Stories From the First Tech Nonprofit Founder

July 21, 2016 | Accelerator

The Godfather Returns: Stories from the First Tech Nonprofit Founder

We like to think of Jim Fruchterman as “The Godfather of Tech Nonprofits.” He launched the first tech nonprofit in 1989, Benetech, before some of our 2016 founders were even born and way before tech nonprofits were a “thing.” We were fortunate to have the first tech nonprofit founder speak for the third year in a row this week, and his stories and insights were nothing short of inspirational and filled with humor.

As an early stage startup in a nascent industry, it’s pretty powerful to hear from someone who has spent almost 30 years building tech nonprofits. When Jim was first starting out years ago, he was with a well-funded for-profit venture when he realized he could leverage the technology they had built to create a product that reads print documents to the blind. When he initially pitched the prototype to his board, it worked as described but with a whopping $1M market potential for the project, it was vetoed outright.

The First Tech Nonprofit Founder

But this wasn’t a project Jim could forget about. Two years later he revisited the same pitch for the reading machine for the blind, Arkenstone, but this time as a 501c3 nonprofit. He said the idea and market were so obviously unfit for venture backing his lawyer actually suggested the nonprofit model. He received funding and within two years Arkenstone was a $5M a year, slightly profitable charity.

As the dot com bubble neared in 1999, Jim was approached by someone interested in buying Arkenstone. He said no at the time, but when the same man approached him again two years later asking about his aspirations for the company, the conversation led to a deal. Arkenstone took $5M in exchange for leasing out its engineers. Primarily a cash deal, Jim now had $5M, a group of great engineers and endless possibilities. This spurred a shift from one social enterprise to become a social enterprise factory launching one company per year with the intent to exit them all eventually. Since their first exit, they’ve have 4 others that were successes.

One night Jim came home from work to find a new icon on the family PC, a household offense in the time of computer viruses. His son promised the software was safe, he had gotten it from their neighbor down the street. What was the program? Napster, of course. Within the hour Jim and his son were trading music downloads back and forth, dancing around having a grand ole time. As excitement mounted, Jim had an idea – what if they did this for books?

Napster for Books 

When he called his lawyer he was pleasantly surprised to hear the idea was actually legal under US copyright laws. There was a copyright exception to make an accessible version of a book for digital texts for the disabled. He combined crowdsourcing and eBooks and made it possible to recreate the traditional library for the blind. That’s where the original $5M went, to the new venture called
Bookshare. Today Bookshare is a profitable $7-8M a year social enterprise with over 400,000 eBooks, the largest library for the blind and dyslexic. Now that eBooks are widespread, they’ve even negotiated a treaty to make this copyright exception a global norm. One of their biggest users is Stevie Wonder.

These are just a couple of the stories Jim shared yesterday. What was amazing about his talk was hearing him go through the various phases of each company, how they evolved and at what point they reached the right moment for an exit. As the first tech nonprofit founder, his thoughts into revenue sources, pivoting, nonprofit M&A, and the for-profit versus nonprofit decision were invaluable shared learnings.

Today Benetech continues to be a leader in the tech nonprofit space, and is focused on four key areas: environment, human rights, global literacy, and Benetech Labs. Their work has been particularly impactful across the world in human rights and literacy. Those interested in getting involved with Benetech can check out their ongoing volunteer opportunities here.