Social Entrepreneurship Challenge Good Morning!! The Aaron L. Levitt Social Entrepreneurship Challenge “Be a Changemaker” Workshop 3: Funding and Financing your Social Venture March 9, 2019

Welcome to Today’s Session Funding and Financing Workshop March 2013 5/25/2019 Welcome to Today’s Session Agenda: Upcoming Levitt Program Activities Reporting Out: Each person/team is to present a succinct explanation of their social venture and logic model (maximum of five minutes per venture!!) Brief Introduction to Capital Structure and the Core Elements of a Useful Business Plan Funding, Financing, and New Enterprise Development Revenues, Revenue Models, and Funding Questions and Discussion Dave Levitt Social Entrepreneurship Challenge: Midwest Center for Nonprofit Leadership

The May Levitt Challenge Funding and Financing Workshop March 2013 5/25/2019 The May Levitt Challenge March 30: Workshop #4 Preparing Dynamic Business Plans April 11: Business Plan Drafts Due – CANNOT BE LATE April 22: Business Plan Drafts returned May 3: Final Business Plan Due – again CANNOT BE LATE May 4: Workshop #5 Creating Presentations with Impact and Sizzle May 13, 2019: The Midwest Symposium on Social Entrepreneurship, including Aaron L. Levitt Social Entrepreneurship Challenge program on Monday, May 21 2019 Dave Levitt Social Entrepreneurship Challenge: Midwest Center for Nonprofit Leadership

Funding and Financing Workshop March 2013 5/25/2019 Let’s Hear From You! Each project has a maximum of five minutes to present a succinct explanation of the social venture and the key elements of its underlying logic model. Dave Levitt Social Entrepreneurship Challenge: Midwest Center for Nonprofit Leadership

Funding, Financing, and New Enterprise Development Funding and Financing Workshop March 2013 5/25/2019 Funding, Financing, and New Enterprise Development Scott Levitt Social Entrepreneurship Challenge: Midwest Center for Nonprofit Leadership

Dual Bottom Line Matrix   Mission Impact High Mission Low Sustainability High Sustainability Low Mission Financial Sustainability Midwest Center for Nonprofit Leadership / UMKC

Nonprofit Resource Considerations Funding and Financing Workshop March 2013 5/25/2019 Nonprofit Resource Considerations Consistent with Strategy Program Stability Capital Structure Restriction Transaction Cost Scott Levitt Social Entrepreneurship Challenge: Midwest Center for Nonprofit Leadership

Understanding Financial Resources Funding and Financing Workshop March 2013 5/25/2019 Understanding Financial Resources Revenue: Monies from contracted services, fees for service, commercial activity Medicare Tuition Capital: All other monies donated to support mission delivery activities Individual donations Grants Scott Levitt Social Entrepreneurship Challenge: Midwest Center for Nonprofit Leadership

2015 Contributions: $373.2 billion by source of contributions (Giving USA) Giving by individuals comprised 72 percent of total giving in 2013.1 Giving by foundations—which includes grants made by independent, community, and operating foundations—amounted to 15 percent of all gifts made in 2013.2 Giving by bequest accounted for 8 percent of all gifts made in 2013. Giving by individuals, bequest, and family foundations amounted to an estimated 87 percent of total giving in 2013.3 Giving by corporations comprised 5 percent of total giving in 2013.

Individual Giving 1975 - 2015 Giving USA

Foundation Giving 1975 - 2015 Midwest Center for Nonprofit Leadership

2015 Contributions: $373.2 billion by type of recipient organization (Giving USA) Religious organizations received the largest share of charitable dollars in 2013, at 31 percent of the total.4 The education subsector received the second-largest share of charitable dollars in 2013, at 16 percent of the total. Human services organizations received 12 percent of total charitable dollars in 2013, ranking third in total gifts received. Gifts to independent, community, and operating grantmaking foundations amounted to the fourth-largest share of charitable dollars in 2013, with 11 percent of the total. The health subsector received the fifth-largest share of charitable dollars in 2013, at 10 percent of the total. Public-society benefit organizations received 7 percent of total charitable dollars in 2013, ranking sixth in total gifts received. The arts, culture, and humanities subsector received the seventh-largest proportion of charitable dollars in 2013, at 5 percent of the total. Gifts to the international affairs subsector amounted to the eighth-largest share of charitable dollars in 2013, with 4 percent of the total. Environment/animals organizations received 3 percent of total charitable dollars in 2013, ranking ninth in total gifts received. Gifts made directly to individuals amounted to one percent of total charitable dollars in 2013.

