Watsi, “an online peer-to-peer crowdfunding platform that allows users to fund life-changing medical treatments for underserved people in developing countries”, has become the first nonprofit that the start-up incubator Y Combinator has chosen to invest in.

Perhaps one of the reasons that Watsi are the first non-profit to become part of Y Combinator is because at Watsi, 100% of your donations directly fund medical treatments. As Paul Graham explains:

Watsi.org is separately funded. They pay all their operational costs from their own funding, and none from your donations. They even eat the credit card processing fees. So when you donate to Watsi, you never have the uncomfortable feeling that lots of your money will be eaten up by administrative costs. Your money has impact you can measure.

This is a similar model to Charity: Water, who ensure all donations go 100% to water aid projects, with their operating costs covered by private donors.

Although that sounds great at first glance, there’s long been a philanthropy-wide consensus that over-focusing on overhead is common and unhelpful:

Picking charities based on the “overhead ratio” is like picking your doctor by the percentage of revenue spent on medicine (more absurdity-highlighting analogies here). The actual reported “overhead ratio” is vaguely defined and generally up to the charities reporting it; the concept of “minimal money on overhead” discourages a lot of good and necessary spending, and is ultimately irrelevant to the question of whether a charity is changing lives.

Watsi also publish a record of every patient they’ve ever funded and the outcome of their treatment, which is incredibly transparent. View the  google Doc here.

Overall, this seems like a great and brave move by Y Combinator. And Graham himself  says that “I’ve never been so excited about anything we’ve funded.”

Will be interesting to see what (and if) other non-profits become part of the programme.

There`s more discussion about the announcement over at Hacker News and you can find out more about Watsi and how it works at their FAQ.