September 4, 2015 | Thoughts

What tech nonprofit startups and their funders should know about impact measurement

For-profits, social enterprises, nonprofits, venture capitalists, impact investors, and philanthropists are all interested in knowing how much good their organizations and their dollars are doing. Most of us want to do the most good possible, and we can’t know whether we’re doing the most good unless we measure it – but we find that measuring impact is really tricky business.

Tech nonprofit startups, in particular, face unique challenges in proving and measuring impact that we’d like to talk about here.

Timing issues:

Like any startup, tech nonprofit startups are full of potential but may not yet have impact. These startups have several hurdles to overcome before achieving impact:

  1. Build a product
  2. Get pilot users
  3. Figure out whether the market actually wants that product
  4. Pivot the product to optimize product-market fit
  5. Growth and scale
  6. Impact

It might take tech nonprofits a few tries to figure out the right way to help address a problem through technology, and we think it’s OK to take the time to pivot because doing so ultimately increases the long term impact potential.

The success or failure of many tech nonprofits will lie in their ability to reach scale and lower the total cost per impact. Scale for technology is extremely important because the marginal cost per impact (e.g. adding an additional user) approaches 0, so increasing scale lowers your total cost per impact, including staff and operating costs. Tech nonprofits, therefore, need to be especially cognizant of the key drivers of cost and of growth in order to bring the total cost per impact down and to take advantage of the huge upside potential of technology.

We also want to shift the thinking of the philanthropic sector to having more patience when investing in tech nonprofits. Funders need to invest in the leadership team and in the organization’s future potential rather than focusing purely on proven impact, the same way a venture capitalist invests. We talk about this more on our blog post on patient impact.

Measurement issues:

Technology products often have a lighter touch but a far broader reach as compared to in-person nonprofit service delivery models. Determining true impact beyond simple output metrics is even more difficult with low-touch models (to understand the difference between inputs, outputs, outcomes, and impact, see Acumen Fund’s “Chain of Causality,” below).

Acumen Chain of Causality

Since the gold standard of impact measurement, randomized control trials, are prohibitively expensive for a startup and would be meaningless in the pre-impact stage, the best alternative is to make well-reasoned projections. The impact metrics a tech nonprofit is projecting will vary in every case, but like any other organization, a tech nonprofit can project its impact in terms of breadth (number of people reached, generally a quantitative number) times depth (how much average impact per person, generally a qualitative estimate).

Fast Forward would love a world where many tech nonprofits have already scaled and are already having huge impact, but that world is still a few years away. Until we are there, we ask tech nonprofits to think critically about how to maximize impact, and we encourage funders to not judge tech nonprofits by the impact they have already had but by the organization’s potential. Join us in helping tech nonprofits reach the point at which they do have impact, and then let’s go one step further and help them scale it.