Capital, Equity, and Looking at Nonprofits as Enterprises | Clara Miller | Nonprofit Quarterly, August 16, 2013

"...Enter a philanthropic form of equity, which we call “enterprise capital grants,” and which we (and some of our colleagues named above) consider the heart of our grantmaking. Just as in the for-profit world, these grants, ideally raised in a capital campaign–style concerted effort, acknowledge the need for the heightened amount of investment that accompanies program-focused revenue growth. Just as it does for its for-profit cousins, enterprise capital allows growing nonprofits to plan for and pay the inevitable deficits incurred on the way to reaching and maintaining an enhanced and durable level of operations. And, finally, providers of growth capital, along with the managers and boards of the organizations involved, together acknowledge that growth is risky and that they play a protective role—not only for the enterprise but also, and more importantly, for the ultimate risk takers: the beneficiaries and causes everyone hopes to serve. While some funders instinctively understand the need for equity-like capital grants (small bits are often labeled “capacity building”), these grants frequently target only one part of operations—the computer system or staff training or board development. The reality is that a growing nonprofit needs relatively large amounts of capital to build an expanded operating platform. This more muscular platform, in turn, reliably attracts more net revenue—including but not confined to fundraising income—and eventually makes these and other expanded capacities part of ongoing operations. An occasional lucky grant for capacity building won’t suffice...."