2011 SEGUE Portfolio Performance Report

Since 2006, Nonprofit Finance Fund has supported 18 campaigns for philanthropic equity, totaling $326 million in financial investments. This report analyzes the role of philanthropic equity in the nonprofit sector, results generated to-date by philanthropic equity investments, and key challenges to developing a robust capital marketplace for philanthropic equity.

The Role of Philanthropic Equity in the Nonprofit Sector

Many nonprofits with strong programs and great results fail to thrive. One reason is the way the sector is currently financed. Nonprofits are rewarded for keeping margins tight, and few have access to the type of capital needed to explore better business models, scale impact, and create lasting change. In contrast to the money needed to fund “business as usual,” philanthropic equity can radically improve our ability to address society’s critical needs by building healthier, more efficient organizations.

Nonprofit Finance Fund’s definition of philanthropic equity done right:
  • Is an enterprise-level investment that is discrete from other forms of (still-important) funding, such as program and operating support;
  • Funds cumulative deficits incurred en route to sustainability
  • Creates a dramatic increase in social benefit
  • Is intentional and transparent in application, and is accounted for separately from regular revenue.

Results to Date 

Philanthropic Equity investments are high-stakes investments that have the potential to dramatically improve social outcomes, but are subject to the risks inherent to substantial change. Among NFF’s nine comprehensive philanthropic equity campaigns for which multi-year data are available, the impact todate resoundingly makes the case for further philanthropic equity investments. The bottom line: At a time when many peer organizations are struggling, recipient programs are thriving.  Annual program delivery has grown at a compound rate of 44% per year on average.

CPPRSummary_Metric

Annual business model revenue for these nine organizations has grown on average by a factor of 2.7x, with a compound annual growth of 32%. 
Encouragingly, program delivery has grown at a faster rate than business model revenue, an indication that organizations are becoming more efficient at turning resources into impact.

Key Challenges

  • Building funder support. We’ve witnessed over $300 million of philanthropic equity infused into the sector but have not seen widespread funder adoption
  • Maintaining rigor. Some nonprofits have begun to raise operating funds in the name of philanthropic equity, but without a clear bridge to sustainability. Without the benefits of rigorous planning and transparency, these “knock-offs” could distort the efficacy of this funding approach.
  • Economy. Growth Capital campaigns are not immune to the challenges caused by a recession economy—the current climate has made the prospect and reality of pre-raising large sums of money a challenge.
To read the 2010 Performance Report, click here.

*For more information, see George Overholser's seminal piece "Building is not Buying."

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Related Articles

  • "Building is not Buying" by George Overholser in NFF Paper