04/06/2022

How a Nonprofit Raised Growth Capital From Public Markets

How to engage stakeholders as impact investors

Nonprofits have often found it difficult to raise the operating support they need for long-term growth. Since most foundation funding goes towards project grants—that tend not to sufficiently cover operating costs—nonprofits that earn significant earned revenue sometimes explore more creative approaches to raising growth capital, including loan financing and debt securities. Yet, compared to the plethora of options available to for-profit companies, nonprofit organizations seeking to raise growth capital have more limited options: for-profit companies can sell shares of stock to investors to raise growth capital, for example, but nonprofits don’t have shares to sell. And few nonprofits can offer investors the market-rate returns or hard assets as security that would attract more traditional investors.

This was the challenge we faced at TechSoup in 2017 when we hoped to raise $11.5 million to fund our own strategic transformation. TechSoup and the TechSoup Global Network (TSGN) have enabled over 1.3 million of the smallest civil society organizations to receive more than the retail value of $16 billion of technology tools, resources, and funding, but many civil society organizations still struggle to access the technology and services they need.

We estimated that there were over 12.3 million nonprofits in the 236 countries and territories where we worked, but to scale our services to reach them—in a hyper-local and fragmented sector—we realized we needed to transform our own systems, digital tools, and programs. More than that, TechSoup has been managing paradigm shifts in the technology sector itself: with corporate partners like Microsoft, Adobe, and VMware rapidly transitioning to cloud-based tools and XaaS (everything as a service) technology, we’ve needed to invest in our own next-generation technology platform, as well as new business models, processes, and systems. Extensive financial modeling indicated that we would need $11.5 million through a growth capital campaign over three years to execute our strategic plan.

Please select this link to read the complete article from SSIR.