The Power of Philanthropic Equity

Philanthropic equity, or “growth capital”, is just a fancy way to say money that nonprofits desperately need. The idea behind philanthropic equity is that nonprofits are only allowed to raise money for programs, when what they really need to make their programs bigger and better is money to build a stronger organization. These dollars that build a stronger organization (technology, systems, non-program staff, etc) are called philanthropic equity. It’s a new concept for the sector and one that the Nonprofit Finance Fund has helped to pioneer. It’s also a concept that we’ve been talking about on this blog recently here, here and here.  Today NFF released a report on how their work to help nonprofits raise philanthropic equity has affected those nonprofits. The results are pretty impressive.

NFF has helped nonprofits like Year Up, Donors Choose and Volunteer Match raise philanthropic equity investments, totaling $312 million since 2006. The report analyzes the role of philanthropic equity in the nonprofit sector based on these engagements – detailing results-to-date, the characteristics that have helped spur success, and challenges that remain in building a nonprofit growth capital marketplace. The initial results are promising: NFF found that  philanthropic equity has, on average, more than tripled program delivery, and doubled revenue for nonprofit organizations that have conducted comprehensive campaigns (and some results were even greater.) Some specific results include:

• Annual program delivery has grown on average by a factor of 3.1x, with a compound annual growth rate of 57%.
• Annual business model revenue for these nine organizations has grown on average by a factor of 2.0x, with a compound annual growth rate of 36%. In aggregate, business model revenues have expanded by $30 million compared to pre-campaign baselines
• Three of the portfolio members – GlobalGiving, Ashoka’s Changemakers, and VisionSpring – accomplished five-fold growth in their program areas.

Why does all of this matter? Because if nonprofits can demonstrate that philanthropic equity can dramatically increase their ability to create social change, then more donors will be willing to make those extremely necessary kinds of investments. And if more philanthropic equity investments are made in the nonprofit sector, the sector will become stronger and better able to create social change. Philanthropic equity is such an important concept because it could dramatically shift the sector from one that lives hand to mouth, to one that grows increasingly sophisticated and capable of solving our greatest social problems.

If you are a nonprofit leader, encourage your board and donors to read the report. The results clearly make the case for philanthropic equity. And once nonprofits and their donors are convinced about the power of philanthropic equity, the sky’s the limit.

Photo Credit: Mr. T in DC

Tags: Ashoka's Changemakers, Donors Choose, GlobalGiving, Nonprofit Finance Fund, nonprofit growth capital, philanthropic equity, VisionSpring, Volunteer Match, Year Up

Two Weeks to SoCap

Two weeks from today the 2nd annual Social Capital Markets Conference kicks off in San Francisco.  I’m pretty excited about it because I think one of the biggest things standing in the way of social innovation is a social capital market–the financial tools and vehicles necessary to adequately capitalize social innovation.  The speaker’s list for the conference reads like a Who’s Who of the social innovation world.  There are some incredible sessions, too many to choose from.  I wish the conference were longer than 3 days.  I’ll be tweeting (as much as my multi-tasking challenged brain can handle) and blogging from the conference.

Just a few of the topics to be discussed at this year’s conference include:

• The Social Capital Movement Across the Globe
• Social venture funds’ prominent role in the new economy
• The sophistication of social investing pioneers
• Raising money for impact investing in a downturn economy
• The Obama Administration’s focus on social innovation
• Creating effective collaboration between the private sector and development agencies
• Moving beyond Microfinance
• Market based solutions for the base of the pyramid
• New corporate structures, including hybrid businesses and L3C organizations
• Creating metrics and value around social change
• Mobile technology platforms worthy of investment

Are you excited yet?

One of the things I’m particularly excited about at this year’s conference is a movement toward including nonprofits and philanthropy in more of the conference.  Last year’s conference tended to focus a bit more on blended value investing (investing in social impact organizations that provide a social AND a financial return). But we don’t want to neglect those social entrepreneurs that employ a nonprofit model to create their desired social impact.

To that end, SoCap this year has a host of sessions about nonprofit social entrepreneurs  and a social capital market for them.  I am moderating one of these sessions, Growth Capital for Nonprofit Social Entrepreneurs on Wednesday, September 2nd at 1:30pm.  Darell Hammond of KaBoom!, Greg Baldwin of VolunteerMatch and Kelly Ward from America Forward/New Profit will discuss the growth capital that was used to bring some impressive nonprofit organization’s to scale.

If you are going to attend only one conference in the social innovation space this year, I would highly recommend SoCap.  Hope to see you there!

Growth Capital for Nonprofit Social Entrepreneurs

Date: Wednesday, September 2nd
Time: 1:30pm

Moderator: Nell Edgington, Social Velocity
Greg Baldwin, VolunteerMatch
Darell Hammond, KaBOOM!
Kelly Ward, New Profit and America Forward

Nonprofit social entrepreneurs like Volunteer Match and KaBoom! have become, over the past decade, very successful, national, multi-million dollar nonprofit organizations working to solve critical social problems. They’ve achieved this impressive scale through growth capital from individuals, foundations and venture philanthropy funds. Greg Baldwin from Volunteer Match and Darell Hammond from Kaboom will be joined by Kelly Ward from America Forward and New Profit, a pioneer venture philanthropy fund in Boston, to discuss the various financial tools available and necessary to scale nonprofit social entrepreneurs.

Tags: America Forward, KaBoom!, microfinance, New Profit, nonprofit, scale, SoCap, social capital market, social entrepreneurs, Venture Philanthropy, Volunteer Match