Accessing Investment Capital
Nonprofits are facing pressing needs for investment capital but report widespread obstacles to accessing that capital, according to a new report from the Johns Hopkins University's Nonprofit Listening Post Project.
"We have long been accustomed to thinking of nonprofits as labor-intensive institutions. But their need for investment capital to finance technology, facilities, and program development has grown massively in recent years. Unfortunately, however, we know very little about the challenges nonprofits face in generating this investment capital," said Lester Salamon, director of the Center for Civil Society Studies at the Johns Hopkins Institute for Policy Studies, which oversees the Listening Post Project.
To help fill this gap, Johns Hopkins researchers surveyed a nationwide sample of nonprofit organizations in five broad fields of nonprofit action (children and family services, community and economic development, elderly housing and services, museums, and theaters) to learn about the capital needs of these organizations and the ease or difficulty they face in meeting these needs.
The survey found that:
Technology (telecommunications, computers, and software) led the list of investment capital needs of responding organizations with more than 90 percent reporting a need for investment capital for this purpose. However, only 37 percent of these organizations reported success in raising the needed capital.
Eighty percent of organizations reported capital investment needs for "program development," while just 25 percent reported success in raising the needed capital.
When asked about accessing major pools of investment capital in our country, such as insurance companies and pension funds, overwhelming proportions of respondents (94- 99 percent) reported either a complete lack of knowledge about or significant degree of difficulty in securing investment capital from these sources.
Although other sources, such as commercial banks, government, foundations, and individual donors, are more familiar to nonprofits, some (e.g., government) are quite difficult to access for investment capital purposes and others (e.g., commercial banks, foundations, and individual donors) are limited in their areas of interest.
"This report documents the critical gap that nonprofits face in securing access to capital for the strategic planning and program development activities so crucial for organizational survival," said Mario Morino, chairman of the board of Venture Philanthropy Partners.
"These findings may help to explain the recent troubling loss of market share for some of these organizations," said Peter Goldberg, chair of the Listening Post Project Steering Committee and president and CEO of the Alliance for Children and Families, the largest national association of private nonprofit child- and family-serving agencies and organizations in the United States. "We need to give increased attention to the investment capital needs of nonprofit organizations and consider ways to help level the playing field for nonprofit access to capital."
Based on the results of this survey, the report recommends creating a tax credit to stimulate the flow of private capital to nonprofits and financial intermediaries and help nonprofits access this capital.
The Listening Post Project surveyed 600 nonprofit organizations, of which 49 percent responded. Most respondents were affiliates of intermediary organizations in the project's five focus fields, but a randomly selected control sample of unaffiliated organizations was also surveyed. For more information on this survey, or to interview Lester Salamon, please contact Mimi Bilzor at the above phone number or e-mail address.
Copies of the Nonprofit Investment Capital Needs report, as well as other reports from the Listening Post Project, will be available on Monday, April 24, at www.jhu.edu/listeningpost/news. Reporters seeking advance copies on an embargoed basis may contact Mimi Bilzor.
The Listening Post Project is a collaborative undertaking of the Center for Civil Society Studies at the Johns Hopkins University Institute for Policy Studies, the Alliance for Children and Families, the Alliance for Nonprofit Management, the American Association of Homes and Services for the Aging, the American Association of Museums, the National Council of Nonprofit Associations, the National Congress for Community Economic Development, and Theatre Communications Group. Its goal is to monitor the health of the nation's nonprofit organizations and assess how nonprofits are responding to important economic and policy changes. Support for the project has been provided by the Carnegie Corporation of New York, the Ewing Marion Kauffman Foundation, the Rockefeller Brothers Fund and the Surdna Foundation.
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