Kiva Chronicles Relative Advantage of Nonprofit Structure

You've probably heard of Kiva which is automating microfinance through the web at a rate of $20,000 in loans per day. The appeal is based on the fact that donors can determine exactly which entrepreneur they will support (Donor Power Blog do you have any research that counters this assertion?) When Kiva's story was featured on Frontline and NPR, new contributors crashed their servers.

Through the Social Edge umbrella of blogs on social entreprenuership, you can follow Kiva's rise to charitable riches with co-founder Matt Flannery who describes his major deals with a humility and passion that, no doubt, has to a few folks in Tinsel Town licking their chops.

In a recent post (no permalink?), Matt dicusses why Kiva is a nonprofit rather than a for-profit:

There are a lot of debates in social entrepreneurship around the topic of whether to become a 501c3 or become a for-profit. It's my impression that prevailing winds within the field suggest the for-profit model whenever possible. 'It's hard to scale a non-profit' , I would hear a lot. Or, 'you can access so much more capital' if you convert to a for-profit model.

That was just my experience with people in the social sector. However, It contrasts sharply with what I heard from the financiers of the tech world, Premal and I spent a fair amount of time in the offices of Sand Hill Road...especially last summer. In general, the VCs we talked to wanted to consider ideas that had a decent shot at a 10x return on their investment. When we ran models of trying to eke a 10x return out of Kiva's model, it never felt quite right.

I am assuming that Steve Case and Richard Branson don't face this 10x return equation with the new social enterprises they are developing. Does this equation only come into play if you require venture capital? Is there a caste system at the cross-sectoral crossroads that folks aren't really talking about?

Susan Herr