Conflicts of interest could become really paralyzing and lead to misaligned incentives, I fear.
I think a VC charitable organization sounds promising, but I don’t think it’s your best personal fit. The legal hurdles will be immense and even if Manifund does the paperwork, you will be responsible to make decisions like whether to sue or whether to settle. You may have to testify on stand. My worry is it will take much more of you time than you expect and generate too much stress that gives you less time to use your other considerable talents. Your writing has made all of this possible and you could easily find this becoming a full time endeavor and take away from your writing and time with your family.
Direct cost of signal-boosting isn't zero, you just haven't got a metric for measuring costs denominated in reputation and signal-to-noise ratio as precisely as you can measure money. May have, in fact, actively worked to avoid developing sensitivity to conventional reputational costs, out of distaste for the deceptive behaviors associated with excessive concern for such. Perhaps the solution would be to formally consult a respected specialist in public relations, or a related field; they might very well have standard tools by which such costs could be assessed, and other off-the-shelf solutions, or at least domain expertise to warn you off from some common pitfalls.
"If we give forprofit companies money, should we donate or invest?"
Is lending a possible middle ground? Of course, it doesn't have the potential massive upside of equity, but you don't have to worry as much about (e.g.) "someone tr[ying] to backstab us to get more shares at our expense." The financial conflict of interest may be less, as you'd predominantly care only about whether the company did well enough to repay the loan.
"What happens if a nonprofit research organization that we donate to later decides to become a forprofit company?"
If it's that brazen, I'd consider reporting them to their state regulators and IRS (in the US). The prohibition against more-than-incidental private benefit (inurement) is one of the most fundamental obligations of a non-profit. I share your concern about "unenforced gentlemen’s agreement[s]" with organizations and organizational leaders who won't comply with their actual legal obligations!
On the organizational side, if I *hadn't* committed inappropriate private benefit, I'd be worried about giving equity in my sufficiently-unrelated new business to donors of the charity I used to work for. It sure looks like conceding that I had violated my duties to the non-profit, or had run the non-profit in a way to benefit my for-profit, or so on.
I want to start a cheaper but worse (not intentionally worse, but because their website seems very classy, I'm less informed, and I just found a cheap source of olivine near the Mediterranean coast and believe I can find a way to dump it to the sea somehow, and also find a way to document this so I can sell carbon credits to people/companies who want to buy, and preferably get subsidies from the Dutch state for each ton of CO2 I sequester) version of Vesta thus my answers are heavily biased:
On the signal, every marginal seal of approval you give out reduces the value of the deal to the people you already grant it to. That makes the cost-benefit analysis not one-sided and you could implement it by (say) fixing the number of approvals.
That being said, probably more trouble than it's worth?
Yes to for-profits. Although for-profit funding ecosystems exist, they filter for different criteria. Trusting that filtering for ACX desires is unwise. Most for-profits are probably bad relative fits, but not all, and I expect you'll find enough exceptions you'd regret disallowing them.
As to invest/donate, unclear. There may be instruments that allow you to pursue novel structures somewhere between the two (forgivable loans, convertible loans, contracts-for-specific-projects, etc.). However, they may be challenging for both parties.
As to seal of approval: yes. Have two categories of contest, one only for $, one only for status. Status contest has a capped number of possible winners each cycle. Yes, it runs risk that you simply increase number each year since it's low-cost to do so, but there is a cost - time and ACX brand cost - for bad/numerous topics.
A. If you don't, people who have big visions are unlikely to submit a proposal to you. Even apart from the financial motivation, it's quite difficult to grow a non-profit, since it's harder to get investments or loans for them.
B. I have too much experience with government agencies and contractors going off the rails because nobody cares if they lose money. For just one example of many, a boss of mine refused my plan to replace our supercomputing grid with a few nVidia machines that could do the same job, because he said it was better to spend $10 million of the government's money every year, than to spend $20,000 of our money. He wouldn't do it even if it were free, because spending $10 million of government money bought people and resources that could be diverted to other projects, and increased the status of the managers involved.
C. I was a member of MIT's entrepreneurship club in the 1990s, and met lots of VCs who told us how they invest, and I don't think they would invest in anything that you would want to fund.
First, the purpose of the VC ecosystem is to make as much money as possible as quickly as possible. They'll never prioritize investment by its public benefit.
