Do you even know what a non-profit is?

Consider the information below. One of these companies is a 501c3. The other is a publicly-traded education company. Can you spot the difference?

Company A's website declares that "“We are committed to powering human progress by unlocking more opportunities for everyone, everywhere.” In 2023, the company made $1.1B in revenue and the CEO's cash compensation was $1.3M. According to their annual report, in 2023 they provided $240K in student scholarships.

Company B's website states, "We help learners build essential life and job skills to accelerate their path from learning to earning.” Their 2023 revenue was $716M and their CEO cash compensation was $1.1M. The organization donated over $600K to nonprofits in 2023.

Company A is Educational Testing Strategies, a well-known nonprofit organization in Princeton New Jersey, founded in 1947. Company B is Chegg, an education technology company that was launched in 2006, and began trading publicly on the New York Stock Exchange in 2013.

After two decades of working for both nonprofit and for-profit organizations, I am convinced that the two organizational types are far more similar than most people realize. I don’t buy the argument that only nonprofits can be mission-driven nor that for-profits by definition are more organized and better managed.

I have watched for-profits and nonprofits compete in the same industry for the same customers, selling similar products and services. I have worked with/for high and low functioning organizations within both categories.

I believe the core difference ultimately comes down to one thing: capital.

Nonprofits raise capital from philanthropic foundations and individual donors, while for-profits raise private capital from investors, private equity, and public markets.

Understanding the differences between these two organizational types requires digging deeper into the motivations behind their investors.