Current Issue
This Month's Print Issue

Follow Fast Company

We’ll come to you.

Why Y Combinator Funded a Radical Political Party in Argentina

Silicon Valley investors are betting that the ideas that turned Airbnb and Dropbox into megahits can work for social enterprises.

"I got my five guys!"

It’s a Wednesday morning in mid-February, and Pia Mancini isn't talking about hamburgers. After countless phone calls, emails, text messages, and many, many bad lunches at conferences, she has found a handful of users to test out her company’s new collaboration platform. Five customers may not sound like a big deal for a startup that one day hopes to reach millions, but Mancini's target isn't any old user. Over the past two and a half months, she's been courting elected officials, not your typical early adopter crowd.

DemocracyOS, which Mancini, 32, started with cofounders Santiago Siri and Guido Vilariño in 2012, allows politicians (or groups of any kind) to poll their constituents quickly. "It’s a tool that has promise," says one of Mancini's early customers, San Francisco city supervisor Mark Farrell, who signed up for the pilot program with city council members from New York, Cambridge, Massachusetts, and Mountain View, California. Farrell is using it to solicit feedback on a proposal to modernize city vehicles and another to encourage children to play outdoors. The programs aren't exactly controversial, and Farrell's commitment to DemocracyOS may be modest, but for Mancini this is a coup. "Selling to politicians is hard," she says. "I needed to get that initial pool of customers. Now I can go everywhere else."

Mancini is employing a classic growth strategy proselytized by Y Combinator, the Silicon Valley startup factory I've been writing about as part of Fast Company’s series, and in which DemocracyOS is currently enrolled. YC cofounder Paul Graham has long encouraged founders to, as he put it in a 2013 essay, "Do things that don’t scale." That especially applies to rounding up your first users. This is how Airbnb went from a couple of air mattresses in 2007 to a company that is reportedly raising funds at a $20 billion valuation, and it’s how Mancini is seeking to launch DemocracyOS more broadly. YC's bet is that the standards an entrepreneur sets early on will continue to inform how he or she treats customers when there are more than just a handful of them.

With two weeks to go until YC's Demo Day, when Mancini will show investors her team's work, she's opening up the free platform to the public starting next week. Her goal will be to sign up as many city council members as possible, along with student governments, food coops, book groups, or anyone else looking for a collaboration tool. If all goes well, her two-and-a-half-minute pitch to investors will likely include a graph of user growth pointing up and to the right.

If DemocracyOS's growth plans look similar to that of the other 113 startups in the current YC class, it has one of the most unusual backstories. First, it's a nonprofit, an uncommon thing among so many companies that are aiming themselves at profit-hungry venture capitalists. Secondly, it happens to operate a political party in its home base of Buenos Aires, Argentina.

Mancini's Partido de la Red—"Net Party," in English—is a wild experiment in direct democracy that seems to take inspiration from both Occupy Wall Street and Reddit (a Y Combinator alum and ongoing investment). Party supporters, mostly young Porteños, as citizens of Buenos Aires are known, weigh in on issues like the possibility of extending late-night hours on city subways and legalizing the sale of small quantities of marijuana seeds. The Net Party promises to vote on bills based exclusively on the feedback it gets online. In 2013, Mancini and her cofounders entered the party into Buenos Aires’s local elections, garnering 22,000 votes. That was 1.2% of the total electorate and not all that far from the 3% it needed to win a seat in the local parliament. "We were trying to find a strategy to hack into the political system and upgrade it to the 21st century," says Siri, 31, who serves as the organization's product chief.

That Y Combinator, which is known for helping to turn silly-seeming software ideas into billion-dollar companies, would back a South American political party whose great ambition is not to be the next Silicon Valley unicorn but rather to create, in Mancini’s words, "a better democracy," might seem surprising. But YC has been broadening its reach in all sorts of ways, expanding into realms like driverless cars, prosthetic limbs, and, yes, nonprofits. Though some investors might have seen DemocracyOS's forays into politics as a red flag, YC's partners were impressed by it. Creating a political party showed that they were committed, not just to creating clever software, but to bringing that software out into the world. "We saw they were actually getting stuff done and really passionate about what they are working on," says Kate Courteau, YC's director of nonprofits.

"I think what really caught their attention was when we said we'd created a political party," Siri says. "They were like, What? You made a what?"

During their interview the founders were also asked why they weren't structured as a for-profit company. Mancini's answer: "You can't put a price on civic engagement." A few years ago, that answer would have been disqualifying. YC, after all, pays its bills by taking a 7% equity stake in each of its startups. But beginning in late 2013, the firm began making exceptions for do-gooders with a technology bent. DemocracyOS is one of three nonprofits in the current class, each of which receives a donation of $100,000. (They also get access to the secret $1 million dollar goodie bag I wrote about two weeks ago.) "We’re looking for high-risk, high-reward investments," says Courteau. "It's a lot like what we promote in the for-profit world."

YC's nonprofits all use technology to solve problems, and most also generate revenue. DemocracyOS already had some revenue when Mancini applied to YC—the team had contracts to run collaboration platforms for a handful of large organizations—and the plan is to expand the new platform to include paid services for people like Supervisor Farrell. "We're trying to get out of the gala mind-set," says Courteau, referring to the continual fundraising that defines most charities. "Not every single nonprofit has a path to sustainability, but we believe there are a lot of nonprofits out there that could have that in their model."

The upshot is that YC's nonprofits—even the ones that operate radical political parties—operate a lot like the for-profit ones. "We feel uncomfortable being bucketed," says Adam Kircher, a cofounder of Sirum, another YC nonprofit that helps hospitals donate unused drugs to people who can’t afford them. "We’re going to change the world in five years," he says. "This isn’t your old charity."

Next Week: Demo Day: The Fastest 150 Seconds in Business. This is part 10 in a series.