Can a Founders Pledge Help Your University Stay Solvent?

Writing for Times Higher Education, Ellie Bothwell reports on a concerning survey of American university financial planners. The survey, conducted by management consultancy Kaufman Hall, reported that nearly half of those surveyed felt their universities’ business models were unsustainable over the next 5–10 years.

The next 5–10 years! While Higher Ed’s financial struggles have been well-documented for some time, degree-granting institutions in the US employ almost 4 million and educate another 20 million, according to the National Center for Education Statistics. Consolidation or closure on the scale suggested by this survey is unnerving.

Kaufman Hall attributes this instability to anemic growth among college aspirants, declines in state funding, and pressure on universities to hold the line on already-high tuition costs. It’s a classic set of problems that’s not going away anytime soon.

Consider adding a founders pledge to your menu of philanthropy options.

In an environment like this, colleges and universities need to evaluate every solution — especially those that offer efficiency, flexibility and a philanthropic return on university initiatives. A founders pledge program could be part of your institution’s portfolio of solutions.

→ Read more: What is a Founders Pledge?

Through a founders pledge, an individual or early-stage startup company can promise future support to a charitable organization. That promise is only activated when the startup achieves an exit, making it a flexible model for both the donor and the charitable organization.

Founders pledge programs offer operational flexibility. In the Kaufman Hall study, a majority of respondents felt Higher Ed lags in access to the latest tools for financial planning. Nearly 70% lamented their inability to respond nimbly to changes in financial conditions.

With finance teams hamstrung by out-of-date tools and drawn-out planning protocols, a founders pledge platform can offer potential revenue with a very light operational burden in terms of accounting. If the pledge mechanism is a non-binding future commitment rather than an actual transfer of private shares, then universities don’t need to value and track the asset on its books each year. It’s a proxy for holding equity, in which universities can participate in a small portion of the upside, with very little downside risk.

Building a founders pledge ALSO supports broader alumni engagement and academic program goals. Though a founders pledge addresses long-term goals for philanthropy, you’ll also see immediate returns in related areas, as alumni get more deeply involved at the university. The low dollar-cost of these platforms and multi-dimensional return on effort makes the time invested well worth it.

Philanthropic return on university initiatives. Has your institution has recently invested in or planned a new entrepreneurship initiative? If so, a founders pledge program geared toward alumni entrepreneurs could provide a philanthropic path directly from that initiative — and the founders/startups emerging from it — back to the university. By building a community around those who make the founders pledge promise, institutions can increase engagement among entrepreneurs, deepen their commitment over time, and better predict philanthropic revenue from this critical segment. What better way to support the investment you've made?

Higher Ed faces steep challenges.

To be clear, I’m not suggesting that founders pledge platforms will solve Higher Ed’s budget woes — and we should expect some consolidation in the coming years.

Market forces should play a role in driving continual improvement among colleges and universities and their business models. Today, Higher Ed institutions are remarkably similar across the board, but as pressure mounts on this basic business model, it’s going to force differentiation as universities struggle to survive. Recent research suggests that Higher Ed should take the innovation context into account when optimizing for economic development. One can imagine a future with a much broader variety of Higher Ed models, options and formats — as varied as their entrepreneurial ecosystems.

In the near-term, though, this competition for students, rankings, and philanthropy leaves universities in a tough spot — and softness in the Higher Ed sector can have far-reaching implications for our economy and future global competitiveness.

A founders pledge platform is nowhere near a silver bullet, but it can help your institution achieve that differentiation among your entrepreneurial community. It can help you better nurture and predict potential gifts in your pipeline. And it can help your college take a more systematic, lifecycle-oriented approach to supporting alumni and maximizing philanthropy.

What are your thoughts?