“Yeah, but what else?”
She already answered your question.
“Yeah, but what else?”
She already answered your question.
Here’s how a great bebopper on the subway was selling his CDs.
“We started today with 100 CDs and we’ve sold 48… we’ve got 52 to go. They’re only $5 each. If you stand up and buy one you’ll create a cascade of other buyers!”
Let’s parse that pitch:
– “We started today with 100 CDs and we’ve sold 48:” these things are good and they’re selling fast. Other people have decided that they’re good already. You’re joining that crowd when you buy one.
– “, and we have 52 to go….” we’re getting towards the finish line, and you can help us….
– “If you stand up and buy one you’ll create a cascade of other buyers!” your actions are bigger than just you. A lot more is going on here than you giving us $5 and us giving you a CD.
Without a doubt, it’s almost always better to create scarcity, a sense of urgency (a deadline) and a feeling of accomplishment on the part of your buyer (donor).
And no, it doesn’t always have to be “act fast time’s running out” (though that’s usually a good thing…but then again it’s not true each and every time). But there’s a lot more you can do than describe just the thing that you’re selling and how much you’re selling it for.
Help people understand that you have a limited number of seats (scarcity), where the finish line is how they’re helping you get there (urgency), and how their actions can and will influence others for great impact (sense of accomplishment). And then take the concrete steps that allow you to keep each of these promises that you’re making.
Remember that old, broken conventional wisdom about how fundraising works in the nonprofit sector– a few folks that sit in the corner while the rest of the people do the important program work over here?
Just the other day I was talking with the new class of Acumen Fund Fellows – as impressive a class as we’ve ever had – and I was struck with how important it is to strike at the heart of this destructive, outdated mindset.
What I shared with them (more emphatically than I or they expected, I suspect) is that for anyone, for absolutely anyone, who plans to make change by working in the nonprofit / social enterprise sector, the ability to mobilize capital behind your idea is one of the most important, most untaught, most underdeveloped skills around.
If you can get funding, you can set up shop, you can create breakthrough approaches that cut through the status quo, you can make things happen.
It’s ironic, actually, because in the high-tech world, successfully pitching a top-tier VC fund is fetishized even while the capital needed to launch technology businesses keeps decreasing. Yet in the nonprofit sector where by definition we are in the business of addressing social issues in a way that the market is not – as it currently is structured – built to address, the ability to mobilize resources is downplayed in its importance.
So let me be as clear as possible: this is a skill required of all you who aspire to be leaders in our space. We need you to learn how to do this because we need you to make lasting, large-scale change.
Please don’t put this off or think someone’s going to do it for you. And please don’t think that just because you don’t know any really wealthy people that you can’t start working on this now.
The first shift you can make is to acknowledge that this is something you want to learn how to do. That intention alone will unlock your potential, will set you apart from your peers, will set you down the path that you’re going to need to walk – and going to want to walk – sooner than you know.
For those who don’t subscribe to the comments section of this blog (horror!) you might be interested to see the comments from last week’s post.
I’d like to highlight Sean Stanndard-Stockton’s point (paraphrased): it is specifically because donors do not directly experience the end product of most nonprofit work that the feedback loop (from “purchaser” to the “end product”) is likely less well-developed than in other sectors.
I think there’s probably something in what Sean is saying, though I would still ask whether, for example, the buyer of High Price Mutual Fund X (or Crummy Subprime Loan X) really has much of a feedback loop at all (since the data says that, in the long term, nearly all mutual funds underperform the market, yet the money persists year after year in these funds.) And I think Sean highlights another important question that we can ask, namely: in which sectors/products are feedback loops strong and where are they weak, and what can we in the nonprofit sector learn from these observations that will inform our work?
More broadly, my latest reflections a week after the post are:
a) I’m all for more transparency and better feedback loops, I just think we should be realistic about what the impact will be (less, I think, than some are claiming)
b) There’s a lot to learn from other sectors – specifically the corporate responsibility space (new standards and transparency launched a decade ago were meant to drive wholesale shifts in corporate behavior; changes have been much more incremental); and the individual investing space (multiple suboptimal products successfully competing for investor dollars). And I’d like us spend more time looking at adjacent spaces that have things to teach us, and less time beating ourselves up about how messed up the nonprofit capital markets are.
c) I firmly believe that for significant changes to occur in how capital flows in the nonprofit sector, leading advocates will have to get into the capital moving business. This could be by moving money in $10 increments (by building a powerful new online platform) or $10 million increments (by raising capital from forward-thinking philanthropists); it could be with predictive markets or challenge funds or some other mechanism… But “provide better information and great stuff will happen” has, I believe, proven to be an ineffective model for making real change happen.