Second, most VCs aren't interested in investing less than a million dollars at a time in anything. It doesn't take take 10 times as long to approve a $10-million investment as a $1-million investment. So they can get a lot more golfing done if they make only large investments.
Third, the most-important factor in investment decisions, to every VC I've talked to, is how many of the founders attended either an Ivy League college, or else MIT or Stanford. That's literally the first or second thing they mention when talking about any company they invested in.
I donated money to a nonprofit that later turned into a for-profit company. At first I felt like a chump, but after that feeling wore off, I reflected, and it’s honestly one of the best outcomes of my donations. I think this is likely to be a good thing rather than a bad thing.
I feel like related- I see that OpenAI is now a defense contractor ($200 million contract with the department of defense). Not quite the charitable aims of the original funders I think.
On whether to funding for profits would funge against VCs - VC has a specific hits-based business model that looks for companies with fast growth potential and a huge potential market so that one success can cover the loss of many failures. Not all impactful investments fit this mold, even if they'll likely be profitable. I currently helping start a new company with huge impact potential but a small market size (in financial terms), and it likely won't be venture backable. If you support companies like this, you might funge against mission aligned angel investors, but this is a generally a looser and less connected community, and the money is less countefactually valuable. You could also ask a similar question in the application around "do you think you could raise this money from someone else."
I think you ultimately just have to give money to confer a seal of approval, even if the money isn't needed. There's no understandable way for the recipient of a seal of approval to tout it without saying they received money in any normal venue. "I got approved to get $15,000 from ACX, but we didn't need the money so they didn't give it to us" might be fine for signaling to some in-group but will be functionally useless in the wider world, where you'll need to just say "grant recipient of ACX." If they really don't need the money, they can donate it, though I know the bookkeeping is what they'd really prefer to avoid.
I am the cofounder of Ovelle, an IVG company, which I am mostly doing because I believe broad access to IVG is a worthwhile goal. From what I’ve seen of VCs and fundraising, I would advocate for investing in private companies (even though that somewhat conflicts with my own interest in donating to them).
VCs really want to make money right now. This means they tend to avoid slightly longer-term investments that have large positive social impact. However, not all of these types of projects can be carried out in a charitable or academic setting. Take IVG, for example. Part of the reason I founded Ovelle is that no academic labs in the U.S. are currently making a serious effort to solve the problem. This is likely due to poor incentives, both in academia and in U.S. funding structures. So, if this technology is important, which I believe it is, I either need to change the incentive structure of academia and the NIH (which seems very hard) or start a company.
This seems like a significant gap in many areas, and the fact that such efforts are overlooked by VCs often means the returns are much stronger than expected (see, for example, OpenAI, SpaceX, Commonwealth Fusion, etc.). These returns can then be used, as you said, to fund future projects.
I’m not a legal expert, but I know this is possible. For example, the Aphorism Foundation (a private 501(c)(3) grant-making foundation that Reid Hoffman and his wife, Michelle Yee, established) invested about $50 million into the new for-profit OpenAI LP in 2018. U.S. private foundations are allowed to make program-related investments (PRIs) in for-profit entities when the activity directly advances a charitable purpose.
Surprised all the commentators are saying Yes to for-profit companies. Venture fundraising is almost always regarded as significantly easier than non-profit fundraising.
Non-profits have a handicap on them because they can't give equity in exchange for funds like for-profits can. They knowingly accept this poison pill, among others. They will often work the same as for-profits but with pennies to the dollar in $, and no prospect of striking it big with their non-existent equity. Grants help bridge this gap.
Making investments requires formalization on your end, but also on theirs. Incorporating, defining ownership all the stakeholders, and so on, shows some additional level of commitment and interest. You had a lot of projects that died out because the recipient seemed to lose interest. I think this would help. Also, you will get good deal flow and becoming a self sustaining endowment might be really powerful long term. Im a VC, so I’m biased. But I think it’d be cool!
For 4, the intuitive answer to my mind is: presumably, for your grantees, there's a step where you ask them for payment information so you can actually send them the money; but, also presumably, you don't need to check that information prior to doing your grants. (Even if you validity-check the information pre-grantmaking or something to that effect, you can presumably assign the validity-check task to a third party who isn't directly responsible for the grantmaking part.) So, at the "specify payment information" step, include an option of "we don't actually need the money, keep it and use it for later grants instead". So you're granting blindly-to-whether-that's-their-position, and reasonably non-inflatedly—if you grant them $5000, that's a clear signal that it's a project you think is worth $5000-ungrantable-to-other-people-this-round-due-to-this-project-taking-up-that-slice-of-your-budget—but *also* you get to non-tax-complication-ladenly keep the money if they don't in fact need the money and just need the project-worth-$5000-as-gauged-by-ACX-grants seal of approval.
