Now I don't know how these legal structures work. For what it is worth, it looks to me as if Singularity University transitioned from being a non-profit to being a "for benefit corporation".
I also have no idea what that means, other than it looks like some kind of fluidity is allowed?
Its not a for-profit business, its a donation driven — funded by a 501c3 and seeking its own 501c3 status — entity leveraging political tribal identity to target small donors and with large donors motivated by its political propaganda aims.
The main risk it faces is that entities with similar propaganda mission and appealing to similar tribal identity are already thick on the ground, but that hasn't seemed to be a major problem for new entities in the space recently, so I wouldn't bet against them succeeding to the extent of creating an durable operation, even if its never anything credible as a university.
Ah, no, that's a legal structure set up in such a way as to prevent commercial transfer. Not necessarily funding related at all...it's more like reconfiguring it to be a non-profit; it can still make money and pay salaries, but it can't be an investment vehicle.
I'm still finding it difficult to understand how their move away from the non-profit mission was legal. Initially, you assert that you are a mission-driven non-profit, a claim that attracts talent, capital, press, partners, and users. Then, you make a complete turnaround and transform into a for-profit enterprise. Why this isn't considered fraud is beyond me.
It's a 501(c)(3) like most private American universities. This means there are no "owners" who make money if it brings in a profit, but conversely allows it to accept tax-exempt charitable donations.
It’s still technically a nonprofit, they just created a (capped) for-profit subsidiary with the nonprofit as the sole controlling shareholder. This was done so it could bring in enough money through VC to pay competitive salaries while supposedly meaning the for-profit section will still be responsible for following the nonprofit’s founding charter.
That last part seems to be what has failed with the big question I have being what in that setup wasn’t done correctly such that the current reality wasn’t prevented.
"The specific purpose of this corporation is to provide funding for research,
development and distribution of technology related to artificial intelligence. The resulting technology will benefit the public and the corporation will seek to open source technology for the public benefit when applicable."
Based on this, it would be extremely hard to show that they are doing something very different from what they said they were going to do, namely, fund the research and development of AI technology. They state that the technology developed will benefit the public, not that it will belong to the public, except "when applicable."
It's not illegal for a non-profit to have a for-profit subsidiary earning income; many non-profits earn a substantial portion of their annual revenue from for-profit activities. The for-profit subsidiary/activity is subject to income tax. That income then goes to the non-profit parent can be used to fund the non-profit mission...which it appears they are. It would only be a private benefit issue if the directors or employees of the non-profit were to receive an "excess benefit" from the non-profit (generally, meaning salary and benefits or other remuneration in excess of what is appropriate based on the market).
I don't think that level of detail is publicly available yet. And even non-profits start out as an LLC, and then gain that designation, so that _could_ be what's happening here.
From the statement it sounds like the board is still committed to running the company in pursuit of the initial non-profit goals and the transition to a for profit status was because of legal limitations. Really surprising to see this.
A for-profit grade school? Interesting. I'm not sure I've ever encountered one of those.
But yeah, an entity's ability to draw a net positive profit doesn't change their for-profit status, obviously. As for why Zachtronics is limiting this to non-profit schools, my guess would be for tax purposes. There's a good chance there's a benefit from providing something like this for non-profit institutions, but not for for-profit ones, although it's been 7 years since law school for me and my tax law is rusty.
Although there's always the chance that he just didn't know for-profit grade schools exist, because I sure as heck didn't.
While I don't intend to register as a non-profit (there's CatalogChoice already), I could see registering as a Benefit Corporation / B Corp. Would that hold any weight, or would you still just view that as "an SF tech startup"?
There is no pitch deck for Mel as I don't intend to raise VC funding – precisely because I don't want to be pressured into doing something that goes against my values like selling user data.
I also have no idea what that means, other than it looks like some kind of fluidity is allowed?
- https://su.org/about/how-we-do-business/
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