Two Ways to Get Money: The Proposal and the Prospectus
I just read a prospectus seeking financial investment in a company. It prompted me to think about the major differences between the two kinds of documents designed to attract money. One is the fund-raising appeal. Nice graphics, attractive colors, and warm personal stories abound. And the premise if not promise is clear: once we get the money good things are bound to happen. The second is the prospectus used by businesses seeking capital. The text is long and dense, filled with words and numbers in small type. Lofty expectations are absent and no promises are made.
What if anything can philanthropy and the nonprofit world learn from the prospectus as a template? Here is my take on four prospectus elements I believe would greatly enhance annual appeals, capital campaigns, and the like. In all cases, the italics come from the prospectus I just read.
- The latest information. “We have not, and the underwriters have
not, authorized anyone to provide any information or to make any
representations other than those contained in this prospectus…” In contrast, nonprofits donors are unsure if the latest information is
on the website, in a brochure, a proposal, or a report, or on a website like Charity Navigator or GuideStar. And a date that says
“as of” would be very helpful.
- Disciplined use of language “Certain Terms Used in this Prospectus.”
This section of the Prospectus goes well beyond explaining
acronyms to define operationally key terms and categories. In contrast, the appeal may use such terms as results, outcomes, and
impacts interchangeably—often on the same page.
- Identification of risk. “Our future success depends on our ability to
successfully adapt our business strategy to changing home buying
patterns and Trends.” This is an example of a clear caution in the
prospectus section called Risk Factors. In contrast, fundraising
appeals rarely suggest any possible factor that could reduce
achievement when the money is gone. Investors in nonprofits as
well as for-profits know that a group that does not identify key risks has no easy way of dealing with them if they occur.
- Clarity on past results. We increased our revenues from $490.9
million for the nine months ended September 30, 2019 o $672.7
million for the nine months ended September 30, 2020. When is the last time you read in a fund-raising appeal that the group increased the number of kids now reading on grade level (or adults getting a job) from x to y? Given that past success is often the best predictor of future success, this seems of vital importance to philanthropic investors.
Come on, nonprofits. Let’s see some experiments to bring in these elements that can nudge us from stating our values at rest in a beliefs or mission statement to reflecting values in motion from what we achieve.