Giving 10% without money still loses on some of the signal. Not sure how big of a deal this is, but there is less of an incentive to choose those carefully if you’re not giving any money.
'How to handle applicants who want prestige / our “seal of approval”, but not money?'
You should send them a seal plushie along with the endorsement.
A $10,000 plushie, and use the usual methods to evaluate whether it's worth it.
$10K would be chump change these days. Think of something like a $10M NFT depicting something exceptionally stupid.
Not sure how hard it is to not be affected by bias, but for the seal of approval/signal boost problem, I'd say that the categories would stay the same. $5000 would correspond to "Seal of confirmation that we would give them $5000 if they asked, but they didn't ask". The same for $10k and any other sum. You would judge the application as if they are asking for money, but then just don't give them money.
Just burn the money as a sign of good faith.
You can do this blinded. Ask applicants just wanting a seal of approval to say how much money they would want. Then rank all proposals, while not knowing which ones actually want the money, then go through them until you run out of money.
With science funding evaporating in the US I’m left wondering if there’s some private ways to seek it.
ACX grants are really great to see and it’s been interesting to have followed these for the past few years.
I’m a grad student. I think my research is beneficial to humanity but perhaps not so obviously so that I felt it would qualify for this sort of thing. (As these grants seem particularly geared toward the most high impact projects).
Does anyone perhaps have advice of anywhere someone might look for this sort of thing? I’d be very happy to hear it :)
Do you give grants to people outside the US? Because in many (most) countries, there is very little venture capital. Even in my own, Denmark, who ranks just below the US on the Freedom of Doing Business Index, it's just not very common. I'm sure many startups could appreciate your help
There's a reason that startups go to places where they can succeed, and a reason that startups in some places do better than others.
But capital flows across borders very easily, and if VCs thought startups in Denmark were worth investing in, they can invest there. And to some extent, they already do - https://www.basetemplates.com/investors/top-vc-investors-in-copenhagen
I'll write a more detailed comment on this but yes, Tornyol (anti-mosquito drones) is based in France and we couldn't have got the support from ACX Grants from a local VC.
Does France have good enough investment law that we could have invested in you if we'd wanted?
Yes, there is, and it would have the added bonus of beeing more of a signal. A small SAFE would be the ideal, so as not to choke the cap table when the valuation is so small. (We have that in France, as a BSA-AIR).
My main point is that VCs, like potential employees or clients, have reading grids to evaluate pitches. The great thing I found about ACX Grants is that the grid is different, and encourages different kinds of projects. Founder obsession for a problem seems to be encouraged in ACX Grants, although it's clearly discouraged for very early VC funding. VCs like very well made slides, communication abilities, and beautiful people in general, while I've found no such bias for ACX Grants. Being based outside the US is a big minus for American VCs, but ACX Grants almost seems to be favoring it. VCs tend to think a lot by analogy (the Uber for X, the Cursor for Y ...) while I found ACX Grants to be much more thinking from first principles than the median VC I met.
I'm not criticizing the VC reading grid. It obviously comes from experience and it tends to work financially for them. But you have to remember that a large part of the decision comes down to the potential for a quite early (3-4 years) and billion-dollar exit option. Not all projects fit that and it's a good thing to support the other. The other advantage of it is that it selects founders that can go through the hoops of making their project fit the grid. That proves VCs the founders are capable of adapting their message to their interlocutors, which is highly necessary when raising further money, recruiting or discussing with any partner. That's something ACX Grants does not seem to value much.
All in all, ACX Grants is great in that it provides funding with a very unique reading grid, so it helps projects that could get no help anywhere else. That was our case a year ago, and is something I'm very grateful for now. Thank you again, ACX Grants, for your help.
Replying to this to give more visibility:
If an entrepreneur is interested in a forprofit company that has a charitable side-effect, that entrepreneur isn't going to be at home neither with VC Capital (full for-profit) nor with traditional NGO funding (full charity).
