Did the cheap-money era kill these tech nonprofits?

Startup success is wisely evaluated by revenue growth. More than venture capital raises or user count, nothing seems a truer signal that a company has identified an important need than fast-growing income.

That’s not the case for nonprofits focused on boosting tech skills and entrepreneurship, a sprawling portfolio that’s seen several recent shakeups. 

Technical.ly reported last week the immediate closure of well-regarded Venture for America, which placed aspiring entrepreneurs as employees at startups in a dozen underknown tech hubs. A few weeks earlier, we reported on the shuttering of Byte Back, a DC-based digital literacy nonprofit. We’ve also followed the closing of Women Who Code, the gender-inclusive tech resource group.

In addition to their work addressing representation gaps within local tech and startup hubs, what do they all have in common? 

Each of these orgs experienced major single-year income increases during the pandemic-fueled tech surge — 35% for VFA, 25% for ByteBack and a staggering 70% for Women Who Code — followed by big declines the following year. 

In its 2020 fiscal year, Venture for America reported $5 million in total revenue, most from philanthropic gifts. The next year, as tech stocks boomed and more VC money was invested than ever before, its income jumped to nearly $7 million, thanks to backers including individual tech founders and local foundations whose own endowments were flush. 

For a well-established, decade-old nonprofit, that is major growth.

Big revenue gains, followed by big drops

Big revenue gains seem like a strange signal of distress, but such a one-off can disorient leaders. Philanthropic dollars are notorious for coming with strings tied to new programs, custom solutions and unique reporting structure. Groups often hire staff or plan investments that later lose support.

This will sound familiar to anyone following the last 18 months of tech layoffs, as tech companies that over-hired during the pandemic regress to pre-pandemic staffing trends. Their boom appears to have contributed to a mini boom among the nonprofits that blossomed to support perceived gaps within the industry, from gender and racial representation to digital access to geographic differences in rates of entrepreneurship.

Single-year jumps in income for tech nonprofits during the pandemic appear widespread.

In addition to Byte Back, VFA and Women Who Code, a Technical.ly analysis found year-on-year total income jumps in a dozen nonprofits, including big national groups like Code for America, Code.org, Npower and PerScholas, and smaller local or multi-local nonprofits like Coded by Kids (now just Coded by), Resilient Coders, Hopeworks and Zip Code Wilmington.

Of course, big revenue increases don’t have to crush a nonprofit. Different nonprofits tell different stories, even under the same chaotic revenue period.

For example, Code.org, the Seattle-based computer science advocacy group, had a 50% increase in year-on-year income in fiscal year 2021, but maintained an elevated income level in 2022.

Others appear to have transformed their organizations. In 2021, Code for America, which champions technology and transparency in government, reported a 170% increase in income, from $34 million to over $90 million, including a massive multi-year commitment and a major $12 million gift from MacKenzie Scott. Reported income fell back in 2022, but the nonprofit appears to have digested the surge toward long term goals. Contrast that with tech-focused government benefits access org Benefits Data Trust, which got its own no-strings Scott donation but announced its closure this summer.

Where income comes from matters too.

Look at TechImpact, which has transformed through a series of mergers into a national provider of tech services and training. It had its own revenue bump, albeit a more modest 11% single-year increase to over $15 million in 2021, after falling back to its previous trendline. One major difference is that roughly half of its income is derived from programs it operates, rather than more erratic charitable giving.

Some saw their income bump later, including Hopeworks and Coded by in Philadelphia and Delaware’s Zip Code Wilmington, so how they adapt to our new tech climate is still playing out. 

Not all tech nonprofits caught the wave. Pittsburgh’s in-person-dependent coworking space-meets-entrepreneurship resource center Ascender reported flat or declining income during the pandemic, as did Baltimore’s youth-focused Code in the Schools.

Investing locally is key to the innovation engine 

Last fall, over a series of CEO dinners Technical.ly hosted with clients, I heard a wave of tech founders discuss how much they were pulling back from investments in their local tech and startup ecosystems. 

They felt humbled by falling company valuations and, with increasingly remote teams, viewed their local communities as distracting from the focus on company growth. I chastised them as short-sighted — interest in tech jobs appears to be fading among teenagers, in favor of healthcare — but it all felt very inevitable. They were committed to growing their revenues, which makes sense. 

But the entrepreneurship boom we’ve had over the last several years has been aided by investments many of us made in the 2010s. Without that backing, our economies will be less representative and dynamic. The work is important. Economic mobility depends on pathways into growth careers. We need new customers.