Sources of Revenue (for public charities in US, 2014: NCCS) PA5553: Legal & Financial Management of Nonprofits: Legal Framework Sources of Revenue (for public charities in US, 2014: NCCS) Fees for goods & services: 72.0% Fees from private sources: 47.5% Fees from government sources: 24.5% “Public support”: 21.3% Private contributions: 13.3% Government grants: 8.0% Investment income: 4.8% Other income: 1.9% Midwest Center for Nonprofit Leadership (c) 2016 David Renz: Midwest Center for Nonprofit Leadership at UMKC

A Different Perspective Funding and Financing Workshop March 2013 5/25/2019 A Different Perspective Revenue Type Beneficiary Restriction Fee-for-service income Individual Tied to service Foundation /Philanthropy dollars Collective to groups Temp Restricted/Unrestricted Government/Philanthropy dollars Society wide Corporation dollars Corporations and nonprofits Unrestricted From Dennis Young, Financing Nonprofits. Scott Levitt Social Entrepreneurship Challenge: Midwest Center for Nonprofit Leadership

Funding and Financing Workshop March 2013 5/25/2019 Capital Facilities Working Permanent Social ??? Scott Levitt Social Entrepreneurship Challenge: Midwest Center for Nonprofit Leadership

Funding and Financing Workshop March 2013 5/25/2019 Sources of Capital Grants Gifts and Donations Debt Loans Bonds Scott Levitt Social Entrepreneurship Challenge: Midwest Center for Nonprofit Leadership

Nonprofit Revenue Models and Funding Dynamics University of Missouri – Kansas City Understanding Revenues and Revenue Models Midwest Center for Nonprofit Leadership at UMKC David Renz: PA 5529 CSR and Social Entrepreneurship

Revenue Model (or Funding Model) Nonprofit Revenue Models and Funding Dynamics Revenue Model (or Funding Model) The Work of the Organization Revenue Type A Revenue Type B Revenue Type C Midwest Center for Nonprofit Leadership at UMKC David Renz: PA 5529 CSR and Social Entrepreneurship

Key Elements of Revenue Model Nonprofit Revenue Models and Funding Dynamics Key Elements of Revenue Model The Specific Type(s) of Revenues(s) The Adequacy of the Total Revenue The Characteristics of the Revenue(s) The Mix of Revenue Types Balance Diversity Midwest Center for Nonprofit Leadership at UMKC David Renz: PA 5529 CSR and Social Entrepreneurship

Key Revenue Model Considerations Nonprofit Revenue Models and Funding Dynamics 5/25/2019 Key Revenue Model Considerations Degree of Financial Independence (especially, associated with source) Capital Structure Nature of Assets Funding Dynamics How Resources Come In (Flow, Timing, etc.) Midwest Center for Nonprofit Leadership at UMKC David Renz: PA 5529 CSR and Social Entrepreneurship

Capital Structure The nature of the venture’s financial Assets Liabilities Net assets Need to understand in terms of: Adequacy and alignment of assets you have and what you will need Diversity and Liquidity (esp. restriction and fixedness) Risk that is inherent in the capital structure you design Trends and changes that may alter the above Midwest Center for Nonprofit Leadership at UMKC

Donated Special-Use Facility Nature of Assets Fixity of Asset Type Level of Restriction Low Medium High Unrestricted Cash Building Temporary Restricted Permanently Restricted Endowment Donated Special-Use Facility Midwest Center for Nonprofit Leadership at UMKC

Funding Dynamics Reliability: Extent to which revenue source is consistent and predictable year to year. Range from Low to Medium to High Autonomy: Degree of restriction and/or enforceable conditions on the use of funds Midwest Center for Nonprofit Leadership at UMKC

Reliability and Autonomy Level of Autonomy Level of Reliability Low Medium High One-year government project grant Unrestricted Bequest Restricted endowment Small regular contributions Midwest Center for Nonprofit Leadership at UMKC

Potential Revenue Types A Few of the Options… Ad Hoc Donations Gifts of Cash Gifts of Property Grants: Foundation Grants: Governmental Department Grants: Governmental Earmarks Endowment Income Dedicated Governmental Revenues: Taxes & Levies Earned Income: Fees for Service Earned Income: Contracts for Services Earned Income: Trade/Sales Debt: Commercial Debt: Bonds Midwest Center for Nonprofit Leadership at UMKC

Characteristics For Each Type of Revenue, Need to Understand the Implications of: Source(s) How the Revenue Flows In Revenue Reliability Revenue Autonomy Drivers of Revenue from the Source Associated Risks Midwest Center for Nonprofit Leadership at UMKC

Funding and Financing Workshop March 2013 5/25/2019 Just Asking… What do you envision will be the source(s) of financial support for your venture? Scott Levitt Social Entrepreneurship Challenge: Midwest Center for Nonprofit Leadership