Donor vs. Investor: An Important Fundraising Distinction
If you looked at the headline for this article and wondered what it has to do with fundraising, please allow me to explain. On my company's blog, you're bound to see many posts where we refer to "investors" and nonprofit "investments." Our blog is meant to help nonprofits get a better understanding of the fundraising process, and we believe that a key part of fundraising is learning whom your investors are, what they value and what return on investment they expect to see from your organization.
So, what exactly is a nonprofit investor? Or is referring to "donors" as "investors" just a fancy way of trying to differentiate ourselves? In my book "Asking Rights," I offer the following definitions:
- Donor: An individual or organization that typically provides low-level (definition varies by nonprofit size, budget, funding model, etc.), often sporadic financial support that is not necessarily connected to the mission of the nonprofit.
- Investor: A type of nonprofit funder who is looking for a return on his or her investment (often incorrectly referred to as gift or donation). Although the term is more indicative of the mind-set rather than the amount of money involved, an investor typically makes larger financial commitments that span several years. An investor is most concerned with the long-term success of the nonprofit.
As you can see, there are several very distinct differences between nonprofit donors and nonprofit investors and how each thinks. Take a look at these two examples.
1. When addressing the need for funding:
- A donor will ask, "Have you demonstrated the need for your service?"
- An investor will ask, "How will funding your organization improve the situation?"
2. When discussing the funding level requested:
- A donor will ask, "Have we sufficiently spread our available funding across those organizations addressing the problem?"
- An investor will ask, "Is this the right amount of money for your organization to bring about real change?"
Our conversations on the funding process focus on investors since they are the people most committed to seeing to the long-term success of your nonprofit organization and are most likely to commit large dollars, both of which are key to a successful capital campaign.
Tom Ralser is a principal and director of the Outcomes Lab with Convergent Nonprofit Solutions. He is the author of two books: "ROI for Nonprofits: The New Key to Sustainability," and the recently released "Asking Rights: Why Some Nonprofits Get Funded (and some don't)."