It's simple, it isn't an investment in the financial sense.

The betterment of the world as a whole?

That's great, but the job of investors is to make money, not to better the world, isn't it?

Investors are humans, like all the other humans, who happen to have the ability to commit significant funds to things, including startups, cars, and charities. There is a well- known challenge of putting large charitable donations effectively to work; that's why Warren Buffett put all his money into the Gates foundation rather than starting The Warren Buffett Foundation or donating it to the Red Cross.

Seen through that lens, it's straightforward to see how enabling people to come up with innovative and effective new charities that startup investors can help fund is a worthwhile project.

The job of investors is to do what they want with their money and make sure they have an alignment of goals with those they give their money to.

I didn't mean to say that they can't do whatever they want, or that they're incapable of helping the world. But if the investor does not expect his investment back, then that would make it a donation, which - as far as I can tell from the article - this is not.

From their page on funding non-profits: http://ycombinator.com/np.html

"Since some people were confused when we funded Watsi, I'd better clarify that the money we're putting into the nonprofits will be a charitable donation, rather than an investment in the narrow sense. We won't have any financial interest in them."

If you need a cynical money-driven motivation, it's more humans to sell things to.

s/make money/build value/g

I assume it's a tax dodge of some sort. I'm sure that investments in non-profits can be offset against capital gains (or something like that).

I'm not an investor and this isn't tax advice!

No, as far as I know we get no tax advantage from this beyond what anyone gets from making any charitable donation (the ability to deduct it).

Why do people think this?

Charitable donations do often result in reduced taxes. The catch is that the reduction in taxes is less than the donation (and at least in the U.S., there is no combination of State and Federal taxes that is greater than 100% of income...).

If you cure AIDS, you're worth probably $50B, so there's that.