The ideal should be an agreement like OpenAI, where there's a charity that "owns" shares in a for-profit company.
I think the question of nonfinancial grants should be a grant minimum of, say, $500 for individuals and $2,500 for organizations. (Or maybe higher?) Organizations and individuals can use the money, it preserves the grant structure, and in my experience it's very rare that when pressed people don't think they would have more time or be more effective with a bit more money. At the very least, that structure would cover the expected opportunity costs of applying for groups that could use the signal boost, but are effective and fully financed otherwise.
But even if you don't put in place a minimum, and allow signal-only grants the cost-benefit calculation should assume a cost of evaluators time and overhead - if the benefit if $100, the cost isn't zero, for an infinite return on investment, it's at least $100 for the time to consider and write up the grant, making it at best neutral. (This doesn't need to be accounted for explicitly for most grants, but the edge case changes things.)
I recommend against mixing investments with donations, since the legal structure get messy, and misaligned incentives are really tricky. (This would likely be different if you weren't doing well financially anyways, or planned to use the profits to start your own VC business.)
So I think the for-profit invest/donate issue is a chance for VCs to tell you if they think the opportunity is marginal for profitability but likely to succeed, or potentially profitable but higher risk then they'd invest in. At that point, they should either tell you they thin you should donate the money, or you can try a co-investment structure where you donate $1 for every dollar they invest. (If you want, depending on the distribution of outcomes they expect, this could be tied to a gentleman's agreement that the VC support future grant rounds with some proportion of the profits if the business makes them a large profit. I wouldn't try to formalize it, though, because that gets really messy.)
Maybe applications could be blinded w.r.t. whether they are financial or clout-only.
There's an existing procedure for returning the money if things don't work out; clout-only applicants could become an alternate form of that, though it might be necessary to make a clear formal distinction between the two. Perhaps returning it same-day, plus an extra 10%, so whoever was next down the list can benefit from the actual cash.
It sounds quite essential to make a clear distinction because "I got grant money but had to return it because it didn't work out" sounds like the polar opposite of a positive endorsement ;)
The profit motive ruins everything. Stay away, far away.
I've got no knowledge on this, but hell if that'll stop me.
1. I don't know what the definition of "charitable aims" is here, but if it meets them, sure, do it.
2. I'd say invest, less so to make money and more so to keep more control over the use of the grant. Easy for a for-profit to decide something else would be more profitable. Sounds like it's a legal nightmare for some reason, but hey, I'm not the one doing it.
3. No further actions. You're not trying to make money, you're trying to get ideas running, and this is basically asking what happens if an idea gets running too successfully. The answer is, you give a polite golf clap and move on.
4. My take is, make them clear the grant, and then give the money to the next-highest contender. If ten people would get grants but No. 11 just wanted prestige, well, they didn't make the 10 grants, better luck next year. But if No. 5 just wanted prestige, give them the prestige, and give 5's money to No. 11.
5. Complicated web of lies, because I don't understand what you're asking and my policy is "when confused, confuse others."
For the seal of approval question, to solve the "getting 5k becomes easier than getting 0" problem: if you have determined some level of money equivalent to giving them the seal of approval, why not add that to the amount sought by every proposal? Getting 0 is evaluated as asking for 10k, getting 5k is evaluated as asking for 15k, etc., and your evaluation process is monotonous in the amount of money requested again.
A nonprofit company doesn't exactly have equity to give, as least as a 501(c) under the laws of every state i am aware of.
You could get a board seat, or shares in a nonprofit that has shares, but you could not get dividends on those shares.
Also, a nonprofit subject to 501(c) can't simply decide later to become a for-profit.
Finally, if and to the extent ACX is structured as a 501(c)(3), dividends received from an investment would be Unrelated Business Income and subject to tax.
Reg. 2: If you give forprofit companies money, I really think you should donate. Conflicts of interest could become really paralyzing and lead to misaligned incentives, I fear.
I think a VC charitable organization sounds promising, but I don’t think it’s your best personal fit. The legal hurdles will be immense and even if Manifund does the paperwork, you will be responsible to make decisions like whether to sue or whether to settle. You may have to testify on stand. My worry is it will take much more of you time than you expect and generate too much stress that gives you less time to use your other considerable talents. Your writing has made all of this possible and you could easily find this becoming a full time endeavor and take away from your writing and time with your family.
