2012 Portfolio Performance Report: Philanthropic Equity Drives Impact & Sustainability
Nonprofit Finance Fund has supported 21 organizations in their campaigns for philanthropic equity, involving a total of $326 million in financial investments. The 2012 Portfolio Performance Report, which tracks the progress of these campaigns to date, illuminates how philanthropic equity unlocks rapid increases in both impact and sustainability. Below, you'll find a summary of the report's key findings and our observations on the cultural shift necessary to foster mainstream the use of philanthropic equity. Click here to view the complete report.
Why Philanthropic Equity, and Why SEGUE?
Many nonprofits with strong programs and great results fail to scale their impact. Nonprofits are rewarded for keeping margins tight, and few have access to the type of capital and business planning services needed to grow sustainably. Philanthropic equity can radically improve an organization's ability to scale what works and address society’s critical needs. Nonprofit Finance Fund’s describes philanthropic equity as:
- Funds contributed to build an enterprise (as opposed to buying services)
- Invested at the enterprise level
- Funds cumulative deficits incurrred en route to growth as well as explicit one-time items
- Transparent, intentional and providing feedback
The SEGUE accounting system provides a mechanism to track the flow of philanthropic equity in a transparent way, which allows the nonprofit and its investors to understand when and how the money is being spent and whether the organization is successfully moving towards sustainability. By distinguishing Philanthropic Equity from other types of funds, organizations and funders overall have aligned understanding and a better understanding of how spending tracks against growth, sustainability, and social impact.
RESULTS TO DATE
Among NFF's eleven comprehensive philanthropic equity campaigns for which multi-year data are available, the impact-to-date resoundingly makes the case for further philanthropic equity investments:
- Annual program delivery has grown on average by a factor of 11.7x, with a compound annual growth rate of 54%.
- Organizations have raised $96 million of campaign commitments.
- Annual business model revenue has grown on average by a factor of 3.2x, with a compound annual growth rate of 35%. In aggregate, business model revenues have expanded by $109 million.
- On average, sustainability has increased by 16 percentage points from their baseline year. Clients in the later stages of their planned growth average a gain of 36 percentage points.
While social impact cannot be aggregated, here are a few examples of just how successful our clients have been in leveraging philanthropic equity to scale their impact.
- Health Leads, a Boston-based nonprofit that connects hospital and clinic patients with the basic resources they need to be healthy, doubled clients served from 4,487 in 2009 to 8,871 in 2012. By 2014, they plan to create over 24,000 successful resource connections through 28 help desks across 8 cities.
- VisionSpring, which provides high quality, affordable eye glasses in underserved areas in India and El Salvador, sold over 300,000 reading glasses in FY11, compared with 35,000 at the start of its campaign in 2007. At the same time, they have reduced the overall cost per pair of glasses from $16.90 to $7.91.
- Yes Prep Public Schools, a Charter Management Organizations which aims to increase the number of low-income Houstonians who graduate from 4-year colleges, went from serving 2,008 students in FY08 to 6,679 students in FY12, all while maintaining a 100% college admittance rate.
Adoption of NFF Methodology
NFF invented the SEGUE concept in 2006 in an ambitious effort to build a common understanding among funders and nonprofits about the unique capital needs and structures required for organizations to grow or change. As the core principles of philanthropic equity slowly become integrated into daily financial practices, we believe that social sector leaders will have a better understanding of what it takes to magnify the potential of the enterprises cradling our world's most impactful programs.