Know Thy Donor: Philanthropy is Investing in a Cause

Screen capture Harvard Innovation Lab

By Debra Kodish

With more than two decades of investment banking experience under my belt, I developed a keen understanding of the impetus behind the act of investing, on both the personal and collective levels. In every case I encountered, the investors made it very clear – with their words, actions or both – that they were not investing in products or ideas but in the people who guided them through each exciting opportunity.

I also realized early on that it was nearly impossible to guide investors without passion. After all, no one wants to follow the advice of practitioners who aren’t genuinely excited about their work and do not put their hearts and souls into unearthing the next big thing for their clients.

Looking back, I remember working diligently to find those extraordinary deals and make my investors pay attention long enough to understand what I had to offer them. Clients often quipped that they could always tell when I had something extra special to share with them.

Since transitioning to the nonprofit world a few years ago, I have found that donors are largely of the same mind as investors. Much like their peers in the world of high finance, philanthropists are intent on making a great investment with their charity dollars. They want to be assured that the nonprofit is led by dedicated and passionate people who can deliver on their promises to better the world. Although they are often quite passionate about the cause, donors invest in the people behind it.

Longstanding financial wisdom dictates that charity and investing are fundamentally different and must be kept separate. Still, I can’t help but muse about the overall similarities between giving and investing.

For example, donors experience extreme frustration when the organizations or causes they support are dissolved after a year or two. Along these lines, a wonderfully generous philanthropist once told me she could no longer fund causes without solid track records or nonprofits that lacked significant matching support because she could not bear to see her investment get washed down the drain. Spoken like a true investor.

Another similarity is metrics. Before investing in a company, executives pour over the business plan, painstakingly dissecting every element to determine whether or not the plan makes financial sense and that the goals are attainable within the time allotted. Throughout this process, potential investors understand the business plan will most probably change several times over the first few years. What do they really want to see? Forethought, accountability and aptitude. They need to know that the right team is in place to handle internal or external pivots and changes while adjusting the business plan appropriately.

Philanthropists expect the same things from us in the nonprofit world. They are counting on a certain level of flux and uncertainty but they always want to make sure that the correct processes, plans and people are in place to somewhat guarantee their charitable yield.

Knowing this, we run MEOR, which works to educate and empower students on 21 college campuses across the US about their Jewish identities, like a business. When drafting our business plan (yes, an actual business plan), we build our budgets based on the number of students attending our on-campus programs and participating in our off-campus experiences in Israel and Poland. If we find that there are too many or too few, we pivot and adjust our projections. The bottom line is that donors – our investors – feel confident knowing that we are dialed in at all times, doing everything in our power to effectively and efficiently reach our organizational goals and help them make the most out of their investments.

The final similarity is customer service. While the mission of all nonprofits is changing the world, they can never lose sight of their responsibilities to their donors. Much like in the business world, nonprofits must keep their investors happy by providing them with timely information, detailed analyses of the programming, proof of success, and a plan of action for overcoming failures. Building the right team, developing proper protocols, and following a stellar business plan will only get you so far if you don’t make your donors feel like true partners. Personal attention, honesty and respect are what every investor is truly after, whether they are funding a charity or investing in the next big thing.

While charity is charity and investing is investing and the smart money says to keep them separate, savvy nonprofit professionals will study the investment banking playbook long and hard to ensure the success of their organizations. From personal experience, I can honestly say that a nonprofit can make no better investment in its own future than learning how to understand, impress and forge real relationships with its donors.

Debra Kodish is the Executive VP of MEOR, a nonprofit organization dedicated to inspiring, educating and empowering a new generation of young Jewish leaders on top US college campuses. Prior to joining MEOR, Debra was a founding partner of Keshet Advisors and Kodish Capital.