A Crazy Idea?

While everyone is thinking and worrying about the economic crisis and the potential detrimental effects on the nonprofit sector, an idea occurs to me.  With the continuing volatility in the stock market and a dark economic forecast at least for the next few months, perhaps the next year, foundations and individuals won’t make money on their investments in the market.  What if a foundation took say $100,000 from their corpus and made a program-related investment (PRI) in a nonprofit hoping to build their capacity to raise unrestricted dollars.  A PRI is basically a loan to a nonprofit at low interest rates.

What if a foundation, or a wealthy individual, loaned a nonprofit $100K+ for a 2-3 year term.  Then, the nonprofit could use that capital to invest in their fundraising infrastructure in order to diversify and be more strategic in raising unrestricted dollars.  They could hire a seasoned Development Director, purchase a new donor database, upgrade their website and email marketing efforts, launch a major gifts campaign, train their board, and so on.  The idea is that all of these investments would pay for themselves in 2 or 3 years, at which time the nonprofit could pay back the individual or the foundation.

We did something like this at KLRU, however it wasn’t with PRIs, but with donor investments, which in a market like this might be harder to come by.  With investments from a handful of donors totaling $350K we completely revamped our fundraising function and increased annual revenue by $1.6 million, a 40% increase.  That’s a pretty amazing ROI.  And donors loved it.

If you applied this idea to PRIs, donors could help nonprofits increase their capacity and sustainability, while the donor protects his corpus in a down market.

Just a thought.

Tags: Foundations, Funding, PRIs

Maybe Things Won’t Be So Bad After All

The Foundation Center just released a pretty encouraging report analyzing the trends in foundation giving during economic downturns.

The data (since they started tracking it in 1975) shows that in past recessions, foundation giving was only marginally affected, if at all.  Because foundations tend to determine their payout amounts based on a 2-5 year rolling average, the effects of one or two bad years are lessened.  Also, in past recessions some foundations went into their corpus to make good on pledges made before the downturn hit.  That’s not to say that if we go into a deeper economic downturn that things won’t be different, but it is encouraging to see that history (at least brief history) tells us that things aren’t as bad as they seem.

This also parallels nicely with the Council on Foundations open letter to their membership, earlier this week, urging them to step up to the plate during this economic crisis and not hide behind lower earnings.  Indeed, going into the corpus to support programs, or even, as some innovative foundations are starting to do,  to fund for-profit/social mission businesses (social enterprises), are some of the creative ways that foundations could continue to support the social sector during these difficult times.

Thanks to Sean Stannard-Stockton’s Tactical Philanthropy blog for pointing out the report.

Tags: Economy, Foundations, Philanthropy, Social Enterprise

Inspiring Social Entrepreneurship

Here is an inspiring video about what social entrepreneurship is and how social entrepreneurs are striving for real change:  solutions to the root causes of social problems.  It is the closing video of the 2008 Skoll World Forum on Social Entrepreneurship.  It includes comments from some of the leaders in the field:  Bill Drayton, Muhammed Yunus, Larry Brilliant, etc.

Tags: Social Entrepreneurship

Signs of a Movement

Things are definitely happening.  While our country is struggling to address the largest financial crisis since the Great Depression, to elect a new President, and so on, new ideas in the social sector are building momentum.  Here are just a few examples from the past week of a growing movement:

• The SoCap 2008 (Social Capital Markets) Conference held in San Francisco this week and sponsored by Good Capital saw its registrations double after the financial collapse.  Sessions yesterday were beyond standing room only.  The conference brings together people interested in changing the world through sustainable business (businesses with a social mission). Perhaps some of the talent and resources from the failure of investment banks will be channeled into social return on investment.  It seems people are hungry for a new way.
• New Orleans continues to be a mecca for social innovation.  The Idea Village, a nonprofit working to envigorate the city’s entrepreneurial engine, just announced a $100,000 business idea competition.  The idea has to help retain and engage 25-34 year olds in New Orleans.
• The Council on Foundations wrote an open letter to their 2,000 member foundations asking them to step up during these difficult economic times and help the nonprofits in their communities.  Rather than hide behind the turmoil and their shrinking endowments, foundations should “continue to serve the common good in these uncommon times.”  It remains to be seen what will come out of this call and their members response to it, but the fact that the largest association of foundations in the country realizes the enormity of the situation and wants to react in a new way is encouraging.

