Essay 5: A Failure of Nerve

There's a story we tell about nonprofits, and most of us who lead them have told it so many times we've stopped noticing it's a choice.

The story goes like this: nonprofits exist because certain things—the arts, education, social services, culture—can't survive in the market. They require subsidy. They depend on the generosity of governments and philanthropists who believe in their value enough to cover the gap between what they're worth and what people will pay. In this story, the nonprofit is, at its core, a funding category. A structural accommodation for beautiful, necessary, unsustainable things.

I've told that story. I've told it to donors, to politicians, to journalists. I've told it so fluently that I nearly forgot it wasn't the whole truth. The support of philanthropists and governments isn't evidence that nonprofits can't sustain themselves. It's evidence that some forms of value are worth investing in precisely because the market won't. The narrative we create for ourselves is the difference between funders subsidizing weakness versus investing in impact.

If profit is the agreed upon definition of “success,” we have decided that nonprofit is the same as “unsuccessful.” As a result, we have stopped running them as businesses that can innovate, be financially sustainable, and be in service.

This is my first time attending the Tessitura Learning and Community Conference (TLCC) as a board member. Andrew Recinos, Tessitura's president and CEO, opened his keynote yesterday with a reference to Matilda, Roald Dahl's character who can't understand why characters in books don't simply rewrite their endings toward something better. It's the right question to ask in front of almost 2,000 conference attendees, because Tessitura is doing just that—rewriting an ending that looked inevitable—and most of us use its software every day without fully reckoning with what it represents.

Tessitura is a nonprofit technology company. It builds and maintains the CRM, ticketing, fundraising, and marketing infrastructure used by over 800 arts and cultural organizations across the world. It was founded in 2001 by seven major arts organizations who looked at a commercial technology sector structurally misaligned with their needs and made a decision that ran against every prevailing assumption of the dot-com era: they built a cooperative. Member-owned. Nonprofit. Governed entirely by the leaders of the organizations it serves.

Twenty-five years later, every one of those founding organizations is still a member. Tessitura has grown every year of its existence. And while it has faced challenges, like all of us do, it has outlasted every commercial competitor that was supposed to make it obsolete.

This is not a story about charity. It is not a story about subsidy or scarcity or the generosity of funders who believed in something beautiful. It is a story about a governance philosophy that worked, and that we have almost entirely failed to learn from.

Here is what I think happened, and why it matters.

Nonprofit status was never meant to be a funding category. It was meant to be a declaration of intent—a legal and organizational structure that says: the purpose of this institution is its mission, and everything else, including money, is in service of that. The distinction between a nonprofit and a for-profit isn't primarily about where the revenue comes from. It's about what the institution is for, and who it answers to.

Somewhere along the way, we lost that thread. Facing genuine resource constraints, nonprofits leaned into the scarcity narrative because it was useful. It unlocked philanthropic dollars. It justified public subsidy. It positioned the sector as deserving rather than demanding. And it worked. Until it became the whole story. Until "nonprofit" stopped meaning mission-governed and started meaning financially precarious. Until the organizations themselves began to internalize the diminished definition, building cultures and boards and strategies shaped more by the logic of survival than the logic of purpose.

The external world, naturally, responded in kind. If nonprofits present themselves as structurally dependent, the world will treat them as structurally dependent. If the sector signals that innovation lives elsewhere—in the startup, the social enterprise, the for-profit disruptor with a conscience—then that's where attention, talent, and imagination will flow.

We trained the world to underestimate us. And then we were surprise when it did.

Tessitura never got that memo. Or if it did, it ignored it.

What makes Tessitura genuinely unusual isn't its technology, which is excellent, or its scale, which is impressive. It's that it has operated for twenty-five years as though the original definition of nonprofit still meant something. Its board is composed entirely of leaders from member organizations. Its surplus is reinvested in the mission. Its strategic direction is set by the people who depend on it, not by investors optimizing for an exit. It is, in the most precise sense of the term, governed by purpose.

And it is innovative. Financially sustainable. Globally competitive. Not despite its structure, because of it. When you remove the pressure to generate returns for shareholders, you can make decisions on longer time horizons. When the people who govern an institution are also the people who use it, the feedback loop between need and response tightens dramatically. When mission is the metric, you stop optimizing for the wrong things.

There is a certain irony worth naming here, and it is not a small one.

The for-profit world is in the middle of an identity crisis about purpose. Stakeholder capitalism. ESG frameworks. B Corp certification. Chief Purpose Officers. The language multiplies faster than the results, but the underlying anxiety is genuine: institutions organized around profit are discovering, with increasing urgency, that profit alone is insufficient to sustain public trust, attract talent, or justify their existence to the communities they operate in. The market, it turns out, is very good at producing returns and surprisingly bad at producing meaning.

So the for-profit world is reaching toward mission, toward accountability to something larger than the shareholder, toward governance structures that give the people affected by an institution some genuine stake in how it operates. It is hiring consultants, commissioning frameworks, and rewriting mission statements in search of something that looks, from a certain angle, remarkably like what a well-functioning nonprofit already is.

Meanwhile, the nonprofit sector has spent the better part of three decades shrinking its own self-concept. Trading governance philosophy for funding strategy. Presenting itself as the place where necessary but economically unviable things go to survive, rather than the place where a different and legitimate logic of value creation is practiced.

The for-profit world is paying to approximate something nonprofits have the architecture for and have largely stopped using. That's not a funding problem. That's a failure of nerve.

The governance insight at Tessitura's core doesn't belong to arts and culture. It applies anywhere institutions have been built to serve a public purpose: infrastructure, housing, healthcare, education, technology. The cooperative and member-governed models that exist across these sectors share a common logic, and a common track record that we consistently underweight because it doesn't fit the story we've decided to tell about where innovation comes from.

At Werklund Centre, we are in the middle of building the largest performing arts campus in Canada. And one of the questions I find myself returning to, often, is this: who does this belong to? Not legally. Legally, the answer is straightforward. I mean it in the governance sense, in the Tessitura sense. Are the communities who will inhabit this space genuinely shaping it? Do they have real authority, or the appearance of it? Is this being built with Calgary, or merely for it?

Those questions don't have easy answers, and I won't pretend they do. But I've become convinced that the difference between institutions that earn lasting public trust and those that don't lies almost entirely in how seriously they take them. Not in their communication strategies or their community consultations—the kind where decisions have already been made and the public is invited to respond—but in their governance. In who actually holds authority, and over what.

Tessitura's founding organizations understood something in 2001 that the broader nonprofit sector has been slow to reclaim: that the structure of an institution is not a bureaucratic detail. It is a values statement. It is the most honest answer an organization can give to the question of what it actually believes.

Matilda's question—why don't characters rewrite their stories toward better endings—has a quiet answer that Dahl never quite makes explicit: because they've forgotten they can.

The nonprofit sector didn't forget that it was capable of innovation, sustainability, or sophistication. It just stopped insisting on it. It accepted a smaller story because the smaller story was easier to tell, and easier to fund, and easier to defend in a world that had already decided where the interesting things were happening.

What I’m finding at this conference is not inspiration. It's something more useful: evidence. Evidence that the governance philosophy at the heart of the nonprofit form—mission over margin, members over customers, purpose over profit—is not a romantic idea. It is a competitive advantage.

We just have to be willing to claim it.