Fiscal sponsorship, incubation, or ops support?

How does it work?

1. Apply to a fiscal sponsor, like Rethink Priorities. The sponsor evaluates your application, considering your funding and the projects’ potential.
2. If you meet their criteria — and they have capacity — they may take on your project.
3. Once sponsored, your project becomes part of the sponsor’s legal entity. This means that your staff become employees of that entity, and any data or IP you produce legally belongs to the sponsor. You’re also bound by the sponsor’s policies, and its board will be responsible for oversight of your activities.
4. You may pay a monthly fee to the sponsor — like a % of your annual budget, or a bill for specified operational services.

What should I consider?

• Support: Pay attention to the sponsor’s operations team so you can understand the sort of services they’ll provide. Do they cover ad-hoc legal questions, budget setting/tracking, data management, or risk control?
• Cost: Not all sponsors charge a fee, but it’s typical to be charged between 5-10% of your annual budget. (If you’re a (re)grantmaking project, consider requesting a bespoke charging model, as your budget will be disproportionate to your operational activity.)
• Autonomy: Sponsors offer varying degrees of autonomy. Check what level of oversight/control the parent entity provides. The sponsor is legally responsible for your project’s activities, so may request month check-ins and annual reports. They might limit your activities in order to reduce their risk exposure.
• Policies: You’ll inherit the policies of the sponsor and there will typically be little flexibility to modify these. Consider requesting a copy of the sponsor’s policies and employee handbook to see which costs you may be exposed to, and which benefit packages your team can access.
• Testimonials: Seek reviews of the sponsor from its previous and existing projects. If any projects have recently spun out, consider asking them why they left.
• “Spinning out”: Use the classic army principle of “thinking to the finish” to make sure you have a clear understanding of the mechanics of leaving the relationship. Pay close attention to IP, data, and employee transfer procedures — as well as any costs associated with the process. (Depending on the complexity, these costs may reach six figures!)

What are the advantages?

• Sponsorship can often be long-term or open-ended
• You avoid the hassle of setting up an entity and building an operations function
• You get integrated into an ecosystem of aligned projects
• Your project can become associated with a very reputable entity, which signals its potential to the community

What are the disadvantages?

• Costs can be high, and outside your control
• Governance of your project is handled by trustees that you haven’t appointed
• Depending on the size and complexity of the sponsor, you may be subjected to an uncomfortable degree of bureaucracy
• You’re exposed to risk by association with other projects and their activities
• You may lose a sense of independence/autonomy

How does it work?

1. Decide whether to pursue an idea of your own, or take on a project recommended by an incubator (Charity Entrepreneurship, for example, has a list of interventions it would like to support). 
2. Apply to an incubator. The incubator evaluates your application, considering your funding and the projects’ potential.
3. The incubator may provide funding (as with Y Combinator or Charity Entrepreneurship), or expect you to have secured funding yourself. Incubators are normally designed to test very early stage projects. The relationship is normally short and fixed in term, usually less than or around a year in length.

What should I consider?

• Support: Consider the type of support they provide and their approach to incubating your project. One benefit of an incubator is the coaching and mentoring you will receive — as well as the experience of joining a cohort of other early-stage entrepreneurs.
• Cost: Will the incubator provide funding as part of the incubation program, or will they charge a fee for their support?
• Policies: You may be joining the incubator’s entity — if so, you’ll need to comply with their policies and internal processes.
• Testimonials: Seek reviews of the incubator from its previous attendees. Where are they now?
• “Spinning out”: Pay attention to the exit process. What happens at the end of the incubation period, and what level of support can you expect in setting up your organization?

What are the advantages?

• The time and financial cost of setting up an entity is eliminated in the near-term
• Some form of coaching is typically provided
• You’ll probably join a cohort of other founders, from whom you can learn and share ideas
• Support may be provided for free (or in return for equity)

What are the disadvantages?

• The support is usually fixed-term
• There may be onerous terms and conditions relating to what you can and can’t do as an attendee
• The application may be very time-consuming and competitive

How does it work?

1. Register as an independent entity — this involves incorporating a legal structure in a suitable country. An ops support provider can walk you through this stage, or register on your behalf. But you can also tackle this yourself using a service like Harbor Compliance (US) or Rapid Formations (UK).
2. Set up your own operational stack, like a bank account, accountancy software, HR platform, etc. An ops support provider can again walk you through this, or scope out your requirements and do this on your behalf.
3. Request operational support for specialist services that are unlikely to be cost-effective for you at a small scale — like bookkeeping, accountancy, or HR administration.
4. Establish your own policies, processes, and governance framework. A good ops support provider will be able to help you with all of this.
5. The ops support provider may charge you on an hourly or project basis, or suggest a retainer for ongoing support.

What should I consider?

• Support: Consider the degree of support the provider is offering. Do you want a full-service provider that’s deeply integrated into your team and systems, or do you want some distance between the provider and your organization’s data?
• Cost: Ensure the provider shares an estimate of costs before you engage them for work. A project-based charging model can give you more certainty over costs, but might make it harder to exit the arrangement if you aren’t happy with the work or decide to pivot.
• Testimonials: Seek reviews of the provider’s work before you choose to engage them, especially if the work is foundationally important or difficult to reverse. What do their current and previous clients have to say about their skills and execution?
• Timeline: Ops support providers will often work on a project basis. Asking for a timeline for each project will help you plan and keep your provider accountable (a good provider will do this unprompted).

What are the advantages?

• You get the support you need when you need it
• Costs are transactional and typically transparent
• The arrangement is flexible compared to other models —if you’re not happy, you can switch provider
• Independence/autonomy is preserved, incl. IP and data from the get-go

What are the disadvantages?

• Quality of service across small agencies may vary more widely than across larger institutions
• Entity registration and administration are required, introducing both up-front and ongoing costs