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Feb 20, 2015

Research on why people give and why both nonprofits and social enterprises need to pay attention

As my readers know, social enterprise is an essential source of new revenue to support social impact.  Philanthropy cannot fill the entire gap between what mission activities cost and the fee or contract revenue those activities attract.  Nevertheless, philanthropy and grants must remain an important arrow in a social enterprise quiver.  Grants are needed for mission, but they are also key sources of support for social enterprises at the concept and pre-revenue stage.  Even Acumen Fund, with its decades of experience, has shifted toward market development and growth stages for its investments, leaving grants as a major source of capital at the concept and pre-revenue stages.

Fundraisers are constantly trying to figure out how to inspire donors to give.  While fundraising will always entail some art, there is a continuing effort to figure out if there is some science.  In fact, a collaboration of the University of Chicago, University of Wisconsin, and Georgia State University have formed the Science of Philanthropy Initiative, choosing the tagline “evidence-based research on charitable giving.”  If you want to tap into some of the latest research, you should listen to their free webinar on March 11, 2015 at 2pm CST.  No advance registration is necessary.

Not sure?  Here are the reasons host Michael Norton provides to check out his webinar: “Can money make you happy? Our research suggests that it can – if you give it away. Encouraging people to spend on others makes people happier than spending on themselves. In addition, the positive impact of behaving charitably can improve organizational health and performance. “Prosocial incentives” dramatically improve employee satisfaction and job performance, while engaging customers in charitable behavior can increase sales and loyalty. These findings should change the way organizations think about incentivizing employees and communicating with customers – and how we should think about spending our own money.”

I think that same thinking can lead people toward impact investing: providing investment capital to social enterprise start-ups, whether they are nonprofit or for-profit.  The motive surely must compete very strongly with any tax deduction incentives.  Even the most donor-reliant organizations, the performing arts sector, has demonstrated the ability to use investment capital to produce a positive return on investment.

And populist investment — crowdfunding — has moved strongly into social enterprise and social impact space, as I wrote about Devon Thorpe’s great list of crowdfunding sites.

But myths and out-dated assumptions keep too many nonprofits from pursuing social enterprise and too many philanthropically-minded individuals from considering social impact investing.  If you are near Central Ohio and want to confront those myths, you should come to the workshops offered by the Center for Social Enterprise Development.  For a quick 20 minute myth-buster talk, check out my TedX talk.   If you prefer to read, the Georgia Center for Nonprofits wrote about it very nicely.