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Is Turning Down Donations Good for Business?

By Aaron Mason on May 1, 2013

NoThanks_thumbThe concept of a social enterprise is nothing new: organizations like Newman’s Own, Kiva and Inveneo have long held that a profitable business model is key to maintaining long-term financial stability.

And as universities are increasingly leaning their business programs, as Stanford’s Center for Social Innovation and Harvard’s Social Enterprise Initiative have done, the trend towards market-based funding for social causes is showing nothing but growth. Harvard alone has nearly 100 staff as part the program who’ve published over 500 books on the subject.

But does this shift mean we should discount traditional funding sources for social causes altogether? Are donations-based organizations a thing of the past?

Zimbabwe’s JumpStart seems to think so. One of JumpStart’s coordinators, Limbikani Soul Kabweza recently wrote that they’re turning down money from NGOs, embassies and donors looking to fund them. Their reason?

“Social impact is just a natural consequence of commercial success.”

I have to say that I applaud the group for wanting to stand up to the challenge of the open market. There are risks in being overly dependent on donations and advantages to cultivating customers and partners over donors. Looking to build out a hub of tech-minded entrepreneurs, Jumpstart have decided to write that funding source off completely and focus on good business. And that’s surprised a few.

To start with, it’s an interesting business play. Financing can be hard to come by and many small business owners would welcome grants as loans that you don’t have to pay back. It’s also interesting from an impact perspective. Market-driven or not, donations fund amazing, successful projects all over the world. Turning down capital means fewer resources. In building a technology-focused hub, however, Kabweza doesn’t see donations as the reason to work with social organizations:

“We see them more as an opportunity for business networking. The proposed funds can be raised locally easily and are not key to the hub. To any hub. Business networks, exchanges, mentorship, relationships, and investment (as opposed to feel good charity money) are more. They are priceless in comparison.”

So what does this say about the future of donations? I can’t see the traditional aid model going away anytime soon, and perhaps this is just an extreme example nudging the needle more towards enterprise than purely social.

Still, turning down donations is a bold move and the question remains: is it solid principles or a missed opportunity?

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Aaron Mason is a technology and development expert with experience in design, analytics, ICT and disaster response. Follow him on Twitter: @Aaron_Mason
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One Comment to “Is Turning Down Donations Good for Business?”

  1. I applaud Kabweza for taking this step. Not looking to grant funding makes sense for many businesses and social enterprises.

    As with most things in life however, there is no one answer for all organizations or all markets. It depends on their role/purpose in a system and community, it depends on the stage of evolution of the market…. There can be a role for grant funding, for example to kickstart or subsidize market development, to support R&D at the earliest and riskiest stages (and I don’t just mean tech R&D, inclusive business models requires just as much early experimentation and testing…), and of course to ensure a safety net for the most vulnerable.

    What will be interesting to watch as more people choose to turn down grant funding is the impact on the funders and the approaches to funding. I hope it will become more enlightened, more stakeholder oriented and more adaptive.