Legal technology investment is beginning to flow in a direction one might not expect: toward not-for-profit organizations (NPOs), including public charities and private foundations.

The NPO world, while not nearly as visible to those of us who traditionally focus on for-profit entities, is not a tiny pond. I recently met with Grady McConnell, a Managing Director covering Social Impact Technology at Raymond James and he shared the following eye-popping statistics:

  1. The highly fragmented software market serving NPOs is $20 billion.
  2. 60% of the well over 1.5 million NPOs in the U.S. will buy software and technology-enabled services this year to help manage donors, fundraising, accounting, and operations.
  3. 79% of NPOs expect to implement widespread usage of AI technology in the next three years.

Most NPOs lack internal resources, yet it takes a lot of hard work to start a NPO and then comply with intense and particularly cumbersome regulations. There is the initial 501(c)(3) formation process and all its various moving parts. Then there is IRS Form 990, an annual disclosure required to maintain tax-exempt status at the federal level. In addition, there are also the regulatory requirements of each individual state.