http://www.ssireview.org/articles/ Strategies, Tools, and Ideas for Nonprofits, Foundations, and Socially Responsible Businesses en katiejh@stanford.edu Copyright 2008 2008-05-29T15:00:01-08:00 http://www.ssireview.org/articles/entry/the_equity_capital_gap/ http://www.ssireview.org/articles/entry/the_equity_capital_gap/ Imagine for a moment that our 21st-century economy were transported back to the 15th century. Businesses, by and large, would be tiny by today’s standards. Most revenue would be in the form of unwieldy barter rather than standardized currency, and profits would be thin or nonexistent, making it difficult to invest in new technologies or fund growth. Guild elders, the king, and other oligarchs, not consumers or the market, would have sway over the entrepreneur and the success of his business. And equity capital, used today to fund the growth of risky start-ups, promising midsize businesses, and large multinationals, would be unavailable. Does this scenario seem difficult to imagine in today’s world? Not if you’re an entrepreneur or manager working in the 21st-century nonprofit sector, where some of society’s most daunting challenges are routinely taken on with commercial tools and techniques that could have figured prominently in the 1394 poem Pierce the Ploughman’s Crede. Although the social, political, and economic environments have changed enormously in the intervening centuries, and entrepreneurial ideas, techniques, and resourcefulness are now common among nonprofits, antiquated commercial habits still dominate the nonprofit sector and undermine its progress. First among these hindrances is this: Nonprofit enterprises suffer… Fundraising and Marketing 2008-06-29T14:00:00-08:00 http://www.ssireview.org/articles/entry/shes_crafty/ http://www.ssireview.org/articles/entry/shes_crafty/ From 1933 to 1947, Dr. Jayanti Mitrasen Mahimtura was among the legions of Indians who joined in her country’s struggle for independence from Great Britain. She took time off from medical school, did jail time twice for acts of civil disobedience, and wore only khadi, the hand-spun cloth that Mahatma Gandhi used as a symbol of India’s self-sufficiency. Today, Mahimtura’s granddaughter, Priya Haji, is a rising star in the fair trade movement. Haji’s company, World of Good, connects artisans—mostly women—in poor countries with trendy consumers in the West. The company first ferrets out handmade items from far-flung villages across Asia, Africa, and South America. It then cleverly displays the wares in affluent urban stores throughout the United States. Though Haji, the CEO, declines to release sales figures, she says gross revenues have doubled every year since 2004, when she started the company with two classmates from the University of California, Berkeley’s Haas School of Business. Boutiques selling ethnic crafts like earrings, scarves, and bowls are ubiquitous in gentrifying neighborhoods. But Haji thinks bigger: Her company works with 150 organizations in 34 countries to source enough wares to stock mainstream retailers such as Whole Foods, Wegmans,… Fundraising and Marketing 2008-05-29T14:00:00-08:00 http://www.ssireview.org/articles/entry/the_funding_gap/ http://www.ssireview.org/articles/entry/the_funding_gap/ On a trip to the ancient temples of Angkor Wat, Jeremy Hockenstein was struck by how many of the young Cambodians he met had worked hard to learn English and computer skills and yet were not able to find jobs that used their talents. In 2001, shortly after returning home to the United States, Hockenstein set out to help solve this problem by founding the nonprofit Digital Divide Data. Today, Digital Divide Data employs nearly 500 disadvantaged young people in Cambodia and Laos to perform a variety of IT services for the company’s clients around the globe. In addition, more than 200 former Digital Divide Data employees now work in jobs in other organizations that pay an average of six times Cambodia’s per capita income. Not only has Digital Divide Data provided Cambodian and Laotian youth with jobs and training, but in 2005 the organization broke even financially. Having proven Digital Divide Data’s business model, Hockenstein wanted to expand the organization, but he was unable to convince investors or donors to give him enough money to grow the operation at a fast pace. “After we proved that our business worked and could bridge the divide that… Fundraising and Marketing 2008-03-16T19:05:01-08:00 http://www.ssireview.org/articles/entry/with_love_comes_war/ http://www.ssireview.org/articles/entry/with_love_comes_war/ Being a hominid in the late Pleistocene era (125,000 to 10,000 years ago) was a rough gig. In addition to hunting, gathering, and evolving, our ancestors had to deal with a fickle