Infusion from public offering, NFF loan
Nonprofit technology organization TechSoup is looking more and more like a Silicon Valley player after securing $4 million in funding and launching a direct public offering (DPO) looking for another $11.5 million in capital.
The $4 million was secured from the Nonprofit Finance Fund (NFF) to support expansion of its global distribution network to bring software, hardware, services, and content to civil society organizations.
It is the second time NFF has invested in the San Francisco, Calif.-based TechSoup. The nonprofit established a line of credit with NFF in 2004 to scale its then two-year-old NGO Tech Marketplace, moving the organization from a local to a national level. Double-digit growth of customers and revenue helped TechSoup pay back those funds ahead of schedule.
With the DPO, investors can inject as little as $50 into the venture. It is the first time the Securities and Exchange Commission (SEC) has qualified a nonprofit to raise funds nationally through a Regulation A+ / Tier 2 offering. Most DPOs are Tier 2, which allows for raising up to $50 million per year. Those using Tier 2 do not need to satisfy state registration requirements to raise capital.
The DPO is through the Canadian-based Social Venture Connexion (SVX) impact investment platform. SVX is a platform offering debt and equity investment opportunities in high-impact companies, organizations and funds that can deliver positive social and environmental impact along with financial return.
The DPO includes three tiers of debt securities investments, all five-year terms with varying minimums and returns:
Community Capital Note: $50 minimum, 2 percent return;
Patient Capital Note: $2,500 minimum, 3.5 percent return; and,
Risk Capital Note: $50,000 minimum, 5 percent return.
TechSoup identified five long-term strategic initiatives focused on growing both its core business and new lines of business and programming, scaling internal capacity, and developing a nimble platform for the core product:
- NGO Technology Marketplace: Scale the quantity and breadth of donated and specially discounted technology offers in TechSoup’s catalog; expand outreach to nonprofits globally and connect them with curated support resources to accelerate their ability to adopt and optimize their use of new technologies to accomplish their missions;
We know technology can be a great enabler. Rebecca Masisak, CFRE CEO OF TECHSOUP
Global Validation and Data Services: Expand resources delivered to the nonprofit sector and impact through validation services and data solutions, and facilitate international giving at scale;
Apps for Good: Design, build, and distribute scalable social sector technology apps and introduce low-cost, lowcode, and secure Platform-as-a-Service (PaaS) offerings that enable impact beyond TechSoup-branded offers;
Processes and Systems: Test, build, and refine new marketing, sales, distribution, and support strategies.
Cooperative Technology Platform (CTP): Complete product development of the CTP to support the social businesses outlined in the first three initiatives as well as the business processes outlined in the fourth. CTP is TechSoup’s next-generation technology platform and underpins its strategic vision.
The CTP provides a secure, scalable platform supporting resource-matching across the social sector to generate the network effects that are possible within a multi-sided platform. CTP allows a “vastly larger set of validated civil society stakeholders to connect and exchange value.”
For us, the kind of work we’re doing, our infrastructure is technology. Marnie Webb CEO OF CARAVAN STUDIOS, DIVISION OF TECHSOUP
For every $100 invested, TechSoup estimates it will be able to distribute $47,000 of additional resources.
“We know technology can be a great enabler,” said Rebecca Masisak, CEO of TechSoup,. “We need to do the next generation of those platforms for those connections to happen,” Masisak said, taking advantage of advances in technology and the ubiquity of cloud computing.
Traditional capital campaigns often purchase things like buildings to invest in infrastructure over time. “For us, the kind of work we’re doing, our infrastructure is technology,” said Marnie Webb, CEO of Caravan Studios, a division of TechSoup. “This is an opportunity at this point in our lifecycle to build out the technology infrastructure that really allows us to take these services to another level, both in terms of accelerating offerings, providing more value more efficiently, but also transform the way services are delivered,” Webb said.
Masisak explained TechSoup leaders are “agnostic about tech,” in that they do not favor one application to another. “We partner with AWS (Amazon Web Services) and have Microsoft Cloud offers. There’s a range of choices and no one answer,” she said. And, the cloud might not be the best answer for some organizations. “It’s not enough to get a subscription to a service. It’s the overall solution and help setting it up. It’s about you being able to get done what you need to get done.”
The organization’s strategy is to build apps on its technology stack, said Masisak.
The NFF loan was about two years in the making. The funds are available on a quarterly schedule of use but as not required to be drawn down until Tech- Soup needs the cash. However, it is not considered a line of credit.
“There was a lot of back and forth, a lot of discussion,” she said. TechSoup connected more than 1 million nonprofits worldwide during 2017, distributing $1.995 billion in donated and discounted technology, knowledge, and other critical resources, according to the organization. The NFF loan will help TechSoup scale its core programs, specifically supporting late-stage research and development, product-testing, piloting, and expansion.
“We are proud to continue to partner with TechSoup as they increase access to much needed technology across the US and global social sectors,” Norah McVeigh, managing director of financing at NFF, said via a statement.
One small item popped up toward the end of the negotiations, which was the sale of an asset (a web brand name) that wasn’t being used but lined up closely to that of another nonprofit. They are negotiating to transfer it and the turnover didn’t slow the approval process.
TechSoup has 70 partner NGOs around the world and manages a global philanthropy program that brings together more than 100 tech companies to provide technology donations to NGOs. TechSoup’s data and validation services enable companies, foundations, and governments to connect their philanthropic resources with vetted NGOs. During the past 30 years, TechSoup has reached 1.06 million NGOs and facilitated distribution of technology products and grants valued at more than $11.1 billion.
For more information, go to www.Techsoup.org