Over the last decade, the nonprofit landscape has shifted, with venture philanthropy playing an important role in nonprofit growth. Venture philanthropy is a practice where donors consider their donations as tactical investments, and it’s become more common partially due to declining funds from traditional sources.
Today, venture capitalists want to play bigger roles in their philanthropic commitments and expect more impactful results from their financial gifts. Private equity and philanthropy are colliding in unprecedented ways, and donors are increasingly taking a venture philanthropy approach to their donations.
Still, the term “venture philanthropy” feels like an oxymoron to many. But in short, venture philanthropy is all about cultivating philanthropic assets. For example, an investor might donate to an environmental protection non-profit for its socially responsible approach to ecological reform. In this case, the non-profit the investor is donating to shares similar values to the investor’s personal values and the values shared across companies in their portfolio. In this case, the term “venture” or “investment” is really referring to the impact that the non-profit will have in the world.
As a non-profit, one your primary goals is to spearhead fundraising initiatives that allow you to continue operating. And although venture philanthropy is gaining momentum, it’s still difficult to find the right investor who is willing to donate. Here are a few tips to help you achieve this:
Think Transformational vs. Transactional
When talking about venture philanthropy, the term “donor” and “investor” is often used interchangeably, but there are some key differences. Traditional donors provide funding to nonprofits who can demonstrate a need for its existence and can demonstrate results from its efforts. Investors, on the other hand, are more focused on outcomes that are meaningful, effective, and relevant to their personal social missions.
Because of this, as you begin looking for the right investor, it’s important that you take a transformational approach to your pitch instead of a transactional approach. Investors want to know how funding will improve the actual situation (not whether there is a need to improve the situation). Investors are concerned about contributing to a non-profit that has the capability to create a real, demonstrable change. This is how they regain the value from their investment.
Start Shortlisting Investors
Once you understand the approach you’ll need to take, it’s time to start your due diligence process and search for the right investors. AngelList is a good place to start. Don’t be discouraged by the lack of investors who openly communicate their interest in working with nonprofits. Most investors don’t advertise this at all.
Instead, reverse engineer the process by searching for investors who have invested in companies whose products and services align with your mission. This way, you already understand that your mission contributes to their portfolio in some way. For each potential investor, ask yourself these questions:
- Is there evidence that this investor identifies with your organization (interviews, previous donations, etc)?
- How might this investor derive a “return” from donating to your nonprofit company?
- Has this investor invested in companies that provide products or services that complement your nonprofit?
After you’ve shortlisted a few investors, dig a little deeper into their history and learn about previous companies they may have donated to or sponsored. Make a note of these companies and continue building out your “potential investors” list until you have 10-20 viable options.
Start Building Buzz
There are many ways to fundraise nonprofit companies. In your early stages, you’ll likely explore those options before you meet with investors. These funding initiates include sponsorship deals, fundraising letters, fundraising events and campaigns, and donation pages.
Use those funds to start brainstorming how to build buzz through traditional and guerilla marketing tactics. The premise is three-fold; you’ll generate more donations (you might even end up with a viral campaign), you’ll attract potential investors, and you’ll have something to tell investors you pitch to.
Get your team together and start thinking about how you can generate buzz. Not convinced? There are dozens of nonprofits that have used marketing strategies to grow their communities and get more donations. Read: the ALS Foundation ice bucket challenge. Contests are another great way to get the word going.
Be sure to share your results through blog posts, email newsletters, press releases, and media outreach.
Once you feel confident in the list of investors you’ve shortlisted, you can start creating custom pitches for each of them. By now, you should have identified several factors that make them a good candidate for a donation. Incorporate these factors into your pitch.
You should also be prepared with a business plan. Although it might take a while to hear back from an investor, you never know how quickly the process can happen. And any investor will need to see a detailed business plan before they make any official decisions. Consider using a non profit business plan template to help you get started.
Your pitch should be concise and captivating. Avoid long emails and lengthy paragraphs. Use this checklist to ensure your pitch meets the right criteria:
- Includes 2-3 sentence introduction
- Includes a request to meet with them for a potential donation
- Includes 2-4 sentences of why you think a partnership will be mutually beneficial (i.e., “I noticed that you’ve invested in Solar Startup A and Clean Water Startup B…”)
- Lists your main accomplishments (preferably in bullet point format)
- Ends with a one-sentence call to action and encourages them to offer any advice they might have if they aren’t interested in meeting
- Includes a short pitch deck or presentation as an attachment
Investors are accustomed to getting emails from startup companies and business owners daily. Stay true to yourself and refrain from pitching like a salesman trying to meet a quota. Humanity, humility, and genuinity are difficult to find in pitches to investors, and they’ll appreciate your commitment to your cause. A good pitch will, at the very least, result in kind words of advice or a recommendation to another investor.