investors

Equity

Stripe, a financial services provider, continues to raise capital from investors by allowing its employees to sell privately held shares every 6 months. This allows the company to defer an Initial Public Offering (IPO) strategy but rewards employees with access to a limited equity market at set intervals. Investors can deploy their funds into a privately held company.

Nonprofits mirror this activity in their fundraising efforts. At specified intervals, social sector organizations appeal to donors, foundations, and companies to make philanthropic investments in their missions. Those organizations perceived to have a remarkable impact, the ability to scale, or to generate visibility for a cause often receive greater support than those that may be less effective or working on causes not as valued by large segments of society. Although the nonprofit employees are not selling shares to enrich themselves, they are putting their work on public display and having it evaluated by the philanthropic market.

What if the nonprofit sector took a private equity mindset at times? What if we offered a limited number of spaces to donors to fund our enterprise, so the return on investment was better for the community, individuals, and the environment? How might we recognize that passively passing a hat around may be a legacy that does not work for all our supporters?

Investors vs. Investments

In the 1990s, Boeing had a 60% market share among commercial aircraft manufacturers and a decision. Did the company concentrate on pleasing its investors and focus on stock prizes, or did it invest in a next-generation aircraft design? In the book Flying Blind: The 737 Max Tragedy and Fall of Boeing, Peter Robison suggests that the interest of the investors took precedence over the pleas of the engineers to invest in a new aircraft design. Harvesting profits was considered the work that mattered. It was safer, had a quicker reward phase, and was more predictable than investing millions into a next-generation design. Eventually, Boeing launched the 787 program in the early 2000s but continued to use stock price as a core metric. When the 737 aircraft came up for an update, Boeing decided to use the existing platform instead of starting with a fresh sheet of paper and launched the Max series. A quick scan of current events and the top 737 Max new stories are about failures and flaws, even an inability to provide Wall Street with earning guidance for 2024.

To expand on this theme, return to yesterday’s post on competitive advantage; there is a tipping point in all our enterprises. When do we prioritize our investors/donors/members/customers, and when do we prioritize investing in our work/programs? What do our core values suggest? How does our strategic framework align with our decisions? If the social sector is working on problems that cannot easily be solved; otherwise, a corporation would be monetizing the program, then why are we not launching more innovative programs? Should we not be finding the others (Seth Godin’s podcast on Akimbo) who are ready to act and launch our work?