hackNY Announces Fiscal Sponsorship
In December 2023, our friend Gary Chou from Orbital came to us with an opportunity to partner. Gary had been awarded a $90K research grant but needed a 501(c)(3) nonprofit to act as a fiscal sponsor to receive the funds.
(Quick background on grants, the IRS and fiscal sponsorship: When donors give grants and claim a tax deduction, the funds must go to a 501(c)(3) nonprofit. This ensures the money is used for charitable purposes and complies with IRS guidelines.
For individuals or projects without 501(c)(3) status, this creates a challenge: they cannot receive grant funds directly.
That’s where fiscal sponsorship comes in. A fiscal sponsor is a 501(c)(3) nonprofit that acts as an administrative partner for aligned projects, like Gary’s. By using the sponsor’s 501(c)(3) status, the project can legally accept the grant and begin work right away, avoiding the lengthy process of establishing its own 501(c)(3)—a process which can take months or even years.
Fun fact: hackNY's own origin story involves fiscal sponsorship. When we launched in 2010, ISOC-NY served as our sponsor, enabling us to receive a Kauffman Foundation grant to fund our first class of fellows in 2010. We later incorporated independently and obtained our 501(c)(3) status from the IRS in 2013.)
After discussing with our board, we agreed to serve as Gary's fiscal sponsor under a typical “Model C” arrangement. This means Gary retains full ownership and management of his project, while hackNY provides financial oversight. In return, hackNY received a 5% fiscal sponsorship fee ($4,500).
This is just a one-year commitment for us, not an ongoing partnership.
So, what’s Gary working on?
As outlined in our agreement, Gary’s ultimate goal is “to build an entrepreneurship pathway, funding model, and ecosystem that prioritizes mission-driven outcomes over generating outsized financial returns.”
This sounds simple, but it confronts a longstanding tension in funding social impact projects:
Investment capital, like venture capital, demands financial returns, which is often at odds with social impact goals.
Philanthropic capital, while mission-aligned, tends to avoid risk, shying away from experimental ideas.
This funding paradox often derails promising ideas before they can even get off the ground.
Gary’s work aims to find an alternative—one that could make the broader entrepreneurial ecosystem more conducive to funding people—like perhaps some of you—who want to pursue social impact projects.
Would it be possible to make pursuing meaningful social change as accessible as starting a venture-backed business?
It’s an audacious goal, and this initial research grant focuses on finding a viable starting point. As Gary explains: “The goal is to either identify the next question to pursue, or to stop working on this altogether.”
We're proud to support Gary's research because it's bold, encourages entrepreneurship and social impact, and aligns with hackNY's mission to "empower the next generation of responsible leaders”. (To be clear, we are serving as fiscal sponsor for this initial research grant, not Gary's broader project.)
At Gary's request, we held off on announcing this publicly until he had developed his research approach. Now, in his newly published blog post, Gary shares how his exploration has led him to focus on a key question: "How might we unlock more risk capital in the social sector?"
To fulfill the requirements of the grant, Gary will release a public report of his findings by the end of December 2024. He will also share resources from research and a retrospective of the process for the hackNY community.
You can follow Gary’s work and read his announcement here: https://garychou.com/the-opportunity-beyond-the-uncertainty/
Stay tuned!