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The Emerging Capital Market for Nonprofits By Robert S. Allen S. A. Kaplan. Grossman By.Nandini(B602) 2 .

MBA Class of 1957 Professor of Management Practice at Harvard Business School. Grossman-Senior Fellow. Kaplan. is the Baker Foundation Professor at Harvard Business School.co-creator of the balanced scorecard strategy execution tool. Allen S.About the Author Robert S. 3 .

4 .Nonprofit Organization A non-profit organization is a group organized for purposes other than generating profit and in which no part of the organization's income is distributed to its members. directors.

• In an effective system. 5 . • Large nonprofit organizations deliver improved services at lower cost. innovative nonprofits with the best management and social change agendas would grow in scale.Introduction • In2007 and 2008. donations to nonprofits in the United States exceeded $300 billion—more than 2% of GDP.

• Financial intermediaries. help investors interpret the reports.help raise capital.Mutual funds. • Information intermediaries-financial analysts and business publications. Venture capital and private equity firms. 6 .A Tale of Two Markets For-profit organizations: • Capital markets connect investors who have money with entrepreneurs who have ideas but little money. • All the information and financial intermediaries facilitate efficient—and usually effective—allocations of capital from investors to companies.

Non-profit organizations: • The mechanisms for directing are less developed. • Their financial report reveals virtually nothing about its effectiveness or efficiency in creating social value. • The lack of good information and lack of accountability create several problems a) continuously scrambling to fund their growth and development. 7 . c) distracting them from their core mission. b) they spend more than half their time raising money. • Raise money from thousands of contributors and allocating it to numerous local agencies.

A Movement for Accountability • The Bill & Melinda Gates Foundation assesses performance through use of governance. sustainable growth b) Growth-ready programs c) Early stage programs 8 . • EMCF formed the Growth Capital Aggregation Pilot (GCAP) focuses specifically on making long-term investments in high performing enterprises. • Prepared to fund organizations at three stages of development a) The most mature. • The Edna McConnell Clark Foundation (EMCF)-focuses on organizations that delivers measurable improvements in the lives of low-income youths.

A Social Mutual Fund Robin Hood Foundation(RHF): Each funded organization must measure the outcomes that it achieves. such as the  The number of four-year-olds capable of starting kindergarten  The number of high school graduates  The number of unemployed trained and hired  The number of meals served. 9 .

An Intensive Selection Process Three stage process 1)Initial screening narrows a pool of 100 nonprofits down to 10 or 12 2)Out of these 10or 12 organizations the staff goes for a one onsite visit to check the growth and sustainability of the organizations. impact and growth strategy. financial model. 10 . 3)At the last stage they select four organizations by analyzing each non profit’s mission.

A model for monitoring and reporting performance New Profit uses two metrics for all the organizations 1)growth in lives touched 2)revenues raised Helps each organization develop a strategy map and a balanced scorecard with distinct performance measures. 11 .

Growing and governing the social enterprise • Most nonprofits attempt to keep their administrative expenses low and focus narrowly on short-term financial performance. supplies the organizations in its portfolio with ongoing resources and strategic support. New Profit. • A New Profit partner serves on each nonprofit’s board and becomes a day-to-day adviser. 12 . like most active investors. • To break this pattern.

such as the amount of money to be spent.  Social capital markets is helping grow and connect the emerging field of impact investing.  Yet boards accept that information which forms the basis for their company's philanthropic spending. profit-driven business models with philanthropy.  Impact investors and the social entrepreneurs are creating ways to bring mainstream investments into social projects by creating businesses that are both profitable and have a positive social impact. 13 .Conclusion  No corporate board would approve capital investments solely on the basis of the inputs required for the project. a newly defined domain that combines traditional.

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