Peter Haas, the Executive Director of the Appropriate Infrastructure Development Group (AIDG), has a strongly-worded post up on the TED Fellows blog called Show Me The Money – Disasters, Restrictions and The Future of the Fund Raising Industry. If you’ve ever thought that this “fundraising question” is something off to the side for nonprofits, read Peter’s post.
Peter argues that there’s an untapped business opportunity for professional fundraisers. The logic goes as follows:
Peter proposes that professional fundraisers could fill the gap by signing up as fundraisers for hire, taking a cut of the funds they raise. This way, goes the logic, nonprofits don’t have to pay hefty salaries upfront, and fundraisers who have proven that they can raise real money can work their magic. In Peter’s words: “Somebody accustomed to raising 50-100 million for a big org could probably do a lifestyle changing business, cutting their work week dramatically while earning the same salary, by only raising 10-20 million divided between a handful of smaller up and coming orgs.”
It’s an interesting idea. In truth there are a handful of these people out there, and I think they and the sector would get a nice shot in the arm if more people stepped up to take this kind of risk and put their skills to use for small, growing nonprofits.
But before we go too far, let’s dig a little deeper into Peter’s post, since he says out loud something that is often left unspoken, namely:
If the mission of the NGO is the service to the community, and fund raising is truly something administrative (as most donors like to classify it in cost analysis), then it should be something an NGO can easily subcontract.
This is where we, our donors, and the sector as a whole go awry – when we think that there’s the “real work” of the nonprofit and this peripheral activity of raising funds.
In 2008 I wrote a Manifesto for Nonprofit CEOs. Here’s an excerpt:
I’ve met too many nonprofit CEOs who say “I hate fundraising. I don’t fundraise.” If you’re being hired as a nonprofit CEO and the Board tells you that you won’t be fundraising, they’re either misguided or lying.
Tell them they’re wrong. Tell them that your job as a CEO is to be an evangelist for your idea and to convince others about the change you want to see in the world. Tell them that if this idea is worth supporting then they should jump in with both feet and support it with their time and money and by telling their friends it is worth supporting.
Spending your time talking to powerful, influential people about the change you hope to see in the world is a pretty far cry from having fundraising as a “necessary evil.”
Apparently I still have a few people left to convince.
Which got me thinking, again: why do we keep on running into this wall in the nonprofit sector? Coke just sells colored sugar water, yet the people who make it a multi-billion dollar company are the storytellers who created and sustained the brand over the past 120 years.
What’s so different in our sector? Is it because the people we serve (“beneficiaries”) and the people we who are our source of revenues (“donors”) aren’t one and the same person? And do we honestly think that this bifurcation of stakeholders is healthy or sustainable? Is there even another sector where we would entertain this kind of dichotomy?
Let me put it another way: if a CEO of anything but a nonprofit said, “I’m starting a new business. I see a gap in the market and I’m jumping in with both feet and am prepared to sweat blood to make this thing work. But I don’t want to deal with the whole revenues side of the business. I’m not THAT guy.” Could a tech entrepreneur say that they’re not willing to talk to customers and VCs? Did Kelly Flatley and Brendan Synnott, the founders of Bear Naked, say they’re weren’t willing to talk to the folks at Whole Foods? Of course they didn’t. How is this any different?
I’m not saying it’s not hard to raise millions of dollars in grant funding – it is hard. It’s really, really hard. And this isn’t the same skill as being on the front lines making your programs work. And, sure, a gutsy fundraiser-for-hire could help. But funders aren’t cash registers, funding conversations aren’t switches seamlessly from one organization to another, and any nonprofit CEO who thinks he is going to secure million-dollar gifts without seriously rolling up his sleeves and being the person those funders bet on is wishing for a market opportunity that just ain’t there.
So my question for Peter is: are you proposing a short-term solution to a cashflow issue (“I need someone today to help me raise that first million”) or a business model issue (“what I do as the ED is and should be separate from this whole fundraising thing.”)?
If it’s the first one, let’s go for it. If it’s the second, then I think we’re kidding ourselves.
The next wave in the social investing space is to create a market of socially-oriented investment funds that are neither purely philanthropic nor purely market-based in their return expectations.
Put more simply – there’s a belief and an assertion that somewhere between pure philanthropy and pure investing, there’s a class of capital that’s willing to get a lower expected economic return for a higher expected social return. The most common term for this is “impact investing” and it’s applied quite loosely – but it implies a level of proactive care for social impact that’s a generation beyond the screened investment funds of the 1990s that invested in various flavors of “vice-free” stocks.
