The sold-out Social Capital Markets conference in San Francisco last week was a veritable get together of who’s who of nonprofits and for-profit social enterprises.
The conversations ranged from investing in organic farms in Vermont to grantmaking for mental illnesses.
Often though, the two camps did not mix. I heard some nonprofits complain that some people there weren’t interested in them because they were a nonprofit. Despite their having a record of success and impact, these nonprofits had difficulty getting interest from funders. Some people said they only wanted to fund for-profit mission driven companies.
This bias is not helpful in my humble opinion. The decision of putting money in a for profit or a nonprofit can be a case by case decision—based on what will provide maximum social impact.
Yes, I know being a social impact investor and investing in for-profit mission-driven companies is considered “cool” these days. There’s an impression that for-profit companies can deliver both an MBA-worthy profit and social impact.
Often however, the profits of these “slow money” for-profits are not that significant. For instance at the conference, one organic farm fund was promoting 1 percent return over 5 years. This hardly qualifies as an investment to investment minded people. (Capital preservation might be of interest to some investors, and I don’t have enough research on what percentage of people this is. But what’s interesting is that from my conversations with Kiva, many people who provide loans on Kiva, do not cash out. They treat it as an on-going grant, in other words.)
What’s more important than nonprofit/for-profit is the common mission that led everyone here to this conference.
Everyone in this field—nonprofits, social entrepreneurs, as well as donors and social investors all want maximum social impact.
Instead of the profit/nonprofit distinction, individuals interested in funding these organizations can ask themselves—who is the target beneficiary and what are the best products/services that can be provided?
After that question has been answered, then we can get to the next question—the structure of the organization and how to cover costs. Can the beneficiary pay? Can other customers pay (ie: advertisers)? If not, entrepreneurs will need to raise money from grantmakers. If there are enough beneficiaries or customers able to pay (ie: enough buyers of organic produce who can pay), then a for-profit model could be appropriate.
But that’s just my opinion. What do you think?