Direct cost of signal-boosting isn't zero, you just haven't got a metric for measuring costs denominated in reputation and signal-to-noise ratio as precisely as you can measure money. May have, in fact, actively worked to avoid developing sensitivity to conventional reputational costs, out of distaste for the deceptive behaviors associated with excessive concern for such. Perhaps the solution would be to formally consult a respected specialist in public relations, or a related field; they might very well have standard tools by which such costs could be assessed, and other off-the-shelf solutions, or at least domain expertise to warn you off from some common pitfalls.
"If we give forprofit companies money, should we donate or invest?"
Is lending a possible middle ground? Of course, it doesn't have the potential massive upside of equity, but you don't have to worry as much about (e.g.) "someone tr[ying] to backstab us to get more shares at our expense." The financial conflict of interest may be less, as you'd predominantly care only about whether the company did well enough to repay the loan.
"What happens if a nonprofit research organization that we donate to later decides to become a forprofit company?"
If it's that brazen, I'd consider reporting them to their state regulators and IRS (in the US). The prohibition against more-than-incidental private benefit (inurement) is one of the most fundamental obligations of a non-profit. I share your concern about "unenforced gentlemen’s agreement[s]" with organizations and organizational leaders who won't comply with their actual legal obligations!
On the organizational side, if I *hadn't* committed inappropriate private benefit, I'd be worried about giving equity in my sufficiently-unrelated new business to donors of the charity I used to work for. It sure looks like conceding that I had violated my duties to the non-profit, or had run the non-profit in a way to benefit my for-profit, or so on.
I want to start a cheaper but worse (not intentionally worse, but because their website seems very classy, I'm less informed, and I just found a cheap source of olivine near the Mediterranean coast and believe I can find a way to dump it to the sea somehow, and also find a way to document this so I can sell carbon credits to people/companies who want to buy, and preferably get subsidies from the Dutch state for each ton of CO2 I sequester) version of Vesta thus my answers are heavily biased:
1- Yes
2- Donation
On the signal, every marginal seal of approval you give out reduces the value of the deal to the people you already grant it to. That makes the cost-benefit analysis not one-sided and you could implement it by (say) fixing the number of approvals.
That being said, probably more trouble than it's worth?
Yes to for-profits. Although for-profit funding ecosystems exist, they filter for different criteria. Trusting that filtering for ACX desires is unwise. Most for-profits are probably bad relative fits, but not all, and I expect you'll find enough exceptions you'd regret disallowing them.
As to invest/donate, unclear. There may be instruments that allow you to pursue novel structures somewhere between the two (forgivable loans, convertible loans, contracts-for-specific-projects, etc.). However, they may be challenging for both parties.
As to seal of approval: yes. Have two categories of contest, one only for $, one only for status. Status contest has a capped number of possible winners each cycle. Yes, it runs risk that you simply increase number each year since it's low-cost to do so, but there is a cost - time and ACX brand cost - for bad/numerous topics.
"Should we give money to for-profits?"
I think so.
A. If you don't, people who have big visions are unlikely to submit a proposal to you. Even apart from the financial motivation, it's quite difficult to grow a non-profit, since it's harder to get investments or loans for them.
B. I have too much experience with government agencies and contractors going off the rails because nobody cares if they lose money. For just one example of many, a boss of mine refused my plan to replace our supercomputing grid with a few nVidia machines that could do the same job, because he said it was better to spend $10 million of the government's money every year, than to spend $20,000 of our money. He wouldn't do it even if it were free, because spending $10 million of government money bought people and resources that could be diverted to other projects, and increased the status of the managers involved.
C. I was a member of MIT's entrepreneurship club in the 1990s, and met lots of VCs who told us how they invest, and I don't think they would invest in anything that you would want to fund.
First, the purpose of the VC ecosystem is to make as much money as possible as quickly as possible. They'll never prioritize investment by its public benefit.
Second, most VCs aren't interested in investing less than a million dollars at a time in anything. It doesn't take take 10 times as long to approve a $10-million investment as a $1-million investment. So they can get a lot more golfing done if they make only large investments.
Third, the most-important factor in investment decisions, to every VC I've talked to, is how many of the founders attended either an Ivy League college, or else MIT or Stanford. That's literally the first or second thing they mention when talking about any company they invested in.
