24 Feb Donors vs. Investors: Funding your Nonprofit for the Future
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. Can a nonprofit truly have investors? Absolutely!
Differentiating between nonprofit donors vs. investors is a key part of fundraising, as 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? In my book Asking Rights, I offer the following definitions:
Donor: An individual or organization that typically provides low-level (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.
The view from the other side of the desk, that of the nonprofit funder, is often very different from the perspective of the nonprofit itself. There are several very distinct differences between nonprofit donors and investors and how each thinks. How investors think can be summed up by the following:
If you can’t demonstrate results (outcomes), then you do not have the right to ask for money.
If you can’t make your outcomes meaningful to me, then you do not have the right to ask me for money.
Appealing to this investor mindset is a far cry from the traditional, emotionally-based method of nonprofit fundraising. It involves more than ROI and truly having a transformational instead of a transactional conversation with prospective funders. 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 with nonprofit executives regarding the funding process always 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 nonprofit donors and investors, fill out the form below and receive the first chapter of the book Asking Rights: Why Some Nonprofits Get Funded (and some don’t) free of charge.