For more than thirty years, TechSoup has facilitated product donations and technical assistance to nonprofits and NGOs with the aim of helping them implement technology solutions that drive social impact.
With the goal of raising $11.5 million over the next three years to sustain and expand that work, the organization recently announced a direct public offering (DPO) through impact investing platform SVX.US. The DPO offers three tiers of debt security investments — risk capital notes, with a minimum investment of $50,000 and a 5 percent interest rate; patient capital notes, with a minimum investment of $2,500 and a 3.5 percent interest rate; and community capital notes, with a minimum investment of $50 and a 2 percent interest rate. TechSoup is the first nonprofit to be qualified by the Securities and Exchange Commission to raise funds through a Regulation A+ / Tier 2 offering.
PND asked TechSoup CEO Rebecca Masisak about the genesis of the DPO, as well as her views on the role of technology in building a more effective philanthropic sector and driving social change.
Philanthropy News Digest: What was the thinking behind the decision to launch a direct public offering on an impact investing platform? Is there a broader goal beyond the immediate one of funding TechSoup's work and outreach?
Rebecca Masisak: Throughout our history, we've achieved scale and reach with the direct support of NGOs that wanted to use technology to achieve their missions. They have been investing in us — in the form of their administrative fees. The DPO takes that principle to the next level. It's important that those individual organizations from our community have a voice in what we do and have a way to vote — not just with a "like" on Facebook or a retweet — but with an expression of faith that comes with an investment in our DPO.
The direct public offering reflects our belief that TechSoup's stakeholders come from a range of economic backgrounds but share a common belief in the importance of a strong infrastructural backbone for civil society. The DPO enables us to offer a debt investment with interest as an impact investment, not just to institutional funders but also to U.S.-based individuals and smaller organizations in our community, with meaningful but relatively low investment minimums of $50. We want all these stakeholders to play a role in our future, not just those who have a larger budget to invest.
From the beginning, we knew we wanted to work with a platform provider in order to securely manage the investment transactions. We also needed a provider that could specifically support a Regulation A+, Tier 2 Offering in all U.S. states, so we looked at a few different options before making our choice. SVX has a strong track record as an impact investing marketplace in Canada and met all our technical platform requirements. Equally important, however, was that the SVX team shared our values and belief in democratizing access to impact investments. They have become a true partner to us, and I'm confident they will do an excellent job supporting the community engagement we seek.
PND: What has been the response to date from investors and other nonprofits?
RM: We get a lot of questions: Can nonprofits do this? What do you mean I get my money back? Why are you making the minimum investment so low?
This is a new way of doing investment in nonprofits — we are the first nonprofit qualified by the SEC to have this type of offering in all fifty U.S. states — and there are a lot of technical questions. We also know people are curious about how it turns out, not only because they want to see us succeed but also because they're thinking about doing it themselves. We're glad to be in a position to learn for the sector and to share our experience as the campaign progresses.
Since the launch in mid-November, the response has been incredibly positive. This includes those community-level "Main Street" investors who have had very limited opportunities to invest in this kind of security offering before. We see that the ability to invest this way feels empowering. Based on preliminary conversations to date, we also anticipate receiving significant support from larger entities at the Risk Capital note tier and look forward to making some announcements in the near future.
We're excited that other nonprofits have expressed interest in learning more about this approach, and we're committed to sharing what we are learning. We want others in the sector to benefit from our experience and have already started to publish updates on our blog and recently hosted a webinar along with the SVX team and our legal counsel from Cutting Edge Capital.
PND: How will the funds raised by the DPO be used?
RM: TechSoup helps over a million organizations worldwide, and we've distributed more than $11.1 billion in technology products and grants to help them achieve their missions. We plan to use the funds to support five key initiatives and more rapidly scale key services, including a next-generation "services-first and cloud-first" NGO Technology Marketplace; global validation and data services; Apps for Good, a nonprofit-specific app-building initiative; testing, building, and refining processes and systems for growth; and a Cooperative Technology Platform for new initiatives.
The additional capital also will enable us to accelerate our ability to deliver vital software, hardware, services, and content to civil society organizations, as well as transform the kind of products we're able to make available. The goal is to create a stronger ecosystem for giving and getting — a modern marketplace for individuals, organizations, and philanthropists to make trusted connections around common purpose.
PND: More and more, we’re hearing concerns being raised about the charitable sector in the U.S. being "top-heavy," with giving increasingly concentrated among the wealthiest Americans in the form of mega-gifts to hospitals and universities and giving by lower-income and mid-level donors to local service providers trending steadily downward. What role, if any, has technology played in those trends?
RM: We see many factors that are contributing to this widening gap, and technology does play a role. People who give want to ensure their giving will be effective, and they can easily find, understand, and see the visible impact of large organizations. Local organizations, however, are the backbone of communities around the world. But because they're so often underresourced, their limited digital presence and ability to message a narrative about their work or collect impact data can make it difficult for funders and individual donors to discover and get to know them.
Technology is not inherently good or bad, but when it is lacking, it can affect an organization's ability to secure funding and ensure that its services reach the communities it is trying to serve. We live in a world where it is necessary to have a well-managed and effective digital presence to be found, and where data that is digitized is also the data that is used to drive decisions, including funding decisions. Unfortunately, the acceleration of technology innovation means these organizations are being left further and further behind and are invisible to a global community that, increasingly, goes online to connect.
The acceleration of technology innovation unfortunately means these organizations are left further and further behind. In addition, they are increasingly invisible in a community that is primarily connecting online and celebrating novel, new innovations over critical service provision to communities in need, even if those organizations are providing service in new and innovative ways.
In addition, asignificant amount of wealth in the U.S. is with ‘non-accredited’ investors, who we believe often are well connected to their local communities, and we hope TechSoup’s DPO may offer them a way to make a highly leveraged investment that has deep impact in their local communities and also connects them to global impact.
PND: What are the most urgent tech-related challenges facing nonprofits and the nonprofit sector at the moment? And are you optimistic nonprofits will be able to come up with answers to those challenges?
RM: It's incredibly difficult for resource-strapped organizations on the front line of critical problems to also ensure that their data and systems are secure, that they are making optimal use of online tools, and to understand enough about the latest technology innovations to determine whether and how those tools can be leveraged for their work.
Three critical areas we consistently see nonprofits struggling with are: one, modernizing their technology so that they are taking advantage of cloud computing services and the security and stability those services offer; two, upgrading their data collection practices so that they are able to not only make good data-driven decisions as individual organizations, but also in partnership with other organizations and better understand the state of their field as a whole; and three, getting a handle on technologies that feel cutting-edge now — blockchain and AI, are examples — and better understanding the implications of those technologies for the people they serve. A recent book by Virginia Eubanks, Automating Inequality, is a great example of what people in our sector need to be thinking about.
While all three are daunting, I've seen many organizations innovate and accomplish things they didn’t think they could with just a little more access to cutting-edge tools and knowledge. I'm extremely optimistic that other organizations can overcome these challenges, and TechSoup remains dedicated to helping them. The collective commitment of our corporate and foundation partners and of the DPO investors that are joining us has will continue to make a difference for millions of organizations doing important work worldwide. And we’re eager to talk to anyone who wants to join us on this journey.
— Kyoko Uchida