Gone are the days when a thank you letter or annual report would suffice for communicating with your supporters. Today’s donors want to know exactly whose lives they are impacting, and they want transparency of how their dollars are being used. Whether you are seeking impact investors or philanthropic donations, the key is to demonstrate the ROI your organization provides to the investor as a combination of financial and social returns. See Part 1 of this series to understand how potential investors and donors are evaluating your company against other charitable investments.

This post provides four steps and examples for attracting support through better reporting of donor-funded impact:

  1. Measure impact in terms that your audience cares about. The simplest approach leverages the Impact Reporting and Investment Standards (IRIS) described in Part 1, Quantifying Social ROI.
    Proof of impact

    Jolkona provides 1:1 proof of impact for each donation it receives.

    However, your cause can lend itself to creative ways to measure impact beyond cold statistics. This can also help you name specific amounts that a donor or investor can provide, matched with a known impact that you can measure. For example, rather than simply asking for $25, $50, and $100-tier donations, frame your fundraising in terms of $30 to provide a fuel-efficient stove to a family or $260 to build and install a sanitary toilet in a family’s home. Jolkona Foundation works with NGOs to design feedback loops that provide proof of impact to donors. For example, a donor sponsoring a child’s education might receive Continue reading

All too often, great design solutions for the developing world fall victim to dependency on charitable giving to achieve their goals. Few social enterprises have a truly sustainable business plan, so it is no surprise that there is no flood of wealth coming from traditional investors to fund these enterprises. This post focuses on understanding the investor’s two bottom lines, which will yield a Part 2 post advising social enterprises on how to attract more funding.

A recent Harvard Business Review article on “Funding Social Enterprises” opened my eyes with a new perspective on how I manage my own little “investments” in social enterprise.

Charitable Giving as an Investment

If you were to think of your annual charitable giving as an investment fund, how would you rate the fund’s performance? Traditional investors look at Return on Investment (ROI) in a pure financial sense. They only put money in if they expect to get more money out in the end. On the other end of the spectrum, HBR looks at charitable donors as another kind of investor. Charitable “investors” seek ROI in terms of pure social impact. They put money in expecting to make a difference in the problem that the organization addresses. It’s nice to get free money, but charitable funding is hard to forecast and competition is steep to win donors’ dollars.

When seeking traditional investment funding, social enterprises face insurmountable challenges when trying to compete against other enterprises, since their ability to promise financial returns is hampered by selling to the poor or increasing costs in order to benefit the cause (environment, health, education). With financial restructuring, new approaches offer a mixture of financial and impact-based ROI to help social enterprises appeal to traditional investors. For a nice summary of those blended financial investment models, I point you to the HBR article, which delves into the financial offerings much more rigorously.

Demand Evidence of ROI

Charitable investors are willing to take a -100% ROI (completely ludicrous for a traditional investment) in order to see social ROI. However, social ROI varies wildly from donation to donation, and it is only by the grace of donors’ emotion-induced investment blindness that most charities continue to receive funding.

To make smarter charitable investments, donors should seek organizations that demonstrate visible accountability for the aid they receive. The more granularly the organization can demonstrate ROI, the better.
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