Fundraising for Nonprofits

Inspiring Gifts that Transform

Monday, November 13, 2006

What’s wrong with profit?

If you're a fundraiser who has been keeping your head down, focusing on building your good causes' annual campaign, launching your fall major donor drive and keeping your Board members happy, you may well be missing the biggest shift in philanthropy to happen in your lifetime. As The New York Times reports today:
"This year, as never before, the line between philanthropy and business is blurring. A new generation of philanthropists has stepped forward, for the most part young billionaires who have reaped the benefits of capitalism and believe that it can be applied in the service of charity. They are 'philanthropreneurs,' driven to do good and have their profit, too."
There are many definitions of philanthropy, but one pragmatic description is “philanthropy is the exercise of private will in the public sector.” From this perspective, the blurring of lines between the for-profit and nonprofit sector is long over due.

On a good day, my wish is the push toward value-driven, sustainable businesses practices means our MBA-graduated brethren have learned something from the social sector field.

But then I am reminded of a conversation I had ten years ago with my investment banker cousin, who upon learning I worked with nonprofits, asked me about sector investment opportunities, “because everybody wants to make a buck.”

Today we live on a planet were the world’s 793 billionaires control more assets than the world’s poorest 3 billion individuals. Such unequal wealth accumulation is due in large part to continuing marketplace deregulations, increasing tax cuts and ongoing access to natural resources at public expense.

For all I know many of these philanthropreneurs are of true compassion and good heart, but I fully agree with Mark Rosenman, a professor at the Union Institute and University, who The Times quoted as saying:
"Though I have no problem with philanthropy and socially responsible business being joined, I do have one with a for-profit enterprise being called philanthropy."
Contrary to recent statements, this new trend does not serve the “public interest over political correctness.” Fortunately, there are at least a few business people who understand the difference. Ted Turner, when recently asked about Sir Richard Branson’s $3 billion "donation" made at the Clinton Global Initiative said:
“It’s not a donation.” Rather he said it was an investment. “He’s probably going to make more off that investment than he has in everything else.”
The Association of Fundraising Professionals ethic statement reads in part that it members “shall not put philanthropic mission above personal gain … and that members shall not accept compensation that is based on a percentage of contributions.”

So what’s wrong with the world's wealthiest individuals making a profit off the backs of the poor, vulnerable and oppressed? It’s unethical.


Sunday, October 01, 2006

Don't be a business in nonprofit's clothing

Rob Johnston of 4Nonprofits and I have the same pet peeve.
"This is a personal peeve, but I think there's an important issue behind it. While I argue at all times that nonprofits should be run as the most effective organizations they can, and I have supported the use of corporate titles (president, chief operating officer) by nonprofits, I believe doing the reverse can be underhanded, done to mislead potential customers. When businesses present themselves as nonprofits, they are exploiting the trust that people hold in social sector organizations."


Monday, September 25, 2006

The definition of New Philanthropy: giving without the gift

Capitalists who care
"Compassionate conservatism has been an expensive bust in Washington. But an intriguing alternative is emerging around the country: compassionate capitalism."

Google's philanthropy
"The end is socially driven, but the means are the beauty of capitalism carried out largely in the marketplace."

Virgin and Google: But is it philanthropy?
"It’s not charity, and it's certainly not philanthropy as it's commonly defined. For the second time in a week, a major international brand has made news with its 'philanthropy' but reserved the for-profit status of its commitment of funds."

Exploding philanthropy: What the Clinton Global Initiative meant
"The estimated $3 billion was not a gift; Sir Richard will invest the company in other companies, including one he already owns, to try and move the developed world to better energy policies."

Clinton's bullet point solutions
"Interestingly, most solutions focused on corporate citizenship, a kind of redefining of corporate social responsibility toward environmentalism."

How the new philanthropy works
"[The] Clinton Global Initiative brings together some of the world's best minds and problem solvers. It functions like a marketplace for global change, where those with the passion to make a difference--and others with the means to finance them--come together."

$2 billion in one day
"'The rich world is where the expertise is, so bringing those innovations and putting them in a form that can be applied globally, that's where people can make such a difference,' Gates told the summit, attended by 1,000 people."


