Nonprofits need to focus on capital, not just revenue, if they want to be sustainable and achieve scale. This article describes a gap in the capital market for nonprofits related to mid-stage enterprise growth and change. Clara Miller, president of the F.B. Heron Foundation, writes about the key role that equity or enterprise capital play in for-profit growth, but highlights the inherent barriers to raising equity-like capital in the nonprofit world.
“Planning for, raising, and deploying equity-like capital in a nonprofit fulfills three needs that are universal for a growing or changing enterprise, regardless of tax status: 1) capital investment…when growth or change occurs; 2) the benefits of shared “ownership” and shared risk by a concerted, expanded group of investors and, potentially, supporters; and 3) the adoption of a protective rather than an exploitative role for these stakeholders (aka the equity holders ethic),” writes Miller.
This article highlights for nonprofits the importance in accessing enterprise capital and provides a strong rationale and guidance for nonprofits and funders alike to prioritize this type of funding.
Read more about the F.B. Heron Foundation’s extensive work in this area, and specifically on mission-related investing, in their case study, Expanding Philanthropy: Mission-Related Investing at the F.B. Heron Foundation.
This article was originally published by NPQ online, on August 16, 2013 (https://nonprofitquarterly.org/2013/08/16/capital-equity-and-looking-at-nonprofits-as-enterprises/). Used with permission.