So the stagehands strike on Broadway is going so poorly, the producers canceled the entire next week of shows because they don’t believe there will be a resolution any time soon. I read somewhere that the folks who own and manage the theatres had been building up a war chest for a number of years so they could weather the next big strike.

Unfortunately, none of that hoarded money will go toward paying off the investors in the shows that have shut down. As far as they are concerned, everything is going to hell.

But investing in Broadway shows has always been a risky proposition. The expectation is that you will lose all your money and it is a shock when you actually see some return whereas most investments operate on the opposite assumption. The only thing you are generally guaranteed as an investor are tickets to opening night and an invitation to the opening night party. (Unless things go south before the show opens.)

If you have ever wondered about the mechanics of investing in a Broadway show, the Franklin Weinrib Rudell & Vassallo law firm website has an article on the subject. While the law doesn’t protect you from losing your shirt, it does limit losing ones shirt to those who won’t be left destitute by the loss. New York State has very stringent laws regulating investments in Broadway shows. If the total investment being solicited is in excess of $5 million, which most are these days, the show is subject to Federal Securities law. Since compliance with NY State laws can be very expensive due to all the legal fees involved, it is preferable to be subject to the Federal statutes.

Even if the total investment sought is under $5 million, a production can avoid being subject to the stringent NY State laws if “potential investors must be furnished with a thorough disclosure document (unless all the investors are accredited, in which event no particular type of information is stipulated); and there may be no more than 35 unaccredited investors, all of whom must demonstrate that alone, or together with a purchaser representative, they have the financial knowledge and experience necessary to evaluate the merits and risks of the offering.”

An accredited investor is “defined as an individual with a net worth in excess of $1 million, or who, in each of the last two years, has earned income in excess of $200,000 per year (or $300,000 with spouse), with a reasonable expectation of reaching that amount in the current year.”

Investing in Broadway shows is not for the risk averse or financially insolvent. The article discusses many of the financing structures that are used when investing in productions. The more money one brings to the table, the better deal one can negotiate–including a percentage of the producers profits above the normal investor’s cut. So if you are interested in the intricacies of funding a Broadway show, give the piece a read.

Back at the end of September a large meeting of people in the philanthropy world was held sponsored by Union Square Ventures which was recorded on their blog under the title Hacking Philanthropy. They posted the transcript of the meeting but given that there were about 40 people at this all day session, it is mighty long. Even after reformatting it so I could read and reference it a bit better, I haven’t had the time to tackle it.

One of the principals at Union Square Ventures posted his reflections on the meeting last month. One of the interesting things he observed was is that the relationship between individual donors and recipients.

“Historically, philanthropy has been dominated by organizations that gather funds from donors based on mission statement and a prior track record and then distribute those funds to those in need. Once the check was written, the donor’s work was done….

Recently we have seen the emergence of a new type of charity, one that radically changes the relationship between donors and recipients. Nonprofits like DonorsChoose and Kiva behave more like marketplaces than traditional charities. This new model allows people in need to post a request for a gift or a loan to the site, and donors to chose which of those needs they would like to fund….

….But information technology also makes it possible to have a much more immediate relationship with the person in need. The appeals to sponsor a child have always had a deep emotional resonance, but it was not possible to put every child’s picture in an ad in the NY Times magazine. Today, it is possible to host hundreds of thousands of pictures and stories on the web and to provide tools to for donors to quickly find the appeals that speak most directly to them.

Organizations like Kiva and DonorsChoose vet the recipients and certify there is no fraud involved and groups tools to promote their needs. DonorsChoose focuses on helping schools sends disposable cameras to teachers so they can document the good the donations are doing then passes the pictures and handwritten letters from students on to donors.

The next 10 years may see a growth in this model of fundraising. The core of an arts organization’s annual campaign may be focused on maintaining the organizational profile on donation clearinghouses rather than direct (e-) mailings and phone banks. It would be interesting to see if larger foundations farm out fraud monitoring activities to companies like Kiva and DonorsChoose as these latter entities grow their proficiencies in this area.

I hope to post my thoughts on the full transcript of the meeting some time soon. The stout of heart might want to take a look themselves.