Wednesday, September 20, 2006, corporate philanthropy the usual way

If you were only to read mainstream media outlets, such as the New York Times and Slate, you’d think that’s for-profit philanthropy model is reinventing the concept of giving.
"Unlike most charities, this one will be for-profit, allowing it to fund start-up companies, form partnerships with venture capitalists and even lobby Congress. It will also pay taxes."
"Google's willfully innovative approach to philanthropy has made the Bill and Melinda Gates Foundation seem like a 2.0 philanthropy in a 3.0 world."
But I think that White Courtesy Telephone has a better read on it when Glauco muses:
"It’s not a new philanthropy, it’s not a new way of doing philanthropy. It’s a corporate giving program not much different from any other."
Though Google's rapid market expansion has yet to cause the kind of blowback that occured to Microsoft and in the 90's with the browser wars (doesn't that now seem a lot about nothing), it is really only a matter of time, as demonstrated by the widespread negative reaction to its censored service for 1/5 of the world's population living in China.

When faced with such business challenges, conventional wisdom calls for publically launching a highly visible corporate giving program, while privately expanding government lobbying efforts, all in an effort to insure continued public good will.

Funny, that’s just what Google is doing.

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Friday, July 14, 2006

What's driving social entrepreneurship? reports ...
… Timothy Zak, President of the Pittsburgh Social Enterprise Accelerator and a panelist at the [NYU'’s Stern School of Business'’ Social Entrepreneur] conference, was among those who believe that in order for an organization with a social mission to be successful, 501(C)(3) status must be viewed as merely a tax code reference. “The difference between non-profits and for-profits is a legal distinction, and should not reflect a way to operate,” he reasoned.
This is simply wrong.

Unfortunately, this seems to be a growing agreement among good intentioned people who wish to "fix" nonprofits. The simple fact is 501(C)(3) status is granted by states Attorney General to corporations -- yes, every registered nonprofit is by law incorporated, hence a corporation -- that operates to the benefit of the public.

The distinction between for-profits and nonprofits is therefore one of ownership. Individual investors -- often as few as one person -- own for-profits. Ownership of nonprofits, on the other hand, rests with its constituency, ultimately the people of the state who have granted it a license to operate. Instead of shareholders, nonprofits have stakeholders. The duty of nonprofit Boards is to insure the maximum return on investment to these stakeholders, i.e. the public. As such, the nonprofit sector is the "hidden socialist sector" of America. This understanding should drive every business decision a nonprofit makes.

Social Entrepreneurs talk a lot about the dual bottom line, i.e. the need for nonprofit leadership to understand that they have both a fiduciary as well as public duty to fulfill. That's all well and good, but I've never met an Executive Director who didn't understand that innately. Of course, the sector can always use more training and capacity in order insure mission success, but what businesses couldn't? Yet too few for-profit CEOs seem to understand that, just like nonprofit corporations, they too have a dual bottom line to return value to the community's in which they are licensed to operate.

If the growing alliance between academia and for-profit America really wants to make an impact on our country's quality of life, they should look at themselves first. If so, perhaps than our world wouldn't be in such a global crisis.

What do you think?


Monday, July 10, 2006

Innovative nonprofit start-up funding

In the 90's there was Classmates and SixDegrees, but it wasn’t until the 2003 launch of Friendster that online social network websites really exploded into public consciousness. Today there are over 200 such services, with the popular MySpace getting more daily page views than Google!

Last month, a new nonprofit joined this competitive fray. YouthNoise, a spin-off from Save the Children, is the first nonprofit, youth-based social network dedicated to social change. Headquartered in San Francisco, the organization is bringing together young people ages 16-22 from around the world to form a global network for sharing and converting their ideas into action. Featuring 100% youth-generated content, it already has registered more than 113,000 youth from more than 170 countries.

Yet what I found interesting was its funding model, according to PNNOnline:
… YouthNoise recently received an innovative first round of $1.5m in financing to support the launch of This first round of funding was led by Omidyar Network and a consortium of the Surdna Foundation, the Rappaport Family Foundation and Virgin Mobile USA, among others. This investment in YouthNoise represents a blueprint for capitalizing high-performance nonprofits in a way similar to funding for-profits.

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