Pity the Poor Nonprofit, a Damsel in Distress if E’er There Was One
Calling it “A Capitalist Jolt for Charity,” the New York Times breathlessly told the story on the front page of its Sunday Business section of a pair of married philanthropists who took the nonprofit they were supporting and transformed it into a for-profit venture because, shock of shocks, what they were funding was costing them money. After pouring $10 million into In2Books, “a philanthropy that used books and online tools to enhance skills of inner-city students,” Miles Gilburne and Nina Zolt watched their “costly venture [grow] only gradually, classroom by classroom,” which compelled them to solicit angel investors for funding to purchase a for-profit company “to expand on the original mission and support the foundation.”
Today, the once-struggling venture has morphed into a primarily for-profit enterprise. And the striking transformation of In2Books is emblematic of a larger trend: charities are changing their spots and making use of some of capitalism’s virtues.
The process is being pushed forward by a new breed of social entrepreneurs who are administering increasing doses of bottom-line thinking to traditional philanthropy in order to make charity more effective.
Oh, please.
Mr. Gilburne is a former AOL executive, so he’s used to watching large sums of money disappear online. And Ms. Zolt is a former lawyer, so she’s used to believing that a J.D. automatically confers upon her unlimited knowledge and expertise in every field imaginable.
Look, nonprofits were “making use of some of capitalism’s virtues,” whatever the hell that means, well before Mr. Gilburne and Ms. Zolt realized they were in over their heads. And the story’s mighty strain to discern a trend — “Various versions of efforts like this are appearing across the philanthropic landscape as business-minded donors … have treated their charitable contributions more like venture capital investments” — is simply old news. I’d argue that most foundations, not simply those founded, funded, and run by former entrepreneurs who want to feel less guilty about their wealth, have sought “programs that can be catalysts for broad changes in fields like health, education and the environment, … measure[d] performance and results, and … encourage[d] nonprofits to become more self-sustaining” for a long time.
I don’t disagree that nonprofits can learn much from their for-profit brethren. But, please, spare us the white-knight rhetoric. It just ain’t so. | 501(c)
Thanks so much for highlighting the content-free nature of this article–which didn’t merely reiterate the mindless worship of the for-profit sector but acted like it was brand new. It’s a shame the New York Times has such difficulty finding anyone to put on the nonprofit beat who actually understands the sector s/he’s covering.
Thanks for reading, NP. Been a tough couple of weeks for the Times, huh?
Thanks for pointing out that the NYT’s piece was a low moment in that paper’s history. The reporter bent over first and then swallowed what was charmingly pumped into him. Or else, an editor hacked the piece and lost any ressemblance of objectivity. Am I the only technologist who read the piece, then went to the ePals and intobooks sites and then wondered what I had just read about after looking under the hood? Nothing made sense. So what gives? The elearning world doesn’t go by the NYTimes biz section. Who does? People and companies who buy ads and potential acquirers. The angle of that story was pitched…it was misdirection, a manipulation of the Times, to have a piece written under the guise of Venture Philanthropy. But the real story is that it was a story, a message meant to impress a small world of former AOL executives and potential buyers. Eight years after the AOLTW merger, and here we go again…same MO.
What reporters should be questioning about Venture Philanthropy is whether it’s one of the last few tax right offs or tax advantageous schemes–or ways to help buddies get rid of dogs or other unwanted investments. Here’s how it works, and the article regarding ePals, which mentions an investment by National Geographic, makes one think of such a strategy. It happens something like this, a non profit like Nat’l Geoph, and many others like it, creates for-profit entities to generate revenue to help support the non-profit parent. But such arrangements open up more possibilities. So lets say a for profit company, a startup in technology, needs an investment from a known brand, a respected brand, to make it attractive to other investors. But the known-brand knows it won’t get anything for its investment in the startup. So the primary backer of the startup, a VC, donates a few million to the name-brand’s parent non-profit. The brand then turns around and invests nearly the same amount into the startup…….lots of favors all around. There should be far more critical analysis of what’s going on with venture philanthropy. Yes it can do a lot of good. But, yes it opens up more schemes to help a few buddies out. Not saying that’s what happened with anyone mentioned in the NYTimes venture phil story, but that story wasn’t really thorough was it?
Jed and JP: Welcome to the discussion, and thanks for your very interesting thoughts.