What Can We Learn From the Sudden Closure of the Cedar Lake Ballet?

"Don't put all your eggs in one basket." It's a lesson we've been told since childhood, and as recent news out of New York City suggests, one that many arts nonprofits are rediscovering the hard way.

The Cedar Lake Contemporary Ballet formed in 2004 and exists thanks to the funding of a single donor, a Walmart heiress named Nancy Laurie. In a stunning move that echoed recent events down the I-95 corridor, Laurie announced the company will close in June after performances at the Brooklyn Academy of Music.

What can nonprofits learn from this episode?

First, understand that not all deep-pocketed donors are the same. As the Times article implies, there are two distinct mega-donor profiles at play. Mega-Donor Number One cuts huge checks and seems committed to the cause, but comes across as somewhat insular, relying on small cadre of friends, generally uninterested in outside help.

Mega-Donor Number Two also cuts huge checks, but more importantly, some of these checks go toward setting up an endowment. Furthermore, Mega-Donor Number Two, according to Katharine DeShaw, the president of Philanthropology, a philanthropic consulting firm, "invites other people in, and I would argue early in the game."

Soliciting outside help is, of course, a good idea, but it's easier said then done. Some billionaire benefactors think quite highly of themselves—notice we said "some," not "all"—and don't want to be told that they should partner with organizational development experts or expand the revenue base. "My way or the highway," they say, pounding their desk for good measure. (Indeed, a subset of billionaire benefactors are what you'd call "irreverent.")

Needless to say, Donor Number Two is a better choice—if such a choice exists—for nonprofits committed the long haul.

If any good news can be culled from this development, it's that Cedar Lake Ballet saw the writing on the wall. While Ms. Laurie's checkbook accounted for a whopping 75 percent of the troupe's revenue of $5.9 million as of July 2013, it made recent efforts to broaden its donor base. The Times noted that as recently as October, Cedar Lake had advertised for a manager for external affairs whose duties were to have included developing "multiplatform sponsorship proposals for corporate partners, foundations, government, and individuals." Alas, the position was never filled.

But let's be fair. It's hard to fault the folks who run Cedar Lake. For starters, they, more than anyone, were well aware of the risks of reliance on a single funder. It may not have been an optimal model, but it allowed them to bring dance to New York for over a decade and create an esteemed brand. And even if Ms. Laurie, say, decided to reduce her giving to 50 percent of total revenues, could the troupe realistically close the gap from scratch? 

As sad as the news is, the closure of the ballet can simply be chalked up to the unfortunate cost of doing business with a single billionaire benefactor.