People who have traditionally made money as venture capitalists are now focusing on social ventures. It's an area normally reserved for nonprofits, an area where venture capitalists can be disruptive applying business metrics to a new space.
This is creating a new breed of investors investing in for-profit ventures that are focused on sustainability and the triple bottom line: people, planet and profit. For instance, one recent project I worked on was development of a building; it was a $100-million dollar project but it also had to have a zero-carbon footprint.
Funders are increasingly telling non-profits to present them with a business model with reasonable targets to hit so that they can justify continuing funding. Where historically non-profits merely looked at opportunities to provide integral support services, they are now looking at new business models and opportunities to generate new revenues.
It goes well beyond simply mailing fundraising letters to the non-profit's so-called "constituency." Nonprofits are also increasingly looking at revamping their board structures to bring on people who have a history of raising money, or who are tied in to Wall Street, or who have worked in the cultural sector.
Management teams must determine upfront if they are a for-profit or a non-profit, if they are an LLC or an LC3 or a benefit corporation. An LC3, for instance, is a nonprofit that flips to a for-profit in a few years when it becomes financially sustainable and achieves payback.
Another new idea is contract-hybrid businesses that allow nonprofits to enter into for-profit relationships with a business partner. The nature of the contract determines the way they are able to structure revenue-generating deals.
For those fundraising with technology, crowdfunding can now do more than accrue awards and donations, it can offer actual investment platforms enabled by the U.S. Securities and Exchange Commission through the JOBS Act.
Organizations can generate start-up monies or product development monies through well-crafted crowdfunding campaigns. It's becoming a new way to evaluate companies with promise because fundraising success is better aligned with the merits of what's being worked on. It's like "friends and family" fundraising on steroids. Through traditional fundraising, entrepreneurs relied on relationships with friends and family; with crowdfunding, they're relying on both reputation and a well-crafted story.
Given how fast the field is changing in the use of technology for fundraising, entrepreneurs who take advantage of best practices in early adoption will see greater opportunities unfold. There are advantages to being experimental and being able to pivot at the drop of a dime. New approaches in social entrepreneurship are sometimes counterintuitive to traditional approaches.