§Academia Constraints

People giving out grants try to derisk them as much as possible

Charities raise money on a yearly or sub-yearly basis

How does money work in PARPA?

Most people give money to philanthropy to make themselves look and feel good

Bell Labs is one of the few examples of an innovation org that was aligned with its money factory

The traditional non-profit structure is a bad idea for an organization that requires a significant chunk of capital and produces uncertain results on a long timescale

What if there was a clean philanthropy-to-government policy pipeline?

Things that are not paper-worthy enough for academia and not product-focused enough for a startup

Pay-it-forward tithing could resolve the tension between the potential public-good and potential profit in research.

Alex Rider Convo 17-1-2020

An institution riffing on the ARPA Model could enable paradigm shifts that are not happening

The C3SOP structure appears to allow non-profit employees to get stock options

Nadia Eghbal conversation 7 Jul 2021

An Institute for Creative Technology - Riffing on ARPA

Lots of philanthropy is based on small checks even from big donors

There’s lots of money out there … for good investments

# §Philanthropy and Non-Profit Constraints
Philanthropy is the funding mechanism and Non-Profits are the Organization in an Organization-Funding Diad. ([[Organizations and their funding mechanisms are coupled]])

- Profit in non profits goes back towards the mission
	- Could this involve investing it?
- Non-profits must spend all of their income every year 
	- This can lead to very cyclic activity 
	- Cyclic hiring harms employee’s ability to think long term because there is no buffer to pay them in income draught periods
	- Are universities non-profits? They invest their excess income. 
- Non-profits need to constantly be fundraising 
	- Is this because they need to spend down every year?
	- This means that they can’t do anything that looks bad in the short term 
- What’s the difference between a foundation and a non-profit? 
	- A foundation is a *type* of non-profit. The other type is Public charities.
	- The money for foundations comes from an initial gift from an individual or business and spends out of interest. 
	- Foundations can only spend in ways that adhere with 501(c)(3) of the Internal revenue code
	- Foundations can be operating or non operating
		- A non operating foundation give money to orgs
		- An operating foundation distributes funds to its own purposes
	- Public Charities
		- A charity must receive 1/3 of its contributions from the general public OR at least 10% from general public + subjective test of “support”
		- Public charities have higher donor tax deductibles
			- How much?
		- [[Only charities can receive tax-deductible donations]]
	- 501(c)(3)s all are exempt from paying income tax, but only charities exempts donors from income tax
		- [What rules do charities have to follow? | HowStuffWorks](https://money.howstuffworks.com/economics/volunteer/starting-a-charity/rules-charities-follow.htm)

- [[Funders want to follow other funders]]
- It’s easier for foundations to pay out grants than anything else ([A “Watch-Out” for Private Foundations Offering Prizes](https://ssir.org/articles/entry/a_watch_out_for_private_foundations_offering_prizes))  but  [[People giving out grants try to derisk them as much as possible]]
- [[Charities raise money on a yearly or sub-yearly basis]]
- [[Most people give money to philanthropy to make themselves look and feel good]]
- [[Philanthropies can easily become misaligned with their money factories]]
- [[Philanthropies are forced to show consistent short term progress]]
- [[Most philanthropists give to specific causes]]
- [[Non-profits must meet several requirements to Maintain 503c Status]]
- [[People have different and unknown caring money thresholds]]
- A possible tweak: [[Pay-it-forward tithing could resolve the tension between the potential public-good and potential profit in research.]]

See also: [[§Misalignment between funders and nonprofits in research]]

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Build a map of how innovation organizations are structured now and in the past

Build a map of how innovations are funded now and in the past

# Has anybody written about how the structure of organizations and their funding are coupled?
# Has anybody written about how the structure of organizations and their funding are coupled
[[Organizations and their funding mechanisms are coupled]]

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§Philanthropy and Non-Profit Constraints

Organizations can get incomes via Contracts, budgets, or products

Has anybody written about how the structure of organizations and their funding are coupled?

# Organizations and their funding mechanisms are coupled
You could almost think of organizations and their funding as diads or tuples.  These diads can be chained because most funding mechanisms have their own organizations built around them. 

Startups and equity funding forms a chain with Venture capital and LP funding which in turn forms a chain with Limited Partnerships and Individual Investments which forms a chain with Institutional Funds and (family money, retirement fees, donations)

## List of coupled organizational structures and funding mechanisms
- Small businesses and debt
- Academic labs and grants
- Startups and equity 
- Venture capital and limited partner funds
- Real estate firms and REITS
- Foundations and massive infusions of capital



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Someone needs to buy manufactured technology eventually in a monetized economy

Different axes of where research gets done in the US

§Axes for Looking at Funding and Organizations

Often spending money is the primary goal over the output of that money

What do organizational boundaries actually mean?

# Organizations can get incomes via Contracts, budgets, or products 
# Organizations can get incomes via Contracts, budgets, or products 

Contracts have more or less fuzzy deliverables.  You need to do some sort of sales to get a contract. Contracts have more or less fuzzy deliverables. Grants are a form of contract funding with fuzzy deliverables.

Products are something where you build the thing and then people pay you for them. In a way, prizes are a form of ‘product funding.’ 

The line between contract and product is not always well-delineated.

Budgets you just get money from someone else that you’re in a relationship with. Everything is implicit.  Budgets for organizations are analogous to salaries for people. Budgets are fragile - if you have a budget you have a steady source of income … until you don’t. Organizations with budgets can be defunded at any time. They generally don’t have any buffer. 

At the end of the day the knobs that get turned are 
- Direction setting 
	- In a contract system the funder sets the direction
	- In a product system the fundee sets the direction
	- In a budget system the fundee sets the direction
- Tightness around deliverables 
	- In a contract system the agreement is tight
	- In a product system the agreement is loose 
	- In a budget system the agreement is tight
- Explicitness of the agreement
	- In a contract system the agreement is explicit
	- In a product system the agreement is explicit
	- In a budget system the agreement is implicit

All the possibilities 
- Funder direction + tight deliverables + explicit agreement *Contract*
- Funder direction + loose deliverables + explicit agreement *Bad contract?*
- Funder direction + tight deliverables + implicit agreement  *Prize?*
- Funder direction + loose deliverables + implicit agreement *Grant  call*
- Fundee direction + tight deliverables + explicit agreement  ??
- Fundee direction + loose deliverables + explicit agreement *Product*
- Fundee direction + tight deliverables + implicit agreement  ??
- Fundee direction + loose deliverables + implicit agreement *Career Grant*

### Related
- [[It is relatively easy for DARPA PMs to re-deploy funding]]
- [[Organizations and their funding mechanisms are coupled]]
- [[People create proxy games for long term or hard-to-measure games]]
- [[Lee Ricketson conversation 6/5/20]]
- [[Innovation orgs need to be aligned with their money factory]]



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Benʼs working notes

Organizations and their funding mechanisms are coupled

List of coupled organizational structures and funding mechanisms

Links to this note