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Donor vs. Investor: An Important Distinction

Posted by BoardSource on Aug 7, 2014 2:11:06 PM

plantsBy Tom Ralser, principal, Convergent Nonprofit Solutions

This post is one in a series written by individuals who will be presenting sessions at the 2014 BoardSource Leadership Forum in Washington, D.C., on October 9 & 10. We hope you’ll be joining us.

So, what exactly is a nonprofit investor? Are donors investors? A key part of fundraising is learning what an investor is, who your investors are, what they value, and what return on investment they expect to see from your organization.

In my book Asking Rights, I offer the following definitions:

Donor: An individual or organization who typically provides low­-level (the definition of “low level” varies by nonprofit size, budget, funding model, etc.) and often sporadic financial support that is not necessarily connected to the mission of the nonprofit.

Investor: A type of funder who is looking for a return on his or her investment (often incorrectly referred to as a gift or donation). Although the term is more indicative of the mindset 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?”

Investors are the people most committed to seeing to the long-term success of your organization and are most likely to commit large dollars, both of which are key to a successful capital campaign. Understanding the differences between investors and donors will increase your fundraising results, and I look forward to discussing this in more detail at BLF.

Tom’s BLF session is titled “Identifying and Communicating Outcomes That Increase Funding.”

Topics: BoardSource Leadership Forum

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