Should you Found to Give?
When I founded Mast, I had a few motivations: I’d never started a startup and wanted to try my hand at it; it sounded more interesting that being a regular software engineer which I’d done for many years; I would get to build stuff that adds value, that people would use.
But the primary motivation was to make a bunch of money and donate it to effective charities – much more money than I could make in a job. It would be dishonest to say that making money for myself wasn’t also a motivation, and starting a startup is one (admittedly unreliable) way of doing that.
I want to make a difference to animal welfare, and my own skillset isn’t relevant (though I have tried to shoehorn it in). As with Earning to Give, Founding to Give almost always involves decoupling your job and the impact you have, although a lot of FtG discourse tries to claim otherwise.
Being a startup founder, if successful, could net me millions. It’s an outstanding opportunity to do good. And if it failed, it would hopefully fail early, and I could just return to my software engineer job.
That was five years ago. I took the Founders Pledge, a commitment to donate some portion of your proceeds to charity when you exit your startup. Since then, a whole ecosystem has popped up around ‘founding to give’ (as opposed to ‘earning to give’, where you take a well-paid job to give some of your salary to charity).
Optimise for money and edge, not impact
It’s unlikely that you’ll be able to found a company that’s both very valuable and very impactful. It would be a suspicious convergence if you were able to do this and not have to trade off one against the other. Almost certainly the most profit-maximising and impact-maximising ideas are going to be different.
You also want to find a startup idea that you’re actually good at executing. I’m a big believer in doing what you know – which is not to say that people can’t learn new skills (and surely being a founder forces you to do so) but founders need to have an ‘edge’, some set of skills which makes them unusually good at something. Picking an idea you think sounds impactful usually involves ignoring this. Founder–market fit is a real thing.
A common failure mode is to venture far outside of your range of expertise in search of an idea. You can convince yourself that you’ve found something that will turn an enormous profit and also benefit the world. But often it requires very large amounts of capital and skills you probably don’t have. I saw this a lot in the latest AIM Founding to Give cohort: they often focused on impact-focused ideas that are crowded and not especially tractable.11. One that sticks out was a group who wanted to shorten the time to get wind farms connected to the grid – a noble goal, but one which doesn’t have a clear solution. The delays in getting wind farms online are mostly caused by government permitting and a lack of grid capacity, neither of which are easy to solve.
This is especially true if your cause area and your edge are just very different – it would be difficult for me to shoehorn my particular set of skills into direct work in animal welfare and have anything like the EV of founding a for-profit and donating.
(There are some notable exceptions, like Sendwave – the canonical example of a high-impact for-profit, a startup which offered an alternative to Western Union’s enormous remittance fees for users in various African countries.)
Accept that FtG is a massive bet
Although startups fail at a shocking rate, I predicted the expected value was higher than working as a software engineer – especially in the UK, where salaries are good but nothing compared to what a skilled SWE can earn in major US cities. Think $150,000 at the very top end in the UK versus up to $400,000 in the US, rising to $500,000 or more at frontier AI labs (though getting a job there is very competitive).
Ambitious Impact (AIM) now runs a Founding to Give program which brings together EA-minded founders to find problems to work on, team up, and form companies. Unlike other incubators they don’t offer funding (I went through Antler, which offers a small amount of initial funding), but they also don’t take any equity. It’s too early to tell how successful the incubated startups will be, but I’m optimistic, although I think many of them don’t aim high enough in terms of potential market size.
Hugo Walrand has written sceptically about whether Founding to Give is as promising as it looks. His core arguments: startups take a long time to exit (he uses 7.5 years as a typical figure), which makes donations heavily discounted in a short-AI-timelines world; founders may renege on their pledges over that long horizon; earning-to-give donors get short feedback loops on their giving while founders don't; recurring annual donations get more favourable tax treatment and often attract employer matching.
An AIM analysis of Y Combinator startup exits suggests:
the median time to exit is 7.5 years
the median exit is worth $7.8M to the founders (so $3.9M each for a two-person founding team)
the 90th percentile exit is ~$30M
I think the median numbers are doing too much work here. The impact is in the tails: for a 90th percentile exit, if the founders hold even 25% of that, they can donate $7.5M. No SWE (or two or three SWEs depending on the size of the founding team) can donate anything close to that.
But ultimately these numbers are not enormous. You probably need to be aiming for a very large exit, and so you should pick a startup idea accordingly. For startups that do extraordinarily well, the donation opportunity is enormous. The cofounders of Canva have 30% equity in the company and have pledged the majority of it to charity, which works out at at least $6bn at its current valuation.
You don’t have to do it for 7–10 years
Startups are a slog. An exit is uncertain, and usually takes many years. The NPV of your exit money needs to be priced in when comparing it to EtG.
Despite this, secondaries allow you to extract value before an exit. When you raise capital, especially in later-stage rounds from institutional investors, the founders are often able to sell some of their equity to investors directly and take the cash directly.
Investors like this because it gets founders bought in for the long haul; although they expect you to take some of the risk of founding, they also don’t want you to be on a ramen-level salary forever and just give up. This gives you a liquidity event and a chance to donate earlier than your exit.
This also reduces the risk of value drift. If you get some liquidity without having to wait years to exit, you presumably have less time to talk yourself into reneging on your donation pledge (I don’t know the base rate for this happening but I imagine it’s very low).22. It’s worth noting that most donation pledges (such as the Founders Pledge and the AIM Founding to Give pledge) are not legally binding. Under English law, as there’s no consideration they would have to be executed as a deed, not a normal contract. So there’s no way to enforce it, though of course there would (and should!) be significant social pressure and reputational damage if a founder were to renege on their commitment.
One other thing to note: it usually doesn’t take 7.5 years to discover if your startup is going to work. Most startups fail well before that point; not dying is the most important part. The longer your startup has existed the higher the chance of an exit. If it blows up in year 2 because you don’t have enough customers, the opportunity cost is much smaller.
Pick a lane: you can’t FtG and EtG simultaneously
Walrand suggests you can derisk by founding a startup and then paying yourself a big salary – founding and earning at the same time. This is almost certainly not possible.
The expectation is that as a founder you will be paying yourself less than what you can get in industry because they’re being compensated by the large equity stake they’ve taken. The whole point is that you’re taking on some risk in exchange for upside.
In the early stages, you won’t have enough money to do this anyway. And later on, investors are simply not going to allow you to take a huge salary. They don’t want their money being doled out on your fat salary! You’re expected to take on some risk – and doing so gives them confidence that you’re bought in to your startup succeeding.
Investors can enforce this by putting limits on what you can pay yourself as a condition of their investment, especially if they’re an institutional investor like a VC (angels typically don’t have this level of control), or by putting in place a requirement that you get approval from them to pay yourself more than a certain amount.
I think Founding to Give is very defensible in a particular form: as a way to make money to donate, not having direct impact. Finding a startup idea that does both requires a suspicious convergence of which I am not convinced (except in very rare cases). For most causes, especially animal welfare, there aren’t many for-profit options that move the needle, especially for tech startup founders.
A big consideration is when you think the money is going to be needed. If your timelines on transformative AI are short, it might be that the money is simply not going to arrive fast enough to make a difference.
Hugo undersells the tail. Most founders won’t become billionaires or even multi-millionaires, but enough will to make the expected value work, provided you’re at least somewhat honest about whether you’re in that distribution. And even if you don’t end up at the 99th percentile of exits, founders sometimes end up with millions and gain a huge amount of experience that they can parlay into their next role. Go forth and found!