The Mulago Foundation is a private foundation focused on the prospect of creating a better life for the world’s poor. Concentrated in rural settings in developing countries, the Foundation’s work is in four areas that contribute to this overarching goal — livelihoods, health, education, and conservation. The Mulago team looks for investment opportunities in promising products and services that address these high-priority problems. When it comes to health, the organization is particularly committed to improvements affecting the lives of mothers and children.
In evaluating potential investments, the Mulago Foundation has observed how many global health innovators grapple with the choice between establishing their organizations as nonprofit or for-profit entities. One of the key implications of this decision is that it determines what sources of capital their organizations can tap into to fund their work. Nonprofits typically rely on donations from individuals, foundations, or corporations, often in the form of grants, which are generally given in anticipation of some “social return on capital.” In contrast, for-profit organizations commonly raise money from commercial investors (angels, venture capitalists, and impact investors) in exchange for equity in the organization. These investors expect a more traditional return on their money in the form of an eventual “exit” through which they will recoup many multiples over the original investment amount. Because many mission-driven global health innovators are creating social businesses that will have a revenue stream, deciding between these options can be a difficult choice with no “right” answer. This mini-case study provides insights based on the Mulago Foundation’s experience in the global health field and raises issues that innovators should consider as they evaluate their legal and capital structure options.
This story is part of the Global Health Innovation Insight Series developed at Stanford University to shed light on the challenges that global health innovators face as they seek to develop and implement new products and services that address needs in resource-constrained settings.
Acknowledgements: We would like to thank Laura Hattendorf of the Mulago Foundation for her participation. This research was supported by the National Institutes of Health grant 1 RC4 TW008781-01.