We are continuing our research into our Micro-Sponsorship concept, this time looking at how old non-profit organizations are and whether age is a factor in designing a Micro-Sponsorship product. As a refresher, Micro-Sponsorships combine “the Long Tail” with microfinance concepts (e.g., Kiva.org and GrameenAmerica.org): ZipSprout will work with a client company to identify a slate of small organizations or associations that meet certain criteria (location, issue, possibly age?), then will facilitate Micro-Sponsorships to these organizations – smaller donations with no strings attached beyond a hearty “thank you” on the organization’s Web site and/or social media.
In this post, we look into the age of non-profits and how that fits with our Micro-Sponsorship concept. Is the non-profit sector a growth area? How big are new non-profits? Does it make sense to offer Micro-Sponsorships based on age – like a “New Faces of Los Angeles” Micro-Sponsorship?
We looked at IRS Exempt Organization data and ZipSprout’s database of non-profit organizations and associations. We used filters to remove entities, such as trusts, that don’t fit the common perception of a “non-profit” from the IRS data. The date that an organization received its exempt status from the IRS is an approximation of age – when the organization officially became a “non-profit” – and annual income is an approximation of the organization’s budget, and hence its size.
ZipSprout’s database grows daily. These statistics are based on a database extract from late August, and while the exact numbers are already hopelessly outdated, we’re pretty confident that they are representative of our database today.
National Statistics on Non-Profit Age
It looks like the non-profit sector is healthy and growing, with thousands of new non-profits coming into existence every year. 22% of non-profits were founded this decade (2010 – present), and just over half of all non-profits were founded in the 21st century. We would expect to see a lot of smaller non-profits and young non-profits running on a start-up model. But what does the data say?
The non-profit sector has always been underfunded, so we don’t expect to see many million-dollar organizations, but are younger non-profits able to get their budgets up quickly? Or is it touch-and-go for new organizations, at least more so than generally in the non-profit sector?
Non-profit sizes, as measured by annual budget, are extremely skewed – while the average annual budget for a new non-profit is $1.9 million, the median annual budget is only $83,000. So half of all new non-profits operate on less than $83,000 per year, while just a handful take off with multi-million dollar budgets (kind of like the tech industry).
And the median does tell a story of young organizations struggling. As mentioned above, those founded in this decade have a median annual budget of $83,000, which is just enough for 1, or maybe 2 full-time employees. Slightly older organizations, those founded in the first decade of this century (2000-2009), have a median annual budget of $125,000. That’s enough to be stable with 2 or 3 full-time employees. Organizations founded in the 20th century have a median annual budget of $309,000, which reflects maturation in the sector.
Age of Non-profits in Southern California
ZipSprout has seen particularly rapid demand and growth in Southern California, so we took a look at the non-profit sector in the greater Los Angeles and San Diego metro areas. As you would expect in a large and growing metro area, about 56% of non-profits were started in the 21st century. Unexpectedly, despite the glitz and glitter of Hollywood, non-profits in Southern California appear to have smaller annual budgets than nationally.
The youngest SoCal non-profits, those started this decade, have a median annual budget of only $69,000. Given the higher rents and cost of living in Southern California, that’s barely enough for 1 almost-full-time employee. Organizations started in the 2000s appear to be more stable, but smaller than those outside of Southern California, with a median annual budget of $112,000. Those organizations founded in the 20th century have a median annual budget of just under $200,000. It looks like Southern California is a great place to fund some Micro-Sponsorships – if you’re interested in helping us launch a pilot Micro-Sponsorship, get in touch: https://zipsprout.com/contact/
Miriam Raftery founded the non-profit East County Magazine in 2008, and her thoughts on fundraising and growth reflect the still-growing nature of SoCal non-profits.
“We’re not the Red Cross or United Way,” she said. “I don’t have a giant pool of money. I’d be happier if we could live off individual donors. [But] if we want to do larger events, we find a bigger sponsor such as a local company or organization.”
How Old Are ZipSprout Organizations?
We have looked at all organizations, so now let’s turn to non-profits and associations that have signed up with ZipSprout. These are the folks who will be in line for Micro-Sponsorships, so if you work for a non-profit, sign up and make these statistics obsolete.
Through August 2016, ZipSprout has been signing up younger and older organizations, but not that many founded in the 2000s. Just over 24% of the organizations in our database were started this decade, and these organizations are very small and very new – so small and so new there is not enough IRS data to estimate an annual budget. This is not surprising, as ZipSprout is itself a start-up and is attracting the equivalent of start-ups in the non-profit world. So you can think of Micro-Sponsorships as venture funding for doing good.
Only 13% of ZipSprout organizations were founded in the 2000s, and they have a median annual budget of $170,000, significantly higher than the median for all non-profits of that age. So ZipSprout seems to be attracting non-profits that are stable yet interested in new and alternative funding sources. Perhaps think of them as focusing on their website, but understanding the importance of social media in their outreach and fundraising efforts.
63% of ZipSprout organizations were started in the 20th century, and they have a median annual budget of $71,000. Those sound like the small, scrappy non-profits that have their niche and are always looking for extra funding to expand their programs or to try something new – the embodiment of the long tail.
We already know that ZipSprout clients are interested in the concept, and everybody likes to give “the little guy” a boost. Looks like “the newbie” could use a helping hand as well. We are really excited about Micro-Sponsorships and the market is ready for them too; are you? If you want to get in on the ground floor by supporting some young, innovative non-profits, get in touch and we will get your brand out, help out the newbies, and make our world a better place.