climate. The planet’s mean temperature varied over a range of about 46 degrees Fahrenheit, forcing hominid groups to wander far and wide in search of kinder climes and better grub. As these groups spread over the face of the Earth, they often bumped into each other – to violent effect: Conflicts between early human groups claimed up to 10 times more lives (as a percentage of all deaths) than did the European wars of the 20th century. Yet groups whose members managed to coordinate among themselves to aggress against outsiders at least won more food and territory, suggest economists Jung-Kyoo Choi and Samuel Bowles in the Oct. 26, 2007, issue of Science. Having more food and territory, in turn, meant birthing more hominids with the same cooperative, yet xenophobic ways. And so over time, altruism – benefiting fellow group members at a personal cost – and parochialism – harboring hostilities toward members of other groups – evolved alongside each other, “with war as both the engine… Fundraising and Marketing 2008-03-11T06:00:00-08:00 http://www.ssireview.org/articles/entry/meet_your_match/ http://www.ssireview.org/articles/entry/meet_your_match/ Economists Dean Karlan and John A. List recently made a deal with an unnamed national nonprofit: They would lend the organization their expertise in study design and data analysis if the nonprofit would let them turn its upcoming direct mail fundraising campaign into a big field experiment. Using the campaign as a laboratory, the economists explored whether, why, how, and for whom matching grants work. Their results were as subtle as their methods: Matching grants do increase donations for some people, but not for the reasons most economists think, they report in the December 2007 issue of the American Economic Review. “Most fundraising analysis is strikingly void of theory and of careful analysis,” notes Karlan, a professor of economics at Yale University. To add some science to the alchemy, he and List, a professor of economics at the University of Chicago, first developed different versions of a fundraising letter, systematically varying the ratio at which a “concerned fellow member” would match donors’ contributions. In the treatment conditions, letter recipients learned that the fellow member would give the same amount, twice the amount, or three times the amount of their donation. In the control condition, recipients did not read about a… Fundraising and Marketing 2008-03-05T16:05:00-08:00 http://www.ssireview.org/articles/entry/condescending_coverage/ http://www.ssireview.org/articles/entry/condescending_coverage/ In 2004, Robert Egger, the noted activist and founder of the D.C. Central Kitchen, groused to an audience at Georgetown University: “The nonprofit sector generates $13 billion at least in revenues a year. Yet the best you get in all the media is the Washington Business Journal’s “Good Deeds” section, which reports [that] the proceeds from the spaghetti dinner helped poor kids in Southeast [D.C.]” He’s right, says Matthew Hale, a professor in the department of public and healthcare administration at Seton Hall University. With several graduate students, Hale examined how newspapers portrayed the nonprofit sector for six months in 2003. He found that although the coverage was copious, it was mostly superficial. “Most stories just give nonprofits a pat on the back, as if to say, ‘Look at this cute nonprofit raising money for those poor crippled children,” says Hale. “You would expect this from television, but you would have thought that newspapers would give more depth and context about the role of the nonprofit sector in America.” Hale and his team analyzed 1,034 newspaper articles from nine major newspapers, including The New York Times, USA Today, and The Wall Street Journal. The researchers noted such factors as where… Fundraising and Marketing 2007-12-14T23:53:00-08:00 http://www.ssireview.org/articles/entry/destination_unknown/ http://www.ssireview.org/articles/entry/destination_unknown/ Although many donors say they give to help the poor, surprisingly few of them donate to organizations that directly assist the needy, shows our Google.org-sponsored study. Surveying 10,000 households that represent the racial, ethnic, regional, and socioeconomic diversity of the United States, we examined the philanthropic intentions and actions of more than 8,000 contributors who in 2006 made more than $16,000,000 in combined charitable donations. Our findings show that there is a wide gulf between donors’ intended and actual giving. The largest segment of respondents (47 percent) said that their primary reason for giving to charities was to assist the needy. Yet in 2006, these donors dedicated only 6 percent of their giving to organizations that aim to meet