This week, an expert at the greater Washington chapter of the business mentoring nonprofit SCORE offers advice to a top engineer starting his own enterprise to assist others.
— Dan Beyers
A life-long tinkerer, designer and mechanical engineer, Stephen Morris had worked at the pinnacle of the international yacht racing world for many years, including a stint on the design team of Oracle founder Larry Ellison’s entry in the America’s Cup. He then spent 10 years helping the U.S. Navy deliver ships to the fleet, until he made a decision to step away.
“It was time for me to get back to making tangible things again,” he said.
After searching for a place to learn welding and work on creative projects near his home in Silver Spring, Md., he found that viable options were too far away geographically. So he had a light-bulb moment and decided to develop and start a so-called makerspace, a local community workshop for tinkerers in the Maryland suburban town.
Figuring out how to turn his idea into reality was trickier, even for someone with 25 years of experience, a master’s degree in aerodynamics and an MBA. Most makerspaces around the United States tend to be volunteer-run, nonprofit organizations, but Morris perceived the need to provide a professionally run organization with top quality machines and easy, welcoming access. He wanted to know whether he should incorporate as a nonprofit, or as a for profit company.
Roger Schwarz, a SCORE mentor who has experience as a program manager in a simulator business, and who owned his own beauty products supply company, advised that any business model requires an infusion of start-up capital. For-profit companies usually rely on the bulk of their initial financing from the founder, friends and family. Nonprofits usually launch with money from donations, grants or even loans.
John Hocker, a nonprofit expert at the D.C. chapter of SCORE, talked further about delivering a social mission and the overhead of running a nonprofit, including the very important structure of the board. “You must carefully think about what board members are critical to the health of the organization, what roles you need them to play, and who you are going to invite to fill those roles.”
“Focusing on the business model was a key point for me. Ultimately, there were two things that helped me make my decision.”
“Firstly, I found that I had clearer instincts around the for-profit business models so my gut reaction was to head in that direction. My perception is that many people feel they can start a nonprofit and money will magically flow in from grants and donations, whereas the advice [I received] showed me this was definitely not the case. Even a nonprofit needs the discipline of a financially sustainable business model, and fund raising can divert the team’s energies and focus away from their mission, so going the for-profit route seemed like the more agile and flexible option.”
Still, he wanted his enterprise to have a social mission. The solution came in the form of fiscal sponsorship from the Fractured Atlas arts organization, which allows Catylator to solicit tax-deductible charitable donations. Donors actually contribute to Fractured Atlas, which then sponsors Catylator’s programs. “With fiscal sponsorship, I can now develop and implement programs that benefit our community and have a path for those programs to be sponsored and supported by individuals and entities without having to incorporate as a nonprofit myself.”
Morris incorporated is newly named Catylator Makerspace as a for-profit LLC in Maryland, and provided the necessary seed capital to bootstrap the business and get it going. The company’s first foray involved running a sold-out summer camp offering teens the change to engage with engineering, design and 3D printing. In mid-2015, Catylator leased a 3,000 square foot space in downtown Silver Spring and opened its makerspace workshop, offering a place for artisans and people who want to make things with their hands can get access to ordinary tools and sophisticated devices like 3D printers and laser cutters. Catylator also provides ongoing programs for young people.
“SCORE’s mentors have been a valuable resource to me every step of the way, and I am very grateful for their support.”
SCORE is a nonprofit association dedicated to entrepreneur education. Looking for some advice on a new business, or need help fixing an existing one? The Greater Washington DC Chapter provides confidential counseling and mentoring from more than 50 executives across the region. Contact us at email@example.com or request a mentor at www.washingtondc.score.org.