I donated money to a nonprofit that later turned into a for-profit company. At first I felt like a chump, but after that feeling wore off, I reflected, and it’s honestly one of the best outcomes of my donations. I think this is likely to be a good thing rather than a bad thing.
I feel like related- I see that OpenAI is now a defense contractor ($200 million contract with the department of defense). Not quite the charitable aims of the original funders I think.
On whether to funding for profits would funge against VCs - VC has a specific hits-based business model that looks for companies with fast growth potential and a huge potential market so that one success can cover the loss of many failures. Not all impactful investments fit this mold, even if they'll likely be profitable. I currently helping start a new company with huge impact potential but a small market size (in financial terms), and it likely won't be venture backable. If you support companies like this, you might funge against mission aligned angel investors, but this is a generally a looser and less connected community, and the money is less countefactually valuable. You could also ask a similar question in the application around "do you think you could raise this money from someone else."
I think you ultimately just have to give money to confer a seal of approval, even if the money isn't needed. There's no understandable way for the recipient of a seal of approval to tout it without saying they received money in any normal venue. "I got approved to get $15,000 from ACX, but we didn't need the money so they didn't give it to us" might be fine for signaling to some in-group but will be functionally useless in the wider world, where you'll need to just say "grant recipient of ACX." If they really don't need the money, they can donate it, though I know the bookkeeping is what they'd really prefer to avoid.
I am the cofounder of Ovelle, an IVG company, which I am mostly doing because I believe broad access to IVG is a worthwhile goal. From what I’ve seen of VCs and fundraising, I would advocate for investing in private companies (even though that somewhat conflicts with my own interest in donating to them).
VCs really want to make money right now. This means they tend to avoid slightly longer-term investments that have large positive social impact. However, not all of these types of projects can be carried out in a charitable or academic setting. Take IVG, for example. Part of the reason I founded Ovelle is that no academic labs in the U.S. are currently making a serious effort to solve the problem. This is likely due to poor incentives, both in academia and in U.S. funding structures. So, if this technology is important, which I believe it is, I either need to change the incentive structure of academia and the NIH (which seems very hard) or start a company.
This seems like a significant gap in many areas, and the fact that such efforts are overlooked by VCs often means the returns are much stronger than expected (see, for example, OpenAI, SpaceX, Commonwealth Fusion, etc.). These returns can then be used, as you said, to fund future projects.
I’m not a legal expert, but I know this is possible. For example, the Aphorism Foundation (a private 501(c)(3) grant-making foundation that Reid Hoffman and his wife, Michelle Yee, established) invested about $50 million into the new for-profit OpenAI LP in 2018. U.S. private foundations are allowed to make program-related investments (PRIs) in for-profit entities when the activity directly advances a charitable purpose.
Surprised all the commentators are saying Yes to for-profit companies. Venture fundraising is almost always regarded as significantly easier than non-profit fundraising.
Non-profits have a handicap on them because they can't give equity in exchange for funds like for-profits can. They knowingly accept this poison pill, among others. They will often work the same as for-profits but with pennies to the dollar in $, and no prospect of striking it big with their non-existent equity. Grants help bridge this gap.
Keep grants to non-profits.
Making investments requires formalization on your end, but also on theirs. Incorporating, defining ownership all the stakeholders, and so on, shows some additional level of commitment and interest. You had a lot of projects that died out because the recipient seemed to lose interest. I think this would help. Also, you will get good deal flow and becoming a self sustaining endowment might be really powerful long term. Im a VC, so I’m biased. But I think it’d be cool!
For 4, the intuitive answer to my mind is: presumably, for your grantees, there's a step where you ask them for payment information so you can actually send them the money; but, also presumably, you don't need to check that information prior to doing your grants. (Even if you validity-check the information pre-grantmaking or something to that effect, you can presumably assign the validity-check task to a third party who isn't directly responsible for the grantmaking part.) So, at the "specify payment information" step, include an option of "we don't actually need the money, keep it and use it for later grants instead". So you're granting blindly-to-whether-that's-their-position, and reasonably non-inflatedly—if you grant them $5000, that's a clear signal that it's a project you think is worth $5000-ungrantable-to-other-people-this-round-due-to-this-project-taking-up-that-slice-of-your-budget—but *also* you get to non-tax-complication-ladenly keep the money if they don't in fact need the money and just need the project-worth-$5000-as-gauged-by-ACX-grants seal of approval.