As president of NeonCRM, I was very sad to see GiftWorks sell out to FrontStream Payments in August of 2013. GiftWorks was an easy-to-use installed system, and our team even recommended their solution to customers looking for basic, installed fundraising platforms.
But things changed under their new ownership. Here’s everything you need to know about the GiftWorks acquisition — and how it reflects a larger problem with venture capital in nonprofit software.
What is GiftWorks?
GiftWorks is a donor management and fundraising software platform for nonprofits. Originally released as installed platform, the product has recently introduced a cloud version. The company behind GiftWorks (Mission Research) sold out FrontStream Payments in August of 2013.
GiftWorks Acquisition: What Happened?
In 2008, GiftWorks posted a press release about a recent round of venture capital investing. They called it “patient capital:”
“Patient capital is just that—investment that is patient about the outcome of the investment. It’s capital that invests in companies, not just opportunities; in people, not just deals. The triple bottom line stands for the elements of sustainability: people, planet, and profit…. It means they aren’t looking to flip the company with a quick payout, and that the company may in fact never sell to another company…. And even if the company does sell someday, it will sell with its values, customers, and software intact.”
Just a few years later, GiftWorks had sold out to FrontStream. But the worst part was what happened next.
After FrontStream Payments purchased GiftWorks, they dropped a bomb on their customer base. Older versions of GiftWorks would be disabled in just a few weeks, forcing customers into a costly upgrade or a migration to a new provider.
“Nonprofits using older versions of GiftWorks donor management software have until March to decide whether to upgrade and shift to a subscription-based fee, a move that’s raised the hackles of some organizations…
…A Sept. 9 notice email from FrontStream first alerted customers that the 2006, 2008, 2010 and 2011 versions of Gift Works would be retired by Oct. 15. Access to all versions was extended until March 31, 2014 after customer feedback…”
The announcement surprised many customers — and us, too! In my mind, it’s a slap in the face of nonprofits and FrontStream Payments should be ashamed.
Why are nonprofit software acquisitions and venture capital bad for nonprofits?
The GiftWorks acquisition deal is just the latest buyout/acquisition in the nonprofit software space. Large corporations and investors are buying up nonprofit software companies, squeezing every last penny out of their nonprofit clients — all to benefit their own shareholders.
We built Neon from the ground-up so we could help nonprofits. This kind of behavior is something that our company is strongly against. Neon receives offers from investment firms and corporations every month, and we always turn them down.
We’re dedicated to being a privately-held company, so we can help nonprofits everywhere further their missions. We make business decisions and feature updates based on client feedback, not to please investors. Our goal is to provide the best nonprofit software at the lowest, most reasonable price possible.
We respected Mission Research for focusing on the nonprofit market, like us. But they’ve now shown that caving to demands and pressure from stockholders interested only in profitability and return is not the solution.
I’ve seen many of our competitors purchased throughout our history, and the outcome has never been good. Services and support suffer, prices increase, products get abandoned, and nonprofits suffer.
What you can do
Here’s our advice to avoid being caught in a similar situation:
- Know who you’re working with. If you’re signing on with a new nonprofit tech company, you should know as much about them as possible. Do they work with investors? Have they sold off companies in the past? This will tell you more about their motives and long-term plans.
- Be aware of alternatives. Anticipate changes before they happen by staying up-to-date on the nonprofit software market. Talking to fellow nonprofiteers about their tech and reading industry news (The Nonprofit Times, Nonprofit Quarterly, etc.) are great ways to stay in the know. You’ll also know enough to make a switch quickly if you have to!
- Look for nonprofit experience. You can tell a lot about a company from their staff. Do they come from a nonprofit background? If they do, they’ll understand your organization better — and they’re likely passionate about their work.
- Trust your gut. If your instincts tell you something is off, you’re probably right. Your software and data are so important — so make sure you’re comfortable with your tech provider before moving forward.
What do you look for in a nonprofit tech provider? Any tips for other organizations?
All FrontStream Payments product names appearing herein are trademarks or registered trademarks of FrontStream Payments.