There’s no doubt that there’s a middle ground here, that it’s important that we find it, describe it, and understand it, because by doing so we will, over time, find much more capital and much more savvy investors willing to occupy that space.
That said, it’s not as easy as it sounds. There’s a pervasive myth out there that there are enormous piles of investor money poised to be “unlocked” if we create the right product and investment opportunity.
Having raised both philanthropic and sub-market return capital, I would describe the mental model people hold of how this will work as:
That is, people typically expect the holders of capital to look at a spectrum of expected financial return and implicitly find every opportunity further to the right (closer to a positive return) more attractive than every opportunity further to the left.
The reality, I’ve found, is different, with a picture that looks like this (yes, those are pockets).
Namely, the potential individual philanthropist / investor has two pockets, two types of capital that they’re used to deploying. The first pocket is for their investing, and it’s where most of their money goes and where they think about financial return. The second pocket is for philanthropy, which is also a defined practice with its own decision-making process – whatever that process may be.
Asking someone to make an impact investment isn’t a move along a rational economic scale, with each step proving marginally more attractive. It’s asking someone to do two things instead of one:
There’s nothing wrong or right about this, it’s just two sales you have to make instead of one; two decisions instead of one – at least if you’re talking to anyone who hasn’t developed that pocket on their own.
Doing this is important – it is, in fact, how markets are created, and the more that this becomes accepted practice (written about, talked about, understood and supported by financial advisers and investment professional, etc), the more that third pocket gets created for everyone, not just for the pioneering impact investors.
It’s important work, but it’s hard work, and until we understand it as such people will continue to throw around numbers blithely, implying that trillions of dollars are waiting on the sidelines, ready to be deployed in pursuit of social change.
Not yet. At least not until we all, together, create that third pocket.
There are two reasons I’ve been thinking and writing about generosity: first, I know I’ll be happier the more generous I am, so I’m practicing. Second, by experiencing the rewards of my own generosity, I will be able to translate something I KNOW into something I FEEL.
Let me explain.
Most people don’t feel comfortable asking other people for donations to causes they believe in. I’ve been told often, even by people who give a lot, that there’s deep discomfort in “hitting up my friends,” and I’ve witnessed fabulous nonprofit professionals who commit their lives to a cause, yet who somehow cannot bring themselves to stand in front of someone and ask them to fund the cause in which they so deeply believe. And even fundraisers box themselves in to comfort levels of what kind and size of donations they’ve decided they can ask for.
So here’s the thought experiment: yesterday I wrote about the $20 I gave to a guy who asked for money on the subway. And what I experienced was that I came out ahead. Personally, I got more out of giving than the $20 I gave away.
Of course this makes sense. Whenever anyone gives a donation, they are coming out ahead. They are deciding freely to give the money away, which means that they are getting something of more personal value than the money they are giving away. And the kicker is that it doesn’t matter if the person is giving a gift of $20 or $2,000 or $20,000,000.
What that value is will vary for every person – it could be the economic value their gift is creating through lost suffering and economic hardship; the moral value of righting an injustice; the social value of putting one’s name on a plaque or a list or on the side of a building; the psychic value of helping someone (the donor) become the person she wants to be.
Intellectually, I get it and you get it. But until we all feel it in our gut, we hold ourselves back. Until we feel it our gut, we believe on some quiet level that the playing field is unbalanced, that the person doing the giving is in one way or another on higher ground than the person doing the asking.
By making a practice of your own generosity, you have a chance to remind yourself: they are the ones getting the deal; you are the one giving the gift.
You are the one who has something special, something precious, that you are offering up to them at a bargain price.
If we ever needed proof that raising capital is one of the biggest, most important challenges facing promising young innovators in the social sector, here it is: Kjerstin Erickson, Jon Gosier, and Saul Garlick, all promising 20-something leaders of new social ventures, are each offering up 3% of their lifetime income in exchange for a $300,000 investment in them and the nonprofits they’re building. They’ve created the ThrustFund to raise a total of $1.2M in unrestricted philanthropic capital ($600k, $300k and $300k respectively) in $3,000 increments, and have created a contract to manage the payout of their future lifetime income to their “investors.”
This is definitely smart marketing: it’s innovative, it’s headline-grabbing, and I bet it will get them the visibility they’re looking for. And without a doubt they’re all courageous and they’re putting themselves out there.
