Years ago, I found myself sitting around a giant speaker waiting for a conference call to start, and getting ready to hear a big announcement from our CEO on the future of our organization.
We never got “big announcement” invitations. Unless they were about budgets, or awards at the end of the year, or awards about hitting budgets. And my brain immediately went to wondering if we were just throwing in the towel as a nonprofit? Did this just not work out? Did we not raise enough money?
Turns out, quite the opposite.
Our leadership team across the country, had made the decision to invest in a tiny genetics company out of Boston to help create, what can only be described as science fiction, a pill that would change the ways cells work.
It wasn’t a TON of money for what was bantered about as a potential cure for a genetic disease that affected so few individuals the government decided it wasn’t worth it to fund research.
But the parents of kids who had it, sure as hell weren’t going to sit back and do nothing. That’s a pretty badass nonprofit leadership kinda move isn’t it?
So, if a research company wasn’t going to get government funding, and there wasn’t revenue in providing a solution on their own, why don’t we just pay these companies to explore ways to create treatments on our behalf. We could minimize their financial risk, and they get critical funds to help push their research forward.
Turns out, it was brilliant. And the O.G. organization who normalized the idea of Venture Philanthropy.
Nonprofit organizations play a vital role in addressing some of the most pressing social and environmental issues of our time. However, traditional forms of solicitation and giving can be limiting, especially when it comes to scaling their programs and achieving long-term sustainability.
Enter venture philanthropy.
Venture philanthropy is a form of philanthropy that combines the impact-oriented approach of traditional philanthropy with the market-oriented approach of venture capital investing. It provides funding, strategic support, and other resources to for-profit social enterprises and nonprofit organizations with the goal of achieving both a social or environmental impact and a financial return on investment.
For a business, an investor and even donor, this is the best of both worlds. You get to impact a cause you love dearly, use all the cool opportunities that start ups and tech firms have used for years to create super awesome things, and solve a social problem at the same time.
Doesn’t hurt that you might make a buck or two as well.
And though it might not be for EVERY nonprofit, some of the ways that venture philanthropy can be utilized, might apply for organizations of any size, scope or scale.
So, here are five reasons why a nonprofit should consider using venture philanthropy as a means to solve your social issue or provide funding for your programs that benefit your community:
1. Access to capital:
Venture philanthropy can provide a significant amount of funding to a nonprofit, which can be used to scale its programs and operations to have a greater impact.
“Where do I find money?” is often the most pressing issue when it comes to expanding and supporting the mission of nonprofits. And finding investors, rather than just donors, opens the doors to so many more rolodex’s & wallets.
In fact, there are countless individuals who are looking for opportunities that help their portfolio, and the fact you get to help a cause, makes your pitch a helluva lot more interesting than your average “shark tank-esque” company. Your appeal to both financial return, and the improvement of your community is pretty compelling when it comes to storytelling.
2. Strategic support:
Venture philanthropists often provide nonprofits with support in the form of mentorship, networking, and other resources to help them achieve their goals.
One of the biggest gaps in nonprofit work is a business hive mind. Most do-gooders want to see the world rid of social woes, but don’t have the economics or investor background in order to find creative financial or strategic experience to map a way forward. And though audacious goals and ideas, are the key to setting the table for solving some of the problems our government refuses to help with, the “how” is typically the biggest mystery.
With venture philanthropy, you unlock a host of resources – most importantly, people power – to help navigate the best and more productive way forward. Usually with a twinge of fiscal fortitude.
Your list of human capital expands greatly, and those who are invested in the solution will use most of their connections to make it happen.
3. Flexibility:
Venture philanthropy allows nonprofits to take a more entrepreneurial approach to solving social issues, which can lead to more innovative solutions.
Did you know that Tesla lost millions of dollars every month for, like , years?
They didn’t make a penny.
And yet? They are consistently ranked as one of the most successful companies in last 100 years.
Talk about patience from investors.
Imagine your nonprofit having the flexibility of showing impact that doesn’t necessarily equate to always hitting budget goals and still able to build momentum for the community you serve.
Investors know that things take time to develop. And unlike that very impatient board of directors you might have, or the skittish CFO who is constantly crying “wolf” every time they look at projections, taking a more entrepreneurial approach to building, creating, and ideating is at the very center of how some of our most pressing community issues are going to be solved.
4. Measuring impact:
Venture philanthropy often focuses on measurable outcomes, which can help nonprofits better understand the impact of their work and make adjustments as needed.
Ever been challenged to show your work? Like, my kids have to use 3 pages of paper to let their teachers know they understand new math, and even though they know the answers in their head, they are graded on “how” they got there, rather than showing that they actually got there.
Kinda sounds like a donor meeting and painting the picture of how your programs grew, make positive differences in the lives of those you serve, and made the community better.
You get a boatload of help with this process by embracing venture philanthropy. Not only do your investors, and leadership team help craft these impact stories with you, but they also have a breadth of experience in how to pitch and tell those stories to a wide range of individuals who have deep pockets.
You get better at major gifts and speaking to business owners REALLY quickly when forced to be succinct, as well as enthusiastic about what awesome impact you make.
5. Sustainability:
By receiving a financial return on investment, nonprofits can become more financially sustainable, which can help them continue their work in the long-term.
One of the things that keeps nonprofit leaders up at night is the constant chase of a dollar.
Where is that next major gift coming from? How many tickets do you need to sell in order to make your budget work? How many calls do you need to make in order to get a “yes” to a monthly donation that helps you keep your organization afloat?
Venture philanthropy becomes another leg on your fundraising stool that helps balance your books, as well as thinking about long term solutions instead of thinking solely about short term survival.
No investor wants to put money where they don’t have a degree of confidence that they won’t get some positive return. Which is why your advice, and leadership become quite adept at showing and projecting the sustainability of your organization. Without constantly monitoring the impact of each program to make sure it is working properly, that money dries up. All of a sudden your little start up nonprofit is thinking and acting like a legit business, and attracting folks who also believe that your programs are the solution.
Pretty fantastic position to be in, wouldn’t you say?
Listen, when it comes to nonprofit fundraising and creating ways to make your community better by filling gaps that are only going to be filled by creative do-gooders like yourself, it certainly might be beneficial to take a page from those venture capital gurus.
And since we’ve seen success with underfunded genetic disorders, chronic homelessness, and even addiction services, the idea of venture philanthropy might be something to consider for your nonprofit.
And if it’s a little too complex for your tastes? These 5 ways to THINK differently about how you fund your projects, programs and services might capture the attention of donors and investors…which, is never a bad thing when you’re funding your mission.
Good luck gang!
-Patrick
PS! Need any help with your fundraising, board trainings or just a bit of nonprofit therapy!? We got you! Send me a quick email at Patrick@DoGoodBetterConsulting.com! Let's Chat!
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