The Third Sector and Startups

Finding Precedent in Collaboration

27th Jul 2020

Startups can help the third sector become more innovative while the third sector can help startups scale. But partnerships between the two are rare.

In the innovation industry, the questions underpinning our business structure are: "Who, or what organizations, are the best at collecting and owning innovation challenges?" And, subsequently, "Who, or what organizations, are best at solving these challenges?"

It's not a revolutionary or even particularly disruptive concept that these two organizations should be separate and independent: throughout the entire age of human exploration and discovery, there has always been precedent for central powers, duly entitled to set aspirational challenges. Then, separately, there would then be the contractors, the explorers and pioneers - agile, nimble, and those with a high-risk threshold, who would willingly accept these seemingly impossible challenges.

From the Spanish monarchs who funded Christopher Columbus's voyage across the Atlantic, the Chinese courts sponsoring entrepreneurs on their exploration and expansion of the silk road, or Boeing's high profile grant from NASA to build the Saturn V rocket which put humanity on the moon, there is an established pattern for innovative excellence through a separation of those holding the challenge, and those executing it. Simply put, those who collect innovation challenges and those who solve innovation challenges are two different animals with entirely different mentalities, strengths, and incentive structures.

As a recent example of this type of partnership: NASA is ennobled, entrusted, and entitled with the future of American space exploration and curators to some of humanities most aspirational innovation challenges. As responsible owners to these challenges, they consider the innovation policy of 'how best to solve them and produce solutions' as seriously as they consider astrophysics. Tellingly, they rely on third-party contractors for this execution and production of their vision, today using contractors like SpaceX as their only method of putting men and women in orbit.

We established basically the high-level criteria, the requirements, in terms of payload and safety, but we didn't get involved in designing everything downstream. We let private companies go and innovate. That ultimately drove us to a point where we're now reusing these rockets, reusing the capsules, and of course, we want to apply that to what we do with the Moon and eventually Mars.

Jim Bridenstine, Administrator of NASA

In similar fashion, NASA's cargo launch vehicles are built by Boeing, their spacesuits subcontracted to ILC Dover, and even their probes and rovers designed and built by CalTech's Jet Propulsion Lab. The aeronautics association sees the benefit of working with tech startups, innovative engineering firms, and research institutions as these independent R&D firms are able to execute the their ambision and vision to a higher standard than NASA themselves would be able to do internally. Essentially, they know their strenghs lie more in vision, curation of innovation challenges and sources of funding, and less in production and execution of those challenges.

This collaboration between private enterprise innovation firms and the governmental and semi-governmental organizations has always been demanding, but highly rewarding to both parties. However, this pattern has been challenging to replicate in the NGO Third Sector.

Outside of the aerospace sector, NGO's like the United Nations (including the United Nations Development Program, the World Food Program, the World Health Organisation, and others) are likely to be the single most significant collector of unsolved challenges on earth today. The work they do is critical to humanity, with aspirational goals to improve the world around us and raise billions out of poverty. However, today, the Third Sector often attempts to act both as 'Challenge Owner' and 'Challenge Solvers,' often leading to a lot of talking and woefully little action. I do not believe the fault in this lies with the Third Sector; they simply are not designed to enable the fast decision-making, Agile production methods, or the out of the box thinking needed to quickly test and learn solutions to problems. This is the realm of the innovation consultancy who can move fast, fail quicker, and iterate solutions.

Collaboration between innovation consultancies and Third Sector NGOs is difficult in the best circumstances, with a world of difference between the timeframes, short term goals, incentive structure, and budgetary considerations of the two parties involved. This collaboration is even more complicated between innovation startups and the Third Sector, where differences are brought into sharp relief. However, with the right structure, some in the Third Sector, such as the UNDP's "Global Centre for Technology, Innovation and Sustainable Development" in Singapore, have recently made huge strides in partnering with startups and innovation consultancies, working together to tackle complex challenges. Within this new structure, they are able to create new partnerships with startups that can solve tough problems faster and cheaper than would be possible on their own, including organising and curating Pastoral and Project Theia, two UNDP projects currently in development at my own Karakoram Innovation firm.

Nesta (formerly NESTA, National Endowment for Science, Technology and the Arts ) is the lead charitable innovation foundation in the United Kingdom. It offers partnerships, investment, research, and innovation policy guidance to promote innovation across a wide variety of sectors. In early 2020, Nesta conducted a wide-ranging report into how third sector organizations and startups can work together for mutual benefit, where they describe how third sector organisations and startups can work together for mutual benefit. I was honored to contribute to this report, sharing my experience working in the private sector with Glorious Labs, Brandwidth, and Karakoram Innovation, with NGOs like the UNDP.

The report was produced in collaboration with Save the Children UK, supported by UNICEF, the Department for International Development, ACEVO, NCVO, Bond, Good Innovation, Impact Shakers and CAST. It is the first of it's kind to describe how third sector organizations and startups, particularily innovation consultancies and tech companies, can work together, structure their relationship, and describes how an aspirational partnership between the two vastly different structures might function.

Effective partnerships, structured innovation challenges, alignment of goals, and, most importantly, a financial incentive structure that suits both parties equally are unfortunately still a long way off. The Third Sector NGOs and innovation consultancies are rarely finding common middle ground in solving the unique challenges of the world, particuarily post-COVID-19.

However, both organizations have clear mutual benefit in working together to solve humanity's most significant challenges. With improved collaboration and the adoption of many of the innovation policy suggustions outlined in the 2020 Nesta Report, I believe that new groundbreaking opportunities will emerge between startups and NGOs for tackling complex challenges together for the world.

We want to be one customer of many customers in a very robust commercial marketplace in low-Earth orbit. But we also want to have numerous providers that are competing against each other on cost and innovation and safety, and really create this virtuous cycle of economic development and capability.

Jim Bridenstine, Administrator of NASA

Full Nesta Report: