Some frequently asked questions (FAQs) regarding concepts and terms used by NESsT:

What does NESsT mean by "civil society organization"?
NESsT uses the term "civil society organization" (CSO) to refer to the wide diversity of not-for-profit, non-state organizations as well as community-based associations and groups (distinct from both the governmental and business sectors) that advance a collective or public good. These organizations are also referred to as "nonprofit organizations," "nongovernmental organizations (NGOs), " "charities," "voluntary organizations," etc.

What does NESsT mean by "self-financing"?
 There are numerous terms currently in use to describe the commercial or economic activities of CSOs (e.g., nonprofit enterprise, social enterprise, social purpose business, earned income, income generating activity, etc.).

NESsT uses the terms "self-financing" and "social enterprise" inter-changeably to refer to a variety of types of entrepreneurial activities of CSOs, including both mission-related and non-mission-related enterprises:

  • membership dues (in exchange for membership benefits, products or services)
  • fees for services
  • product sales
  • use of 'soft' assets (e.g., licensing agreements, patents, copyrights, etc.)
  • use of 'hard' assets (e.g., rental of unutilized equipment, real estate, etc.)
  • ancillary business enterprises
  • investment dividends (e.g., income earned from both 'passive' investments like interest from savings; or dividends earned from more 'active' investments in the stock market, etc.)
Does NESsT believe self-financing is the 'panacea' for nonprofit financing problems?
In a word: no. NESsT believes that self-financing is one additional form of nonprofit finance that is already used by many CSOs but typically in an ad hoc way. Self-financing does not mean "commercializing" CSOs. Self-financing is not intended to replace philanthropic support (donations/grants) but rather to supplement them - and thereby help CSOs to diversify their financing base. We believe that self-financing strategies have not been given the professional and rigorous attention that other traditional CSO "fundraising strategies" have received. As a result, many opportunities for generating revenues have been lost, many unnecessary mistakes made and unnecessary risks taken by CSOs. With appropriate financial and technical support, the financial stability and mission impact of many CSOs have been improved through self-financing. However, we do not believe that self-financing is for all CSOs - whether for practical or philosophical reasons, not all CSOs may be able to or choose to use self-financing strategies.

What does NESsT mean by a CSO that works for "social change"?
 For NESsT, a social change organization is one that addresses systemic, root causes of social and economic inequalities and thus aims to structurally transform society to achieve greater social and economic justice. Such organizations can work in all fields, and employ various strategies for change, including community organizing, social activism and political advocacy.

NESsT applies a "social change" philanthropy perspective in our work that follows the principles defined by organizations like the Funding Exchange network (www.fex.org) and the National Network of Grantmakers (www.nng.org). Social change philanthropy focuses on marginalized and disenfranchised communities and the social and economic injustices that affect them; addresses root causes to create systemic or policy change to address the root causes of problems; strives to be accountable to marginalized and disenfranchised communities by inviting leaders and people affected to participate in assessing needs and related decisionmaking; established inclusive processes, paying particular attention to accessibility of the organizations supported to information and development of their own capabilities. (Excerpted from Alison D. Goldberg, "Social Change and How It's Done" Foundation News & Commentary (May/June 2002, Vol. 43, No. 3. See http://www.foundationnews.org/CME/article.cfm?ID=1982)

What does NESsT mean by "social entrepreneur"?
 The term "social entrepreneur" is currently used to mean very different, albeit interrelated, things. Some use the term social entrepreneur to refer to a "social innovator" (i.e., an individual that is addressing a critical social problem in a particularly effective or innovative way). Others, including NESsT, use the term social entrepreneur (or social enterprise) to refer to a CSO that uses entrepreneurial, business activities as a means to generate income and/or otherwise further its mission impact (e.g., to create employment opportunities for underserved constituents). A social enterprise is also referred to as a "nonprofit enterprise," "social-purpose business," or "revenue-generating venture" that operates with a "double bottom-line" of generating financial return while simultaneously advancing a social mission.

What does NESsT mean by "venture philanthropy"?
NESsT defines venture philanthropy is an emerging field of philanthropic investment that combines the policies and practices of long-term, engaged investment and venture capital models of the for-profit sector with the principles and public-benefit missions of the nonprofit sector. Venture philanthropy strategies combine financial capital "investments" with some form of additional capacity-building or technical assistance to the nonprofits they support.
Some of the key distinguishing characteristics that define the venture philanthropy approach include:

Multi-year financing: venture philanthropists provide longer-term, multi-year (and perhaps also larger scale) investments in nonprofits as opposed to single-year grant awards;

Tailored financing: venture philanthropists use an "investment" approach" (versus a "grantmaking" approach) to determine not only the amount and duration of financial support, but the type of financing most appropriate for the nonprofit's needs (i.e., making available an array of financing instruments rather than depending solely on grants/subsidies);

"Engaged" philanthropy: venture philanthropists provide more than simply financial resources to nonprofits. These non-financial "investments" can include capacity-building, coaching/mentoring, or technical assistance to the nonprofit on organizational development and/or even taking a seat on the nonprofit board to assist with overall organizational development.

Organizational focus: venture philanthropists focus their strategy of support on the overall organizational health of nonprofits rather than on individual projects or programs; 		Shared risk: venture philanthropists may encourage innovation and new ideas just as classical philanthropists, but take an invested role in attempting to realize success rather than placing the burden of success (and risk of failure) on the nonprofit alone (i.e., venture philianthropists' success/failure is based on their portfolios' performance);

Measurable performance: Venture philanthropists seek measurable results and impact and hold the nonprofits they support to agreed-upon benchmarks for success (and also seek more regular interim progress reports as opposed to narrative/financial reports at the end of a grant term);

Exit strategy: Venture philanthropists define exit strategies for disengaging from the nonprofits they support once agreed-upon benchmarks are achieved (or when the nonprofit consistently fails to meet agreed-upon performance benchmarks) or when they are no longer able to "add value" (i.e., the nonprofit outgrows the type of support provided).

What does NESsT mean by "capacity building"?
 Capacity building refers to the development of a CSO's core skills and capabilities-including leadership, management, financing, infrastructure, systems, program implementation and evaluation - in order to enhance its effectiveness and ability to further its mission.

What is a pre-feasibility study? a feasibility study? a business plan? a strategic plan? A pre-feasibility study is an initial investigation of the viability of an enterprise idea to determine if additional time, effort, and research is worth pursuing. A feasibility study is a formal and comprehensive analysis of the viability of a proposed enterprise. A business plan is a concrete and comprehensive implementation strategy undertaken by the principal agents of a prospective enterprise to assess the existing market, the enterprise's proposed entrance strategy to the market, and its future operations within this market. A strategic plan is an outline of future goals, methods, and actions designed to guide an organization in pursuing its mission.

 

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