Why nonprofit technology organizations are struggling despite increased revenue

The success of a startup is measured by revenue growth. More than venture capital raises or user numbers, nothing seems to be a surer sign that a company has identified a key need than rapidly growing revenue.

That’s not the case for nonprofits that focus on promoting tech skills and entrepreneurship—a broad portfolio that has undergone several recent restructurings.

Technical.ly reported last week on the immediate closure of the well-respected Venture for America, which placed aspiring entrepreneurs as employees at startups in a dozen lesser-known tech hubs. A few weeks earlier, we reported on the closure of Byte Back, a digital literacy nonprofit based in Washington D.C. We also tracked the closure of Women Who Code, the gender-inclusive technology resource group.

What do they all have in common, aside from their work to close representation gaps in local tech and startup hubs?

Each of these organizations saw large increases in revenue one year during the pandemic-induced tech boom—35% at VFA, 25% at ByteBack, and an incredible 70% at Women Who Code—only to see large declines the following year.

In fiscal 2020, Venture for America reported total revenue of $5 million, most of which came from donations. The following year, as tech stocks boomed and more venture capital was being invested than ever before, revenues rose to nearly $7 million, thanks to funders including individual tech founders and local foundations whose own endowments were lush.

This is tremendous growth for a well-established nonprofit organization that has been in existence for ten years.

Large increases in sales, followed by large declines

Large increases in revenue may seem like an odd sign of distress, but such a one-off incident can confuse those in charge. Philanthropic giving is notorious for being tied to new programs, customized solutions, and unique reporting structures. Groups often hire staff or plan investments that later lose support.

This will sound familiar to anyone who has followed the tech industry’s layoffs over the past 18 months, as tech companies that overhired during the pandemic fall back to pre-pandemic levels. Their boom appears to have contributed to a mini-boom in nonprofits scrambling to fill perceived gaps in the industry, from gender and racial representation to digital access to geographic disparities in startup rates.

During the pandemic, nonprofit technology organizations appear to have experienced frequent annual revenue jumps.

In addition to Byte Back, VFA and Women Who Code, a Technical.ly analysis found that a dozen nonprofits saw their total revenue increase year over year. These included large national groups like Code for America, Code.org, Npower and PerScholas, as well as 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 bankrupt a nonprofit. Different nonprofits tell different stories, even in the same chaotic revenue period.

For example, Code.org, the Seattle-based computer science advocacy group, increased its revenue by 50% in fiscal year 2021 compared to the previous year, but was able to maintain its high revenue level in 2022.

Others appear to have revamped their organizations. Code for America, which advocates for technology and transparency in government, reported a 170% increase in revenue in 2021, from $34 million to over $90 million, including a massive multi-year pledge and a generous $12 million donation from MacKenzie Scott. Reported revenue fell in 2022, but the nonprofit appears to have digested the increase for its long-term goals. In contrast, technology-focused organization Benefits Data Trust, which provides access to government benefits, received its own unconditional donation from Scott but announced its closure this summer.

The origin of the income also plays a role.

Look at TechImpact, which has grown into a national provider of tech services and training through a series of mergers. It too has been able to grow its revenue, albeit by a more modest 11% in one year to over $15 million in 2021, after falling back to its previous trend. One key difference is that about half of its income comes from programs it runs, rather than more irregular donations.

Some companies, including Hopeworks and Coded by in Philadelphia and Delaware’s Zip Code Wilmington, saw their revenues rise later, so it remains to be seen how they adapt to our new technology climate.

Not all tech nonprofits have jumped on the wave. Pittsburgh’s coworking space Ascender, an entrepreneurship resource center that relies on in-person work, reported flat or declining revenue during the pandemic, as did Baltimore’s youth-focused organization Code in the Schools.

Local investments are the key to driving innovation

Last fall, during a series of CEO dinners that Technical.ly hosted with clients, I heard a number of tech founders discuss how much they were disinvesting in their local tech and startup ecosystems.

They were humbled by declining company valuations and, as their teams increasingly worked remotely, saw their local communities as a distraction from the focus on company growth. I chided them for being short-sighted—interest in tech careers seems to be waning among teenagers in favor of healthcare—but it all felt very inevitable. They were determined to grow their revenue, which makes sense.

But the entrepreneurial boom of recent years has been fuelled by investments that many of us made in the 2010s. Without this support, our economies will be less representative and dynamic. This work is important. Economic mobility depends on paths to growth careers. We need new customers.