Donor Vs. Investor: An Important Distinction

Donor Vs. Investor: An Important Distinction

Throughout this blog you’re bound to see many posts where we refer to “investors” and nonprofit “investments.” Don’t worry though; you are in the right place. This blog is meant to help nonprofits get a better understanding of the fundraising process, and we believe that a key part of fundraising is learning who your investors are, what they value, and what return on investment they expect to see from your organization.

So, what exactly is a nonprofit investor? Or is referring to “donors” as “investors” just a fancy way of trying to differentiate ourselves? In my book Asking Rights, I offer the following definitions:

Donor: An individual or organization that typically provides low­level (definition varies by nonprofit size, budget, funding model, etc.), often sporadic financial support that is not necessarily connected to the mission of the nonprofit.

Investor: A type of nonprofit funder who is looking for a return on his or her investment (often incorrectly referred to as gift or donation). Although the term is more indicative of the mindset rather than the amount of money involved, an investor typically makes larger financial commitments that span several years. An investor is most concerned with the long-term success of the nonprofit.

As you can see, there are several very distinct differences between nonprofit donors and nonprofit investors and how each thinks. Take a look at these two examples.

1. When addressing the need for funding

A donor will ask “Have you demonstrated the need for your service?”
An investor will ask “How will funding your organization improve the situation?”

2. When discussing the funding level requested

A donor will ask “Have we sufficiently spread our available funding across those organizations addressing the problem?”
An investor will ask “Is this the right amount of money for your organization to bring about real change?”

Our conversations on the funding process will focus on the investor since they are the people most committed to seeing to the long term success of your organization and are most likely to commit large dollars, both of which are key to a successful capital campaign.

To learn more about the differences between investors and donors, signup for our newsletter in the box to the right and receive the first two chapters of “Asking Rights” free of charge.

About the author

Tom Ralser

Hundreds of organizations have utilized Tom’s sustainability planning techniques to ensure they can thrive in a tight money environment. He holds the Chartered Financial Analyst (CFA) designation, which provides the framework his Investment-Driven Model™ of fundraising, and led to the development of the Organizational Value Proposition®, which is widely used by corporations, foundations, and individuals as confirmation that the nonprofits in which they invest are truly delivering outcomes with value. His specialty of utilizing for -profit concepts and methods in the nonprofit world has helped nonprofits raise over an estimated $1.1 billion in the 18 years he has worked with them.