Nonprofit Finance Fund Report: Philanthropic Equity Pays Off for Nonprofit Sector
NFF Capital Partners’ Portfolio Analysis Finds that Philanthropic Equity Recipients Tripled Program Delivery and Doubled Revenue
New York, NY – September 21, 2010 – A new report released today by Nonprofit Finance Fund (NFF) reveals the promise of philanthropic equity for the nonprofit sector. NFF Capital Partners’ Portfolio Performance Report, which analyzes the role of philanthropic equity in the nonprofit sector based on its own engagements, found that philanthropic equity has, on average, more than tripled program delivery, and doubled revenue for nonprofit organizations that have conducted comprehensive philanthropic equity campaigns.
Philanthropic equity investments are typically significant, multi-year investments that a nonprofit organization uses on the path to sustainable growth or change. Done right, philanthropic equity investments transform an organization in a way that sticks, using transparent, shared reporting systems. These investments are distinct and separate from program and operating support used to maintain “business as usual.” While still a miniscule percentage of charitable giving, interest in philanthropic equity is increasing as forward-thinking funders and social change entrepreneurs strive for new models of addressing critical issues.
“Like for-profit companies, nonprofit organizations need access to capital investments so they can explore better business models, scale impact, and create lasting change,” said George Overholser, Founder and Managing Partner of NFF Capital Partners. “We cannot wring more ‘results’ from an overburdened sector without addressing fundamental flaws in the way nonprofits are financed. This report presents evidence that applying the principles and practices of philanthropic equity can create dramatic and sustainable progress. Every organization in our portfolio has substantially enhanced both its program delivery and financial durability.”
Since launching in 2006, NFF Capital Partners has helped standout nonprofit organizations such as Year Up, DonorsChoose.org and VolunteerMatch plan for, attract and deploy philanthropic equity investments, involving a grand total of $312 million in philanthropic commitments.
This new report focuses on NFF Capital Partners’ comprehensive philanthropic equity campaigns for which multi-year data are available. The impact-to-date of these campaigns resoundingly makes the case for further philanthropic equity investments:
- 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.
“Philanthropic equity is a breakthrough concept for the financing of nonprofit growth,” said Gerald Chertavian, Founder and CEO of Year Up. “Similar to for-profit venture capital, it made it possible for Year Up to secure tens of millions of dollars of growth capital, so we could then focus on building the combination of program infrastructure and revenue-generation infrastructure needed to have enduring impact. In just three years, we’ve been able to double the number of young people we serve, while also expanding the diversified revenue streams that will sustain our ongoing operations.”
“While these initial results are extremely encouraging, many challenges remain as we work to develop a robust capital marketplace for philanthropic equity,” said Craig Reigel, Partner at NFF Capital Partners. “High-stakes investments have inherent risks, but also extraordinary rewards. Based on results-to-date, we are optimistic about the promise philanthropic equity holds for the future of the nonprofit sector.”
To view the full report, please visit: http://nonprofitfinancefund.org/capital-services/portfolio-performance-report
About Nonprofit Finance Fund
A national leader in social sector finance, Nonprofit Finance Fund connects money to mission success through consulting, innovation, and direct investment. Founded in 1980, NFF (www.nonprofitfinancefund.org) provides services that build the capacity and durability of nonprofits. A leading community development financial institution with over $80 million in assets, NFF has provided over $200 million in loans and access to additional financing via grants, tax credits and capital in support of over $1 billion in projects for nonprofit clients nationwide. NFF has a staff of more than 75 serving nonprofits nationally from offices in New York City, Philadelphia, Newark, Boston, Detroit, Washington, D.C., San Francisco, and Los Angeles.
Tricia McKenna or Crystal Noble
Louder Than Words for Nonprofit Finance Fund