Non-Profit Capitalism

The Economist, print edition; September 11, 2008.

Under the banner: ‘The Business of Giving’, The Economist reports on the latest trend in not-for-profit fundraising circles: the Initial Public Offering (IPO). IPOs were the golden child of the era, occurring when a company floats its stock on a public stock exchange and the shareholdings become publicly available. Now, some nonprofits in the US have launched their own ‘IPOs’ as part of their fundraising efforts, following a growing trend within the social sector for the adoption of business practices. There are, of course, precedents for applying market thinking to social problems such as Muhammed Yunus’ pioneering work on microfinance. But instead of promising a cash return to investors, these new IPOs offer instead a perpetual interest in the organisation seeking funds.

The Economist reports that around $200m of this ‘philanthropic equity’ has been raised by non-profits in the past few years and another $100m is currently sought.

Yet some believe this new IPO approach is ‘gimmicky’. Do non-profit IPOs represent a new theft of capitalist lingo for social purpose? In time, the marketplace will be the indicator of whether donor/ investors respond to this approach with their dollars.

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