But it doesn’t sit right with me. I’m worried that this plays into and amplifies the exact power imbalance that we need to re-imagine – the story of the successful, wealthy, powerful philanthropist and the struggling nonprofit CEO, hat in hand, who literally is offering up a part of himself and his earning potential in exchange for an investment in his dream.
And this is a very small view of the value that nonprofits offer (and I’m not talking here about social versus economic value).
Thoughtful philanthropists are looking to make real, important, lasting change in the world, and through their philanthropy have the potential to realize personal growth, development, connection and legacy. Yet unless the philanthropist is going to become a front-lines operator of a nonprofit/social venture, she has no choice but to realize these aspirations through her philanthropic investments. Put another way, great nonprofits are uniquely positioned to enable the philanthropists to realize their own dreams and aspirations. As much as nonprofits need great philanthropic investors, philanthropic investors need great nonprofits. And this is a good thing for everyone.
Which is why, no matter what the contract says about a termination clause and the exact terms of the payout, the story of selling 3% of your lifetime income to a philanthropic investor seems to reinforce all the old ideas.
It says, to me, that the value that promising leaders like Kjerstin, Jon and Saul bring to the world is easily bought in a simple transaction. It says that the answer to finding partners to back your dream can best be realized by tapping into a little bit more greed (“maybe I’ll get my $3,000 back…or even make a profit!”). It says that someone who has $3,000 to give isn’t already getting enough in return – for themselves and for the world – when they back someone willing to work 20-hour days, 7 days a week, in pursuit of a dream whose main payback is improving the lives of others.
I wish Kjerstin, Jon and Saul great success. And I know that we can and we must do better than this.
Jeff Immelt, the CEO of GE, was a sales guy. So was Sam Palmisano, CEO of IBM, and Steve Ballmer at Microsoft. In fact, Steve Ballmer started in sales at Proctor and Gamble, selling something called the “Coldsnap Freezer Dessert Maker.” Better yet, while selling the Coldsnap, Steve shared an office with Jeff Immelt, another entry-level sales guy.
When you’re a Fortune 50 company looking for your next CEO, you often pull from the ranks of your top salespeople. Why? Because they spend all their time talking to your top customers, who are, in turn, the lifeblood of your business, not just today but into the future.
What about in the nonprofit sector? A friend of mine who is a very successful nonprofit fundraiser describes fundraising jobs as “the best-paid unfilled jobs in the world,” and while I don’t know all the data, every time I check out the Chronicle of Philanthropy job site I see more unfilled “fund raising” [sic] jobs than any other (today’s count: 233 fundraising, 151 Executive, 98 program, 82 administrative.) It strikes me that if nonprofit fundraising jobs (sales jobs, right?) were where nonprofit Boards looked for their next CEOs, then this wouldn’t be the case.
My chicken-and-egg question is: why isn’t the “Head of Development” job the proving ground for future nonprofit Executive Directors and CEOs? Successful EDs and CEOs spend most of their time in external-facing roles (representing the organization, raising funds, working with the Board, creating strategy and positioning and owning the brand and thinking about organizational growth), so shouldn’t at least a typical stepping stone to the CEO role be the top fundraising job?
It isn’t and I wonder if this is because:
This matters because in order to have growth and large-scale impact, nonprofits need to mobilize resources. And if we could find a way to bring the best people into fundraising roles (however broadly conceived), and if we could groom them to become world-class at mobilizing capital and at creating the best deep, innovative, lasting partnerships, we would take a huge step forward in cultivating a different kind of leader for our sector.
For a long time, when interviewing for jobs that I was supposed to want, I prayed that I wouldn’t be asked, “Why do you want to work here?” Because often I didn’t have a clue why I wanted the job. It often wasn’t my passion.
Now I find myself answering this question nearly every day – not because I’m on the job market (I’m not), but because this is the (often unspoken) question in any fundraising meeting.
“Tell me a little more about yourself,” says the potentially interested donor. Translation: “Tell me why you’ve decided to devote your life to this cause. Tell my why you’re passionate about it, why you believe in the mission, and why you’ve decided to walk this path when so many others with your capabilities are doing something completely different?”
Put another way, “tell me about the commitment YOU’VE made, before we talk about the commitment I might make.”
Every potential donor should ask this question, and every time you or anyone in your organization talks to a potential donor, you need to find a way to tell this story (briefly).
By skipping this, you miss your greatest chance at authentic, personal connection. You miss the chance to talk about your own passion in a personal and genuine way.
Too often, people think their job in a fundraising meeting is to do a dog and pony show about why the organization they work for is so great. Find the comfort to talk about yourself first, with humility, to tell your own story.