Tags: Foundations, New Orleans, Social Enterprise, social innovation

Gatherings of Innovators

As I mentioned in my last post, in the past few years there has been a dramatic increase in the number of gatherings and conferences for those interested in social innovation.  Here is just a sample of some of the most interesting conferences bringing together people working on and thinking about social entrepreneurship, social enterprise, social investing, and so on.  Many of them are happening this month. Those that have already passed will likely hold them again around the same time next year, so check back.

Harvard Business School’s Social Enterprise Conference, March 2008
New Profit’s Gathering of Leaders, March 2008
The Feast in New York City, October 2008
Social Capital Markets 2008, October 2008
Social Venture Network’s Fall Conference, October 2008
Investor’s Circle Fall Conference and Venture Fair, November 2008
Net Impact Conference, November 2008
Social Enterprise Alliance’s 10th Annual Social Enterprise Summit, April 2009

Tags: conferences, gatherings, Social Enterprise, Social Entrepreneurship, social innovation, Social Investing

Evidence of a Shift

The economic uncertainty is starting to hit the nonprofit sector. Some foundations are already talking about how, given the devaluation of financial assets, grants will be smaller in number and size in the coming year.  And wealthy individuals, suffering similar financial hits, will likely restrict their giving.  At the same time, the need for the services many nonprofits, particularly social service agencies, provide is increasing.  But the costs to provide those services are also growing (gas, food, etc.). Add to that the impact of the credit crisis on nonprofits ability to expand, or just continue, their services, and the picture is pretty bleak.

However, in the midst of all of this there are some very encouraging signs of increased interest in the social sector and philanthropy. Over the past 40 years philanthropic giving has increased almost 3 fold.  The number of national conferences, meetings and gatherings around philanthropy, social innovation, social enterprise, and social entrepreneurship throughout the country has grown significantly in the last several years.  As has the number of investor or giving circles (groups of people who pool their money to make large investments in nonprofits). And discussions about national service, greater philanthropy, more volunteerism have become regular features in political campaigns and the mainstream media.

Despite the fact that the nonprofit sector is really struggling and will continue to do so for awhile, a real shift is taking place.  More people are recognizing that the nonprofit sector cannot just limp by.  We need to find a better way to solve the many problems facing our country.  We need to invest more money in the sector, we need to devote more time to it, we need to find more solutions, we need to pool our efforts and our thinking to come up with new strategies.  It is an exciting, if unsettling, time.

Tags: Economy, Foundations, nonprofit, Philanthropy, volunteerism

The Opportunity in the Chaos

These past months have been frightening, with new banks crumbling every week and the government weighing the merits of a $700 billion bailout.  The economy is reeling with tremendous uncertainty.  I can see the nonprofit sector, which is often hit hardest and longest by any economic downturn, holding its collective breath, unsure what all of this will mean to the critical services they provide.  And, if the government does end up providing a tremendous influx of cash to the overall economy, it must mean that less will be left over for nonprofit programs.

All of this seems incredibly bleak.  Indeed, the times we live in are rather bleak.  But they are also incredibly historic.  And what if, instead of battening down the hatches, we viewed these times as an opportunity? Perhaps times like these are exactly when system-changing ideas can take hold.  Take New Orleans for instance.  Despite the incredible destruction of Katrina which threatened to wipe that city off the map, New Orleans is starting to come back.  And social entrepreneurship is driving that come back.  New Orleans’ school system was in disarray before Katrina.  It was one of the worst in the country.  However, Katrina has given them a clean slate.  And social entrepreneurs, with great new ideas for education, have taken the city by storm, using it as a test case for some pretty exciting and powerful models for changing the end game:  improving future outcomes for at-risk kids.  It’s a pretty inspirational story.

So, maybe, amid all of the bleak news of recent days there is a ray of hope.  When nothing is sure, anything is possible.

Tags: Economy, government, New Orleans, nonprofit, Social Entrepreneurship