Making a case for an NGO Investor

Now is a point of inflection for Indian NGOs - Firstly, the role of nonprofit organisations, the nature of work they do and their partnerships with business and government is evolving rapidly. This requires nonprofits to invest in a wide range of new capabilities and systems. Secondly, the talent that is entering the sector is evolving, pushing nonprofits towards greater focus on professionalisation and institution building. Investments in enabling learning, career growth and effective compensation is increasing the need to invest in organisation building. However, NGOs struggle to address these needs since there are substantially more funders willing to fund programs than those willing to fund institutional capabilities.

Now is also a point of inflection for Indian Philanthropy - The role of domestic capital is poised to rise in the Indian Philanthropic ecosystem. There is an opportunity for these emerging donors to find new ways of engage with impact beyond program funding. There is an opportunity for Domestic Philanthropists to create a network of NGO Investors, who are committed to the success of organisations beyond just scaling of programs.

So, what is an NGO Investor?

There is ample evidence on how investors have enabled startups to change the way we live our lives. However, there is not enough documented evidence of case studies of investors in the non-profit ecosystem. This despite nonprofits needing investors for the exact same reasons as startups do - To help play the long game and build truly differentiating solutions.

As I had written earlier, the premise is simple - A philanthropist chooses an organisation, and not a program, as her primary investment to create impact. She provides capital to build institutional muscle, pilot new ideas, hire quality talent and build effective internal systems. She leverages her influence to expand the network of the organisation. She acts as a sounding board to the leadership to provide strategic inputs. Finally, as a member of the board, she ensures strong governance and controls. While all of this is similar to mainstream investments, the only difference is that the Philanthropist will not have any return to their investment.

As the investee continues to scale, the philanthropist holds the organisation accountable to create greater impact and attract funders for programs that have demonstrated impact and scalability. The NGO investor continues move her capital to areas of high risk, allowing the organisation to leverage other sources of capital for replication and scale. The investor measures her return of investment by (A) The impact her investments have been able to create and thus (B) funding her investment has been able to unlock from the rest of the Philanthropic ecosystem as evidence of credibility and impact of her investments.

Why would one be an NGO Investor?

The question that always comes up is - If there are no financial returns, why would anyone want to be an NGO investor? However, if one rephrases the question as - Why does any philanthropist invest in impact? And would being an NGO investor help address the same motives better than a traditional grant model where they fund a program? This is true on all four counts that, in my experience, a Philanthropist evaluates their investments.

• Impact at scale: Philanthropists love scale and always want their programs to achieve scale and replication (beyond their own funding). Being an NGO investor helps them invest in foundational capabilities and encourage the organisation to play the longer game to get the program/solution right - both of which are absolutely essential to achieve impact at scale.
• Gratification: Philanthropists seek a deep sense of gratification that they have been able to create impact. Being an investor gives them a chance to engage in the work of the organisations beyond quarterly reports, meet employees and stakeholders across the organisation to truly see their capital in action.
• Legacy: Philanthropists, especially the elderly, see their Philanthropy as an integral part of the legacy they leave behind. More than programs, organisations that they help build - through their capital, guidance and insight - and the impact these organisations will continue to create beyond their time, will always be a much richer legacy.
• Learning: Exceptional Philanthropists often see their philanthropic investments not just as a way of giving but truly as a way of learning. Investing their efforts in helping an organisation grow gives them a chance to truly understand what it takes to solve social problems, the stakeholder dynamics and the levers that enable scale.

Who is this for?

Being an NGO Investor is not for a Philanthropist who is looking to write a cheque and think of impact for a few hours every year. It is for those growing number of HNIs / UHNIs - both young and old - who give their Philanthropic intent a serious amount of thought and are willing to commit to Philanthropy both resources and a significant time horizon. Today a lot of these Philanthropists are starting their own NGOs and foundations and implementing their own programs. My conversations with these Philanthropists highlight the frustration with the maturity or intended scale or impact of existing programs. However, by starting their own organisations they are limited by the same gaps that exist in the ecosystem

The invitation to these Philanthropists is to play the longer game, finding promising nonprofit entrepreneurs, of which there are many, and guide them to build scalable solutions and institutions. By providing capital, networks and strategic insight to these entrepreneurs, and letting them build the solutions and the organisation, the philanthropists can truly maximise the social return of their time and their investment.

Similarly, an investor is not for all nonprofits (much like in the mainstream business). However, there are solutions that are waiting to built - like digital platforms, financial innovations, technology-led solutions, high quality assessments, curricula - for which, the the current funding models are not adequate. Organisations that are looking to build infrastructure or solutions that can enable existing implementation organisations to succeed will truly benefit from an NGO investor who is committed to the long term.

So, what next?

The idea of NGO Investor is not new - I have personally had a chance to see leading Industrialists and leaders of business conglomerates play the role of NGO Investors and helped their respective NGO investments achieve scale and depth of impact. I have seen senior partners from consulting firms on the board of these NGOs play similar roles as well. However, these case studies are far and few in between - We need a network of such investors who can learn from each other's experiences, complement focus areas and building norms for effective philanthropy that are fit for purpose for India.

And if ever there was a time for this to happen, it is now. Truly remarkable young people with breakthrough ideas are knocking on doors of donors everyday. Both donors and nonprofits are constrained by predefined engagement models. The foundational infrastructure to make innovations happen at scale is falling in place. And the one thing that Indian Philanthropists are good at is knowing what it takes to scale in India - And that knowledge and guidance, combined with a deep integrity to create impact, can truly help nonprofits create impact at scale.