people’s basic needs in the United States, and sent just 2 percent of their donations to organizations that aid people in other countries. At the same time, they gave the bulk of their charitable contributions (60 percent) to religious causes. Respondents whose main philanthropic goals were to make their community or the world a better place (38 percent of the sample), to provide services that government doesn’t (5 percent), or to achieve other ends also made most of their donations to… Fundraising and Marketing 2007-12-14T23:42:01-08:00 http://www.ssireview.org/articles/entry/money_for_a_song/ http://www.ssireview.org/articles/entry/money_for_a_song/ Last summer, Bill Legere, president and general manager of KTOO-FM in Juneau, Alaska, learned a disturbing lesson when his small public radio station tried to buy two commercial stations. The purchase price was reasonable enough – $674,000 for both stations – and KTOO had $250,000 of its own money to contribute to the deal. But try as he might, Legere could not find a commercial lender willing to loan KTOO the balance. “What we learned is that public radio acquisition of commercial stations isn’t bankable,” he says, because traditional media lenders do not typically deal with such small sums, and because nonreligious, nonprofit radio stations often do not have enough cash to pay debt service. The Telecommunications Act of 1996 made expanding – and thereby preserving – public radio even more difficult. The act deregulated media ownership and allowed widespread consolidation within the industry. After its passage, commercial and religious broadcasters began to buy up smaller radio stations in unprecedented numbers. In 2006 alone, roughly 3 million people in 10 states lost their public radio stations to commercial and religious broadcasters. Now the number of companies that own stations in at… Fundraising and Marketing 2007-07-09T12:00:00-08:00 http://www.ssireview.org/articles/entry/pyrrhic_fundraising/ http://www.ssireview.org/articles/entry/pyrrhic_fundraising/ It takes money to make money, the saying goes. But nonprofits actually lose money – at least in the short term – when they try to raise funds through direct marketing, find the coauthors of a recent paper in the Journal of Nonprofit & Public Sector Marketing (vol. 16, no. 1/2). The researchers show that over a one-year period, U.K. nonprofits earned just 39 cents in donations for each $1 they spent on direct mail. Altogether, fundraising through direct marketing, which includes direct mail, television and print advertisements, and face-to-face solicitation, generated just 44 cents for every $1 invested. “It’s extraordinarily expensive to raise money,” says Mal Warwick, head of a U.S.-based nonprofit direct marketing consulting firm. He says he has seen nonprofits spend as much as $300 per new donor through direct marketing. Organizations slowly, if ever, recoup that initial loss. How much bang nonprofits get for their direct marketing buck has been a mystery, says Adrian Sargeant, the study’s lead author and an adjunct professor of philanthropy at Indiana University’s Center on Philanthropy. That’s why he and his co-authors Elaine Jay, a U.K.-based fundraising consultant, and Stephen Lee, the director of the… Fundraising and Marketing 2007-06-01T19:27:00-08:00 http://www.ssireview.org/articles/entry/how_nonprofits_get_really_big/ http://www.ssireview.org/articles/entry/how_nonprofits_get_really_big/ Squeezed around a conference table designed for eight people, 12 leaders of a highly regarded nonprofit discuss how to fund the organization’s growth. With the support of a large national foundation, several family foundations, a few major individual donors and many smaller ones, a handful of government agencies and corporations, and even an earned-income venture, the organization has grown significantly, if erratically, to reach about $3 million in annual revenues. The group’s programs bring young people from the inner city together with their peers from the suburbs to engage in leadership activities. Now, a decade after the organization’s founding, the board and staff are eager to grow. The problem is, some board and staff members fear, that their funders are nearing the limits of what they can or will contribute. And without increased funding, the organization will not be able to expand. Has the organization hit a funding wall? Where should it turn for additional money? One board member makes the case for additional government funding. Another sees enormous potential in a direct mail campaign. The executive director and staff maintain that the organization can secure funding from one more large national foundation. Without any clear path, no idea is… Fundraising and Marketing 2007-04-02T12:00:00-08:00