Two decades ago, India had few entrepreneurs, little venture capital and scant know-how in building billion-dollar firms. That changed as state initiatives - digital payments, Startup India, Sidbi's FoF and AIM - created a market for startups. Today, the nonprofit sector faces similar headwinds: good ideas exist but struggle to scale.
An August 2025 Change Engine report, 'The Playbook for Non-Profit Unicorns', studied over 30 'non-profit unicorns', each of which has impacted more than a million people. These organisations, led by young founders (median age: 36 years), range from providing sound policy input to lawmakers to helping prevent road accidents. GoI's hand is visible in their operation: 80% scaled by working with it, providing the latter with specialised skills and capacity.
GoI can do more and, once again, should step in as a market maker. We have made a beginning through the CSR policy, unlocking upwards of ₹34,000 cr annually for nonprofits. AIM allows its incubators to fund nonprofits as well. Some ministries provide grants, and Social Stock Exchange (SSE) is still in its fledgling years. Yet, most of this funding is programmatic, funding service delivery, usually insisting on a direct line of sight to a beneficiary, presumably because it makes monitoring easier.
GoI should unlock unrestricted funding to help create nonprofit unicorns. Our data shows that nonprofits need an average of $500K cumulatively in the first three years. But as important as the total sum is the way it is allocated. Currently, most funds are accessible via line-item budgeting systems. These are overly restrictive and infeasible for a genuine innovator that must experiment and iterate its way to success. Experimentation cannot ensue without some line of sight to a reserve to fund creativity. This simple learning from the startup ecosystem needs to be applied to nonprofits.
Project Deep, a nonprofit focused on cash transfers, found that lump-sum transfers to adivasi households in Maharashtra led to asset creation - housing, livestock, sheds and more. To scale, they learnt to work with state governments. Now, they're testing how factors like scheme name, frequency of transfers and timing affect impact.
PRS, a nonprofit unicorn, began with policy briefs for MPs. Its acclaimed Legislative Assistants to MPs (LAMP) programme emerged through iterations shaped by MPs' needs and assistants' experiences.
Since much of this funding is infrastructural, organisational and needs flexibility, we need new policy instruments to unlock it. Here are 3 candidates:
Competitive unrestricted grants, like Startup India, should be made available for nonprofits through an FoF structure. Here, GoI doesn't directly pick nonprofits but helps seed new unrestricted philanthropic funds and provide matching grants to pre-existing performing funds.
Its imprimatur can go a long way in enhancing the credibility of a fund. FoF grantees pick nonprofits through a competitive process. This way, the state will build trust, crowd in unrestricted private money and fuel the ecosystem.
CSR rules have been widely interpreted to suggest that the capital must fund time-bound programmes with well-defined beneficiaries and short-term outcomes. A modification should allow a portion of CSR funding, say, up to 25%, to be unrestricted and used for infrastructural expenses and capacity building. It is true that this is harder to monitor, but the trade-off is between easily monitored but pedestrian change, and hard-to-monitor but creative change. We argue for leaning into the latter.
Much impact comes from purpose-driven for-profit organisations. Aravind Eyecare, for instance, performs 8% of India's cataract surgeries at low cost. Equity investment for such organisations has dried up outside niches like community finance, as the returns do not match internet startups serving the well-heeled. This is a market failure akin to deeptech startups.
GoI can, again, step in as a market maker by providing a capital cushion to so-called impact funds at a discounted return rate. Another approach is to provide non-dilutive, concessional debt to fund the cash flows of nonprofits. This will improve equity returns for private investors and make the economics work.
We should make the most of this moment by treating nonprofits as the creative entrepreneurial efforts they can be, just as commercial startups are.
(Disclaimer: The opinions expressed in this column are that of the writer. The facts and opinions expressed here do not reflect the views of www.economictimes.com)
An August 2025 Change Engine report, 'The Playbook for Non-Profit Unicorns', studied over 30 'non-profit unicorns', each of which has impacted more than a million people. These organisations, led by young founders (median age: 36 years), range from providing sound policy input to lawmakers to helping prevent road accidents. GoI's hand is visible in their operation: 80% scaled by working with it, providing the latter with specialised skills and capacity.
GoI can do more and, once again, should step in as a market maker. We have made a beginning through the CSR policy, unlocking upwards of ₹34,000 cr annually for nonprofits. AIM allows its incubators to fund nonprofits as well. Some ministries provide grants, and Social Stock Exchange (SSE) is still in its fledgling years. Yet, most of this funding is programmatic, funding service delivery, usually insisting on a direct line of sight to a beneficiary, presumably because it makes monitoring easier.
GoI should unlock unrestricted funding to help create nonprofit unicorns. Our data shows that nonprofits need an average of $500K cumulatively in the first three years. But as important as the total sum is the way it is allocated. Currently, most funds are accessible via line-item budgeting systems. These are overly restrictive and infeasible for a genuine innovator that must experiment and iterate its way to success. Experimentation cannot ensue without some line of sight to a reserve to fund creativity. This simple learning from the startup ecosystem needs to be applied to nonprofits.
Project Deep, a nonprofit focused on cash transfers, found that lump-sum transfers to adivasi households in Maharashtra led to asset creation - housing, livestock, sheds and more. To scale, they learnt to work with state governments. Now, they're testing how factors like scheme name, frequency of transfers and timing affect impact.
PRS, a nonprofit unicorn, began with policy briefs for MPs. Its acclaimed Legislative Assistants to MPs (LAMP) programme emerged through iterations shaped by MPs' needs and assistants' experiences.
Since much of this funding is infrastructural, organisational and needs flexibility, we need new policy instruments to unlock it. Here are 3 candidates:
Competitive unrestricted grants, like Startup India, should be made available for nonprofits through an FoF structure. Here, GoI doesn't directly pick nonprofits but helps seed new unrestricted philanthropic funds and provide matching grants to pre-existing performing funds.
Its imprimatur can go a long way in enhancing the credibility of a fund. FoF grantees pick nonprofits through a competitive process. This way, the state will build trust, crowd in unrestricted private money and fuel the ecosystem.
CSR rules have been widely interpreted to suggest that the capital must fund time-bound programmes with well-defined beneficiaries and short-term outcomes. A modification should allow a portion of CSR funding, say, up to 25%, to be unrestricted and used for infrastructural expenses and capacity building. It is true that this is harder to monitor, but the trade-off is between easily monitored but pedestrian change, and hard-to-monitor but creative change. We argue for leaning into the latter.
Much impact comes from purpose-driven for-profit organisations. Aravind Eyecare, for instance, performs 8% of India's cataract surgeries at low cost. Equity investment for such organisations has dried up outside niches like community finance, as the returns do not match internet startups serving the well-heeled. This is a market failure akin to deeptech startups.
GoI can, again, step in as a market maker by providing a capital cushion to so-called impact funds at a discounted return rate. Another approach is to provide non-dilutive, concessional debt to fund the cash flows of nonprofits. This will improve equity returns for private investors and make the economics work.
We should make the most of this moment by treating nonprofits as the creative entrepreneurial efforts they can be, just as commercial startups are.
(Disclaimer: The opinions expressed in this column are that of the writer. The facts and opinions expressed here do not reflect the views of www.economictimes.com)
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