Microfinance isn't just a buzzword for funding small businesses in the developing world. The tactic can also help people get much-needed medical treatment.
Or so that's the idea that dawned on Chase Adam two years ago while he lived in Costa Rica and worked for the Peace Corps. While riding a bus through a town called Watsi, a woman came aboard and attempted to raise money for her ailing son to undergo a medical procedure.
That was the seed for Adam's entrepreneurial ambitions. "I thought we could build an organization that would enable people around the world to fund medical treatments for people that don't have access to them," says Adam. "We could do it in a way where we insure the legitimacy of the donation where we vet the organizations we work with and be more transparent."
In the months that followed, Adam went to work on his business plan. And upon returning to San Francisco, the now 26-year-old launched Watsi, a nonprofit that aims to raise funds to cover low-cost, high-impact medical treatments.
Since launching last August at an initial cost of about $3,500, Watsi has helped nearly 500 patients in 16 countries. It was also the first nonprofit to participate in Y Combinator, Paul Grahams seed fund and startup incubator. Financial support from Y Combinator helped Watsi get off the ground and the organization is in the process of closing a seed round.
Transparency is a huge part of Watsis mission, so the organization posts all of its financial information for the public in a Google document. Watsis statement of financial position from May 31, 2013 showed its total current assets as $678,243.19 with total liabilities of $135,376.07.
We chatted with Adam to find out more about Watsi, how he chose the business structure and why he thinks transparency is key for nonprofits -- and businesses.
Q: Why did you structure Watsi as a 501(c)(3) nonprofit versus a B corporation or a for-profit entity?
A: It goes back to that motivation behind Watsi of building an organization that we would want to support ourselves. As a donor, I would not want to support our organization unless I knew how my money was being spent. With a nonprofit, people get that insight.
Plus, to us healthcare is not a commodity. Its a fundamental human right. Watsi was never really a moneymaking proposition. It was about filling a social need, so we decided it made the most sense for it to be a nonprofit organization.
Q: A lot of nonprofits (and even for-profit social ventures) say they struggle to find funding. How did you manage the tall task?
A: We launched the site on about $3,500, completely bootstrapped, and then we tried to raise money, which was really difficult. We had traction, a number of people gave us term sheets and asked us to become a for-profit, but we ultimately turned down those for-profit investment opportunities to stay as a nonprofit.
Paul Graham learned about us via Hacker News and invited us to meet him. After the meeting he invited us to his home, wrote us our first big donation, and invited us to join Y Combinator. He's amazing. They wrote us a check enabling Jesse (Cooke, who handles tech) and Grace (Garey, who handles marketing) to go full time. I received a salary for the first time.
We just got out of Y Combinator, and now we're raising a legitimate seed round. We can't announce it yet, but that will give us at least a year plus of runway and it will enable us to hire at least two more people, hopefully more.
Q: Obviously, having a nonprofit vs. a for-profit business means that you'll need to divulge numbers, which many companies keep under lock and key. How have you dealt with that hyper-transparency?
A: Since we started being very transparent, there hasn't been a single problem that persisted for longer than a day or two. In fact, we've noticed a lot of unintended benefits that have pushed us to be even more transparent.
In addition to making our financials public, we've been crowdsourcing a lot of our work. If there's a mistake, the crowd finds it. The crowd is in a sense auditing all of our financials so that's a huge unintended benefit.
Another unintended benefit is it validates assumptions for a really low cost. If we're thinking about doing something operationally, we can just blog about it. Then the comments we receive will either validate or disprove that assumption.
Transparency actually leads to an improved quality of work. For example, our CFO, knowing that he has to publish our financial statements, is perhaps subconsciously putting more effort into them. It's the future of charities. I also think it's the future of business.
Q: What's your top advice for young entrepreneurs looking to start up a social venture?
A: Don't think too much about success or failure. Just find something you love doing and do it.
-- This interview was edited for clarity and brevity.
The author is an Entrepreneur contributor. The opinions expressed are those of the writer.
Boston-based freelance journalist Susan Johnston has covered entrepreneurship, small business and personal finance for publications including Bankrate.com, The Boston Globe, Learnvest.com, Portfolio.com (now Upstart Business Journal) and US News and World Report.