This blog post is from Duke University’s website Dear Pamela, where UniversalGiving’s CEO Pamela Hawley answers questions from Duke students.
Social entrepreneurs understand the importance of steady revenue. Yet there is a difference between ‘funding sources’ and revenue streams.
I have a pretty high standard on what I consider a revenue stream. A startup venture would identify startup capital (funding) and sales from a product/service (revenue). They wouldn’t count startup capital as revenue. Both are valuable financial resources, but they are categorized differently. Funding is to allow you to start-up. Revenue is to sustain and grow your business. Social entrepreneurs need to hold these same high standards as traditional for-profits.
As an investor, I would want to know that you are thinking about securing funding and revenue for your social business or nonprofit. You should demonstrate the foresight to realize you need both. You are also forecasting that you will not always rely on funding/donations. Now second and third injections of funding can help you grow your business. But your investor wants to see you off this and operating independently.
That’s exactly what traditional for-profits must do: They get an initial investment. Then, they have to get off the venture capitalists (VC) and angel funding and stand on their own two legs, 100 percent. VC funding is only intended to get companies off the ground. It’s never ongoing support. Those VCs want to make a return on their investment, so your product or service should be giving them back money. Social impact will be cool and most will love it. But they are not going to want to fund it forever.
But nonprofits raise money in a different way. They often have a large fundraising event, and then a year-end ‘donor ask’ mailing campaign. This can work: It is good to celebrate the accomplishments of the year. It is wise to send out letters or e-newsletters asking for money during the philanthropy high season. But it’s also a strategy that follows a similar road as other nonprofits, competing with a ton of year-end holiday campaigns just like everyone else. If fundraising goals aren’t met, then program services may be impacted.
So for for-profits, a raise is at the start. For nonprofits, fundraising is ongoing. With UniversalGiving, I always plan to have this natural fundraising in place, taking the best practices from the nonprofit and for-profit worlds. It’s simply smart diversification, which is a sound principle for your personal or organizational financial planning.
But our eventual goal is 100 percent support of our operations from earned revenue. Why? First, let’s take a look at the model.
UniversalGiving provides two services. At our core, UniversalGiving is a nonprofit online platform that connects people with quality giving and volunteering opportunities all over the world. We focus on bringing trust into the donating and volunteering process — 100 percent of every donation made through UniversalGiving goes directly to highly vetted organizations. UniversalGiving focuses on connecting people with small, local organizations to allow donors’ and volunteers’ time and money to have the greatest impact possible.
Our second service, UniversalGiving Corporate, provides customized services to help Fortune 500 companies scale their Corporate Social Responsibility programs worldwide. We create strategy, operate, and expand CSR initiatives in over 120 countries. Key services include NGO Vetting and Disbursements. We have a proprietary 24-Stage Quality Model used to vet NGOs – pairing people with only the most trusted organizations.
Fortune 500 companies, foundations and donor-advised funds trust our NGO Services to provide a positive impact in the community as well as strengthen their company due to increased employee engagement and retention.
This principle goes back to my goal as a social entrepreneur: Have a lasting philanthropic impact, and make UniversalGiving itself sustainable in its revenue. It’s a balance between a nonprofit’s heartfelt services and stable influx of funding. With creative funding, we can focus on connecting people with vetted giving and volunteering opportunities all over the world. We achieve our vision to create a world where giving and volunteering are a natural part of everyday life using a VC mentality and nonprofit heart.
You should note that the structure will attract different types of funders and motivations. Be aware of the different expectations your supporters will have, such as “heart return” (nonprofit) and monetary return (for-profit). What drives you the most? Then, examine what you believe will best allow the organization to succeed.
Funding gets your service off the ground. Revenue operates and expands your service. Continuous fundraising as a nonprofit diversifies your funding and helps you scale even more. For that and reasons of the heart, I chose nonprofit. By doing both, we are building a social enterprise for the long term.
Visit Duke University’s Dear Pamela website here!