Nonprofits, NFTs, and a WHOLE Lot of Rambling
(Originally published November 1, 2022)
Alright, so bear with me here. I've been investing for a few years. I went to business school, got an MBA, and have worked in a few different corporations. Just before COVID, I had started trying to allocate some occasional extra money to a TD Ameritrade account. Then, nobody could do anything for months and months. Eventually, my lease ran out and I moved back home for a short time. There, I started putting money away into public stocks and my investing journey was in full swing.
I have zero intentions of talking about specific investments in my blog. If you want that type of content, Twitter is the place to look. I'll happily discuss my holdings and any details. In fact, my whole public stock brokerage portfolio is posted on www.depressivehacks.com in an effort to provide transparency.
As I began doing more and more research, I started to learn more about alternative investments. I started diversifying into crypto in early 2021 and have just become super interested in what's going on in the space. The technology and innovation are fascinating and I think it is so invigorating to learn more about them. I've thought about writing about the space, which would be so fun, but there are already a lot of great educational tools for people who want to learn. I am currently happy to use my Twitter to provide information that is both valuable and useful.
No, this post is meant to be about nonprofits. The work that these 501C3s do is invaluable in many cases. I have seen some lives changed in my day by the efforts that nonprofits provide around the world. Two nonprofits that I personally donate to or work with, since I can't go a few paragraphs without a good plug, are Kiva and BonaResponds/Positive Ripples.
There are a lot of different nonprofits out there, both big and small. Most at least start out with donations being the primary means of bringing in revenue to then disburse to whatever they deem as their worthy cause. One thing that has always stood out to me is the limitations of a donation-based model to charity. There is a limitation that exists when there's only one means of income for any entity or even individual person for that matter. Adding an additional revenue stream in case something happens to the first is not only good risk mitigation but can help fuel growth.
Not only does your average nonprofit not have multiple streams of income, but donations aren't a very consistent means of income. It's totally fair that donations remain part of the equation and a sizable one can make a large difference in the impact of the nonprofit's work. However, an additional income stream can not only help advance things that much further in good times, but can keep the wheels turning during times of limited donations as well.
The question becomes how to raise money aside from donations. There are examples of 501C3s creating some type of product to sell. They use the product to generate revenue, cover the expenses of creating the product being sold, and then take the profits and funnel them toward their cause or current project. In fact, today at the grocery store, I purchased some pasta sauce that is manufactured by a church organization that donates all of the proceeds to their charitable arm. This idea is great, but startup costs to create a product offering generates a barrier to entry that many nonprofits can't overcome without either a majorly generous donation or redirecting donation money away from the cause at hand towards product development. This tradeoff is difficult to justify in a nonprofit, even if the long-term outcomes could lead to more revenue to direct the cause down the road.
Where am I going with all of this? I think that there is a huge potential for this barrier to entry to be lowered, especially for smaller nonprofits that aren't swimming in donation money. It's probably evident from the title of this blog post, but NFTs I believe are a great opportunity for nonprofits.
Stick with me for a bit. 501c3s regularly do fundraisers. Plenty of things are done to raise money for charitable organizations. Fundraisers, galas, charity auctions, and golf tournaments are just a few off the top of my head that I can think of. Imagine curating an NFT collection that is made for a charity. Even a small collection of say 10 pieces could be auctioned starting at $100 each. That creates a minimum of $1,000 for the charity, which can be significant for the cause. Hopefully, the auction raises even more than that floor of $1,000.
The big difference is what happens after the auction. The contract for the NFT collection can include royalties for the creator, which in this case, is the 501c3 or a representative of the nonprofit. This means that any time that one of the NFTs originally auctioned off gets resold, a percentage of the proceeds goes to the nonprofit. If a full collection of NFTs were to be launched, that's a resource for secondary sales profits to create a revenue stream for the nonprofit.
I hope to someday actually test this out, as I feel that it would be a beneficial fundraising mechanism with long-term benefits for the 501c3. Thanks for coming to my Ted talk.