Why the federal government’s startup support doesn’t help new non-profit founders

Startups are on shaky ground right now, in the midst of a COVID-19-induced recession. After much pushback from the Canadian startup community about its exclusion from government funding for small and medium-sized enterprises, the federal government put $250 million into support for early-stage and high-growth startups. One study found that 64 percent of Canadian startups say the government’s support is helpful to them, compared to 45 percent of startups globally. 

But non-profit startups are a very different story. In many cases, they don’t qualify for the same support their for-profit counterparts do. They can’t show revenue losses in the same way for-profit startups can, as their revenue comes from various funding sources like public and private foundation grants, individual donations, sponsorships, and earned revenue. And wage subsidies might not be helpful to startups that rely on contract workers or volunteers, for instance. 

Future of Good reached out to six founders of non-profit startups to learn more about their challenges navigating COVID-19, why federal government support isn’t working, and ideas for what the government can do to support an ecosystem that matters for recovery. 

Rachel Kiddell-Monroe, founder of SeeChange

“The federal government has launched various initiatives for for-profit start-ups and entrepreneurs, but not-for-profit start-ups like SeeChange tend to fall between the cracks. We do not fall into traditional needs and there is very little that is geared directly to organizations that work like we do. 

So what would help? Recognize the importance of humanitarian entrepreneurs in Canada. There is little to no support for humanitarian start-ups like SeeChange. In an event like COVID-19, the importance of these types of organizations have come to the forefront, yet we survive on handouts and small change. More openness and transparency on funding opportunities. Even though we are working directly on COVID-19 with Indigenous communities in Canada and have decades of experience, we have not been eligible or been able to access any federal funds.  Special funds specifically for non-profit startup organisations to adapt their programming to working on COVID-19. Encourage philanthropic foundations in Canada to fund non-profit startups.”

Ana Gonzales Guerrero, co-founder of Youth Climate Lab

“The federal government can better support non-profit startups by recognizing and adapting to the best of their abilities to the fact that non-profits are not impacted in the same way as other sectors. For example, that ‘reduction in revenue’ for the Canada Emergency Wage Subsidy looks very different for non-profits, as it is hard to demonstrate immediate losses versus losses yet to come as a result of COVID-19. For a lot of us, this will be more noticeable as funders’, partners’, and governments’ priorities change in the coming months, and the allocation of resources that could traditionally go to supporting our efforts is no longer available. 

The federal government can help by recognizing this is an opportunity to put people back to work in a way that recovers and rebuilds our new normal. This means continuing to support and expand the Canada Summer Jobs program so that more non-profit startups can retain young talent to reshape our economy. 

And by not losing sight of other social issues, many of which non-profits focus on, as we come out of this. The more that social and environmental considerations are included as part of recovery efforts and economic stimulus packages, the better off our sector, and all others, will be afterwards.” 

Candies Kotchapaw, founder of Developing Young Leaders of Tomorrow, Today (DYLOTT)

“As a non-profit under three years old, DYLOTT is acutely aware of the financial challenges facing emerging organizations in this sector, where per project funding is concerned. Organizations such as ours, which have a specific niche area, depend on government and philanthropic grants to enable delivery of essential and impactful programs that reach stereotypically marginalized groups. 

We see the onset of COVID-19 as an important and significant opportunity for the federal government to invest directly and specifically in emerging grassroots organizations. The federal government can create a dedicated avenue of visibility for new non-profits to highlight their work, collaborate with other emerging organizations and enter into multi-year funding partnership agreements directly with the government that removes the uncertainty of access to funding year over year.”

Julian Powell, founder of Music Share

“I believe the best way the federal government can support non-profit startups would be to adjust the small-business loan to include non-profits that spend far less on employees. Seeing as non-profits often operate with the help of volunteers and part-time staff, employee costs can remain relatively low. However, operating costs for startups can still be very high. Many startups take out loans to get their organizations off the ground, and have to continue paying these loans back in spite of COVID. 

On top of this, startups often require many hours of extra work that are not reflected on paper, and dedicated non-profit leaders should not be excluded from support from the federal government because of it. With many non-profits losing income, offering a loan similar to the small-business loan [specifically for non-profit startups] could make a big difference in the innovation sector, and allow young founders the liberty of focusing their energies on growing their organizations rather than struggling to pay their bills.”

CG Chen, founder of Ample Labs

“It’s been hard to fundraise at Ample; all the deals and interest we’ve had from corporate sponsors via large companies have been put on hold. As a new non-profit who doesn’t yet have charity status, we’re excluded from most foundations. Government funding is also aimed at essential services that have staff doing the work, but we’re building tech which makes us a low-priority.

Flexible dollars right now would be extremely helpful to us to continue to create impact via our product and build out longer-term change and continue to drive innovation in the sector we’re in.

The government should: give funding to new non-profits that don’t yet have charity status; give funding to non-profits that have a tech-focus and can aid front-line workers/critical services; give funding to non-profits that are innovation-driven or new and building covid-solutions that can’t demonstrate impact just yet [because it’s still relatively early in the crisis]; be more flexible in grants and include unrestricted dollars in grants.”

Uswah Ahsan, founder of Ally Squared

“The federal government needs to pay more attention to new non-profits, particularly ones started by youth. Young non-profit founders already don’t get the same recognition and legitimation as their older counterparts. These founders are usually balancing their academics, breaking into their chosen field, managing their personal life, while also running a non-profit. They don’t have access to the same types of networks, seed funding, or knowledge resources as those who have already had a career in this field. With COVID-19, they face additional funding and infrastructure challenges, and may not have the know-how or resources to keep their organization afloat. 

In response, the federal government needs to open up more grants or reduce the red tape for their existing grants to enable young founders to keep their programs running. In addition to the operations and program funding that we’d need, we now must also find more grants to move our work online. For me, finding operations grants to keep Ally Squared afloat and continue with our programs has been the most challenging. 

As well, governments creating platforms for networking with bigger non-profits would allow shared learning and non-profit partnerships. Getting bigger non-profits to partner with Ally Squared for its summer project, especially in the midst of COVID-19, has been a huge challenge. It’s difficult when the community supports a project but we can’t get the support they need to responsibly execute it. It would be significant if the federal government recognized the capabilities of smaller non-profits as compared to bigger ones.”

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