New and Emerging Revenue Streams: Pathways to Revenue Sustainability. MCN Annual Conference October 24, 2013 Duluth MN

Transcription

1 New and Emerging Revenue Streams: Pathways to Revenue Sustainability MCN Annual Conference October 24, 2013 Duluth MN

2 Panelists Brad Brown, Socentia Linda Holliday, Initiative Foundation Brian Paulson, Greater Twin Cities United Way Tom Triplett, Triplett Consulting, Moderator

3 Goals for this Session Outline the range of traditional funding streams used by nonprofits Highlight new and emerging streams Relate these back to traditional ones and to each other Discuss structural and legal implications

4 Revenue Categories Contributed Public or Governmental Membership Earned income Quasi-equity Miscellaneous

5 Revenue Categories Contributed Public or Governmental Membership Earned income Quasi-equity Miscellaneous

6 Assumptions Growth potential of most current streams is limited Funders want measurable returns on their investments in nonprofits More investors are looking for social returns, not just financial For-profit and nonprofit sectors are becoming blended

7 Contributed Income Foundation support for general operations Foundation support for specific projects Corporate contributions and sponsorships United Way or other combined giving Individual donations Fundraising events Planned giving Cause-related marketing Crowdfunding (v. 1)

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9 LETT CONSULTING LLC Crowdfunding (v.1) Seeks relatively small contributions from many donors Can be used by nonprofits Does not give an ownership interest Some sort of certificate or gift More than 50 hubs and portals

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11 BRAD BROWN, SOCENTIA Venture Philanthropy Strong focus and deep investments (grants and capacity building) in a smaller, more select number of grantees High expectations for creating wide-spread and long-term social improvements Rigorous selection process to find organizations that are highly effective and promise to be highperforming in their field

12 BRAD BROWN, SOCENTIA Participants Minnesota Social Venture Partners Minnesota Charter School Partners National / International Acumen Ashoka Charter School Growth Fund Draper Richards Echoing Green New Profit Skoll Foundation Venture Philanthropy Partners

13 Give to the Max Day! November 14

14 PANELISTS & AUDIENCE Other Examples of Cool New Contributed Revenue Ideas?

15 Public/Government Federal grants/contracts State and local govt grants/contracts Legislative earmarks Dedicated taxes or fees Tax-exempt borrowing

16 BRIAN PAULSON, GTCUW New Public Models Providing early childhood scholarship payment to families, not providers Social impact bonds (performance-based contracting) Human potential performance bonds (true GO bonds with performance enhancements for nonprofit providers

17 DOL Model The Model $ Outcome Based Payment $ Outcome Based Financial Return Government Intermediary (dealmaker) Investor $ Initial Investment (working capital) Improved Social Outcomes, Societal Benefit & Government Cost Savings at Multiple Levels Service Providers Target Population Provision of Services 17

18 Earned Income Sale of goods or services The fastest growing revenue category Helps ensure organizational independence Appeals to other funders Includes concept of Social Enterprise

19 Social Enterprise Selling a product or service that s related to your nonprofit mission But doing so in a way that s charitable in nature or maybe not MN is hotbed for social enterprise: last May s national summit, HQ of Social Enterprise Alliance active Twin Cities chapter with Virtual Marketplace

20 LINDA HOLLIDAY, INITIATIVE FOUNDATION Financial Resiliency Through Social Enterprise (FRSE) Initiative Foundation Program Training Technical Assistance Consultation Grant Support

21 LINDA HOLLIDAY, INITIATIVE FOUNDATION FRSE Training Social Enterprise 101 Identifying and Vetting Ideas Market Research Financial Projections & Business Plans Entrepreneurial Skills Business Structures Lending and Other Financing Marketing

22 Other Examples Selling a product related to your charitable mission Selling accumulated knowledge Engaging the disadvantaged or hardto-employ in the business or as clients Selling what you re now providing as a charity to a new market

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24 A Great Resource

25 BRIAN PAULSON, GTCUW Mission Investing Equity or debt participation in social enterprise Foundation investing through PRIs and MRIs; Leading foundation: FB Heron Others?

26 The Basic Premise Remedial Models Preventative, Lasting Change $$ $$ $$$$ $$ Better Way $$ $$ $$ 26

27 Partnering: a way to work around issues With other nonprofits that have complementary skills With for-profits but be cautious With a variety of tools such as joint ventures, wholly owned subsidiaries, licenses, new jointly owned entities, sale of revenue rights

28 Cool example Girl Scout Cookies

29 Quasi-Equity Income The newest source of potential income for nonprofits Most often tied to earned income and social enterprise Attempts to access revenue streams that have historically been the province of forprofits Almost always requires a new entity

30 Methods of Investing Tax credits (e.g. low income housing, New Markets, angel investing) Targeted bank investments (EQ2s to meet Comm Reinvestment Act requirements) Venture Capital funds for social enterprises Direct public offerings Crowdfunding (v.2)

31 BRAD BROWN, SOCENTIA Impact Investing "...investments made into companies, organizations, and funds with the intention to generate measurable social and environmental impact alongside a financial return. Impact investments can be made in both emerging and developed markets, and target a range of returns from below market to market rate, depending upon the circumstances." Investing in double / triple bottom line businesses.

32 Investing in early stage social businesses that create social impact in Environmental Benefit and Sustainability Community and International Development Impact Software, Websites, Applications, Ecommerce

33 501(c)3 L 3 C, Benefit Corporation LLC, C Corp, S Corp, LLP, Proprietorship "Traditional" non-profit Non-profit / business Hybrids Emergent Structures Social Purpose Business College Possible Genesys Works, Rebuild Resources, Eureka Recycling CoolPass, Women News Network RowBot, Cognific, CFWshops Social Enterprise Social Innovation Social Entrepreneurship Venture Philanthropy (grants) Impact investing (loans and equity) 33

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35 Concerns about Quasi-equity Can be very complex transactions Possible securities and banking regulation May result in too much profit focus Requires nurturing new breed of funders

36 Structural Issues Some of the new revenue streams may require structural adjustments: a) Segregating new streams within your organization b) Partnering with another entity through a joint venture, license, or even a franchise c) Creating a new entity: e.g. a subsidiary LLC, corporation, or one of the new hybrids

37 Emerging Hybrids Overall goal: new business models that bridge the gap between for-profits and nonprofits Emulating some of the EU structures Examples: a) L3C low-profit limited liability company b) Public Benefit Corporations c) Certification by B-Lab and others

38 Emerging Hybrids Goal: business models that bridge the gap between for-profits and nonprofits Borrowing from EU ideas Key examples: o L3C low-profit LLC o Certification by B Labs and others o Public Benefit Corporation

39 Public Benefit Corp. The Right Thing for Minnesota? Thursday Nov 14 Gray Plant Mooty law offices IDS Center, 4-7pm

40 Contact Info Brad Brown Linda Holliday Brian Paulson Tom Triplett