“Investing” & Philanthropy Part 2

Jeff Trexler who is a professor of social entrepreneurship at Pace University leaves a comment on my last post:

This is an important discussion. As we see with the way Obama and others have framed government expenditures on infrastructure, the investment metaphor can be an effective rhetorical tool for building support for public benefit activities. The same goes for what Sean describes in his answer to Leslie’s question.

However, handled less adeptly the language of investment can actually be self-defeating. One conspicuous example of this is the recent trend toward re-framing donor appeals as IPOs. Read certain “prospectuses” and you’ll find ROI variably described as self-esteem, smiles, feeling good and so forth.

This may seem clever, but if you’re trying to impress someone with a substantive background in securities it’s not a good way to go. It makes the IPO-and the charity–seem glib and superficial, more like children playing Wall Street than a serious engagement with social investment.

I wrote about the dangers of “nonprofit-IPOs” recently, but also highlighted the public interest in the concept. Donors are hungry for financially sophisticated philanthropy. But they do not yet understand what that means. Some people will profit by dressing up regular fundraising in financial market language. But donors will lose interest in that quickly. The challenge is going to be in offering real investment opportunities to donors before they get turned off to the slick language of imposters.

One Comment

  1. Thank you so much for posting this. I agree that investing focuses on long-term impact and building strong organizations, rather than specific short-term projects. I think the best way to do this is by building a board that is both personally and financially invested in the organization’s success.

    Personally I often feel a bit like a child playing Wall Street, as I have very little background in finance and investing. I think it would be silly to call our fundraising campaign an IPO. However, I do think that a long-term commitment — of time, money, or expertise — definitely can be called an investment. And we definitely could be more specific about our ROI, not by describing smiles and self-esteem, but by somehow calculating the changes in income generated throughout the communities in which we work.

    I posted this discussion here on our blog
    and I am interested to see what the finance people in our network will add to the discussion.

    Happy Holidays!