Over the past several years, the idea of impact investing has gained significant momentum, driven primarily by large foundations and mega-donors. In a nutshell, impact investing is the idea that money can be put toward for-profit companies that provide both social and financial returns, as opposed to the purely social returns offered by a traditional philanthropic gift. In addition, by providing returns, these businesses show they are sustainable and scalable—no annual gifts required.
This trend is likely a little troubling for nonprofits. The big, yet-to-be-answered question with impact investments is whether the dollars for these investments are coming from what would normally be given to nonprofits or what would be put into for-profit investments. The answer is likely a little bit of both.
This means that, to some extent, there’s increased competition for philanthropic dollars. As for-profit businesses become more socially minded, it’s important for nonprofits to become more business oriented. What areas should your organization be focusing on, and which could be outsourced to someone who could do it more efficiently?
Similarly, just because you are a nonprofit doesn’t mean that you don’t have valuable assets. Maybe it’s an engaged audience, location, expertise or recognized brand. That brand may be of value to more traditional for-profit businesses looking to “outsource” the social aspect of their brand or to convey their values to their customers.
Finally, don’t be afraid to think big. What will the issue your organization addresses look like in five, 10 and 20 years? What will you need to address it that you don’t currently have? Don’t be afraid to discuss these ideas with your boards and close donors. While nonprofits will never be able to provide financial return, the growth of impact investing means they will have to be more effective and efficient at providing social return.
Shocking Statistic: Facebook founder Mark Zuckerberg and his wife, Priscilla Chan, have committed 99 percent of their Facebook shares, estimated at $45 billion, to the Chan-Zuckerberg Initiative, which is structured as an LLC rather than a private foundation.
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