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Reflections on Ten Nonprofit Funding Models
Jeff Trexler | Friday 3rd April 2009|
The past couple weeks in my social enterprise seminar, we've been taking a detailed look at the recent SSIR article on Ten Nonprofit Funding Models. The piece is relatively standard take on business models. Analogous to the more general article that it cites as an example of the genre, TNFM creates a typology of nonprofit funding loosely based on sources of revenue and services provided. Thus, the "Heartfelt Connector" raises funds through causes that appeal to a large number of people, while the "Member Motivator" serves its members and the "Big Bettor" relies on grants from just a few major supporters. The article offers a concise and straightforward breakdown that has understandably attracted considerable positive buzz. Yet, as is all too common with articles in this particular genre, the typology nonetheless tends to break down with sustained scrutiny. On one level, the typology is an exercise in stating the obvious: nonprofits raise money through services that appeal to various constituencies in different contexts. While this is a fact that any nonprofit needs to know, for most groups it's not a sufficient basis for successful fundraising, nor does it identity the actual revenue-generating strategies of the organizations cited as examples. Consider Susan G. Komen for the Cure, noted as a "Heartfelt Connector." If we're assessing business models, the key trait to isolate with a group such as this is not one that it shares with any number of other cancer charities, but what has enabled it to gain market share significantly greater its peers. Here the appeal of the cause does not help all that much, inasmuch as there are any number of charities that have a similar appeal but have not attained an analogous scale. Another weakness in the typology is that it redirects attention away from the most critical strategic questions. For example, the "resource recycler" focuses primarily on obtaining donated goods for redistribution, which, for such organizers is typically the least troublesome element in the business model. Simply noting that managers of such organizations also need to consider a strategy for attracting cash to fund operations and overhead does not redeem the model but rather, underscores its inadequacy--if I'm running such a project, this is precisely the question that I want a typology of funding models to answer. Finally, the typology obscures the value added implicit in certain models. For me, the most telling example on this score is the so-called "Market Maker," in which nonprofits generate revenue from fees or donations associated with transactions that are "unseemly or unlawful" for a for-profit to sell. For a group such as a nonprofit involved with organ transplants or adopting children, the key element is not that they are making a market but that they are doing so by creating an environment that people do not associate with market values. This is an essential design element in any social business; framing the model with the rhetoric of commodification obviates the very design logic that is essential to its success. |
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