Philanthropic Equity Boosts Program Delivery, Revenue, Study Finds

An analysis by the Nonprofit Finance Fund of its Growth Capital Portfolio clients finds that philanthropic equity can deliver dramatic, ongoing benefits to nonprofits that take advantage of it as well as the communities they serve.

The 2013 SEGUE Portfolio Performance Report (12 pages, PDF) examined how eleven nonprofits used philanthropic equity to improve and expand their programs, deliver services to people in need, and build sustainable revenue streams. According to the report, the nonprofits — Ashoka Changemakers, DonorsChoose.org, GlobalGiving, Health Leads, Shared Interest, Success Measures, Stand for Children, VisionSpring, VolunteerMatch, Year Up, and YES Prep Public Schools — were able to expand the delivery of their programs by an average compound annual growth rate of 23 percent. VisionSpring, for example, raised about $3 million in philanthropic equity beginning in 2008, and by 2013 was delivering 369,000 pairs of eyeglasses a year, 10.5 times the number it had been delivering at the start of its equity campaign.

The report also found that business model revenues for the eleven organizations grew, on average, by a factor of 3.7, a compound annual growth rate of 28 percent — or equal to a total of $142 million in additional funding per year. In addition, the organizations' sustainability ratio, measured as the ratio of business model revenue to total operating costs, increased 16 percentage points across the cohort.

"Philanthropic equity can scale what works and shore up the long-term capabilities of nonprofits to provide critical services to people in need," said NFF managing director Kristin Giantris. "By giving strong organizations rare but much-needed flexible capital for growth and change, funders can play a transformative role not only for these nonprofits but for the people they serve."