Social Capital Marketplace Requirements (Part 1)

The for-profit world has NASDAQ, the New York, American, London and Tokyo Stock Exchanges (among many others around the globe) to raise capital, mobilize savings for investment, facilitate company growth, redistribute wealth, provide for corporate governance, create investment opportunities, and to serve as an overall barometer of the economy. Unfortunately, no such efficient mechanism exists in the nonprofit world.

In a nutshell, the problem in the nonprofit marketplace is two-fold: 1) it is difficult at best to get capital to high-performing social entrepreneurial organizations; and 2) the social processes used to mobilize charitable giving are inefficient and ineffective. As Mario Marino and Bill Shore state, “…the lack of sufficient funding—growth capital—to build strong and healthy organizations is what keeps the sector from leveraging its assets and knowledge to improve, grow, and scale its most successful and effective organizations.” They also state that there is agreement on the part of both funders and nonprofit leaders that “high-engagement philanthropy stresses [greater effectiveness]—building stronger management teams and boards, investing in outcome assessment, improving product and service quality and delivery, and other strategic ways to improve effectiveness and increase scale.” And that, “greater effectiveness and access to capital are inextricably linked and the challenge facing funders and nonprofits alike is a lack of access to capital—money to fund and grow nonprofits—and the means to distribute it effectively.”

According to Jed Emerson, Senior Fellow, Generation Foundation, Generation Investment Management, “We need new ways of capitalizing social enterprise because individual enterprises are not getting the right kind of capital at the right time, principally because of the outmoded nature of the non-profit capital market.”

At the same time, there is a body of research that indicates that there is potential for wealth management market dynamics in the philanthropic market. For the super wealthy—pentamillionnaires and above, deciding about charitable donations takes on much more importance than for other individuals.[3] In fact, we know that today’s donors want:

* to be engaged in their giving
* to give their money away while they are living
* to engage their children in their philanthropic efforts
* low-cost, easy, flexible giving options, and
* “psychic reward”

More tommorrow.

Carla E. Dearing