Social Media and the Future of Fundraising

There is an interesting post on Peter Deitz’s blog about how social media is changing the future of fundraising.  Peter is the founder of Social Actions a US/Canadian nonprofit clearinghouse of social causes.  They use social media to spread the word and engage people in various social issue organizations.

Peter argues that the growth of social media (everything from Twitter, Facebook, MySpace, Flickr, etc.) is dramatically changing the way nonprofits will successfully raise money in the next 4 years.  He argues that the presidential campaign tactics, fundraising and measures of success shifted fundamentally from 2004 to 2008, largely because of the growth and use of social media.  Obama won the presidency because of his team’s efficacy with Facebook, MySpace, Twitter, online fundraising, etc.

Peter argues that by 2012 nonprofits that are still raising money in traditional, i.e. non-social media, ways will find it significantly more difficult to reach their goals:

Current best practices will serve nonprofits just fine in 2009. Between email solicitation, direct mail, major donors, and grant-writing, the vast majority of nonprofits will weather the economic hard times. But a shifting communications environment and changing donor demographics could render those best practices ineffective at best, and obsolete at worst, as early as 2012.

He definitely has a point.  Nonprofits need to be actively engaged in the social media world.  And I agree that donor engagement and investment will increasingly move into that space.  But I don’t agree that traditional practices, especially major donor cultivation, solicitation and stewardship, will become obsolete.  Rather, I would argue that nonprofits, as always, should diversify their fundraising activities, in order to strengthen their fundraising function.  Whenever someone argues that traditional models are gone, I am reminded of the dot com evangelists who spoke of the death of the traditional business model, i.e. where valuation is based on actual profit.  Yeah, that traditional model is still around somehow.

That being said, however, I do think Peter, and Beth Kanter, a social media consultant to nonprofits, who commented on his post, do have some good advice for nonprofits in the social media space.  Nonprofits absolutely need to be actively engaged in social media and working to add social media strategies into their fundraising mix.

Peter has 5 tips for nonprofits in order to move them further into the social media world:

1. Use social media to communicate with all donor groups, not just the young.  People across the spectrum are using Facebook, MySpace, etc., so make sure your communications in those arenas have that in mind.  Don’t assume your audiences there are just young people.
2. Create and participate in online contests in order to understand who is following your organization online.
3. Make hiring decisions based on social media knowledge.  He argues that “you are better off hiring people who are at home online than trying to make them that way after they’ve been hired.” I disagree with this.  Since social media is so new, we are all learning what it is and how to use it.  There are no social media experts.  It is far better to hire someone who understands and has experience in fundraising overall and can learn about social media as another tool.
4. Use your interns for ideas about engaging in the social media landscape.  A great idea.
5. Get an iPhone, or other mobile device.  If you truly want to be part of the “always on” social media world, you have to go mobile.

In her response to Peter’s post, Beth Kanter discusses a new Twitter application, Twitpay, that allows people to donate to organizations and causes via a PayPal-like extension of Twitter.  You simply Tweet your donation amount to your intended recipient, in any amount under $50.  Now that’s a great and interesting use of social media in the fundraising world.

Social media is a very exciting space for nonprofit fundraisers.  And they absolutely should embrace it and add it to the mix as a further way to engage and invest donors more deeply in their organizations.  But I really don’t see social media ever completely replacing one-on-one fundraising.  Fundamental to fundraising is the individual relationships that develop between a donor, the organization, and the person making the ask.  Social media can certainly expand the reach of an organization and deepen relationships, but I doubt it will ever completely replace traditional models.

Tags: Fundraising, social media

How to Scale

Continuing my series on defining and exploring key terms in social innovation, I’d like to take a look at scale.  In an earlier post defining social entrepreneurship, I discussed the key part that scale plays:

Absolutely essential to the idea of social entrepreneurship is the idea of scale. A pattern changing idea, by definition, creates a new model. And to do so, it can’t just exist in one school, in one district, in one city. To truly be social entrepreneurship, the new idea must grow to scale, to reach all of those who can benefit from the solution.

However, just as there are various ways a successful business can grow to scale, there are different ways a nonprofit can grow to scale.  There is the franchise model that we see with organizations like Teach for America, Citizen Schools, or College Summit.  These organizations have a successful model with dramatic results that they want to replicate in other areas of the country.  They raise growth capital that will allow them to import the model to other cities and regions; they bring in or recruit a staff and build the new chapter.  This can be a very successful model.

In a session at this month’s annual Net Impact (an organization for socially-minded business school students and alums) conference, panelists had some provocative ideas for how nonprofits scale.  Aaron Hurst, founder of Taproot Foundation, an organization that provides pro-bono marketing, IT, and HR consulting to nonprofits, took the franchise idea even further arguing that there must be great consolidation within the nonprofit sector:

We need to talk about how we get foundations to stop giving inefficiently…the multitude of nonprofits with similar missions…[are like] the hundreds of Chinese restaurants across New York City. All the restaurants serve dumplings, lomein…[to be efficient] they should all be one Panda Express.

I’m not sure that is the answer.  Nathaniel Whittemore, founding Director of the Center for Global Engagement at Northwestern University argued in his blog on Change.org that scale for nonprofits needs to be thought of a bit differently.  Because of the social, consensus and local nature of nonprofit organizations, you cannot simply franchise a good idea from one city to the next.  He makes a very necessary distinction between scaling an organization and scaling a solution.  The former forces a model onto the next community, without taking into account local processes, norms, behaviors, beliefs, etc.  The latter approach molds the basic solution to the new area.  He believes the successful model is Jane Addams’ Hull House, one of the first settlement houses offering social services to the poor.

For [Jane]…[scale] meant helping other socially concerned citizens found their own organizations with similar but locally appropriate models. She was far less concerned with franchising and branding the Hull House name, but cared that poor people in every city had access to the same quality of services with dignity that her organization offered.

That’s not to say that organizations like Teach for America, Citizen Schools and others don’t meld their model to be locally appropriate,  but it is still very much a franchise model.  And as you grow that model overhead becomes more expensive, quality assurance standards become harder to enforce, and ultimately, the solution may creep farther away.

The franchise model also necessitates significant growth capital.  For example, College Summit has had to raise tens of millions of dollars in growth capital to expand to 8 states with their current program and 6 additional states with a pilot program.  And growth capital can be very difficult to find.

With a model more like Jane Addams’, scale is less about the organization that brings about the solution and more about the actual solution.  You are not building a nationwide organization with a very specific solution, but rather you are building local organizations that mold the solution to be most successful in their communities.  However, because the latter is less rigid and more decentralized it would be more difficult to ensure the quality and effectiveness of the solution, and perhaps much more difficult to track outcomes.

There is much more to be learned as social entrepreneurs continue to grapple with how best to grow to scale – what that means, and what it looks like.  But it is a very necessary discussion, because the true impact of social entrepreneurship does not lie in the ideas that social entrepreneurs create.  I don’t think we have ever lacked good ideas.  But rather, true solutions come when a great idea can grow to scale and fundamentally alter an old, broken model.  How that scale happens most effectively, however, is yet to be determined.

Tags: Citizen Schools, College Summit, growth capital, scale, Social Entrepreneurship, Teach for America

Read and Listen about Social Entrepreneurship

There is a new podcast out today in the Stanford Social Innovation Conversations series, a great series of interviews with people involved with social innovation.  It’s an interview with Pamela Hartigan, Founding Partner of Volans a consulting firm to help social entrepreneurs and author of the recent book The Power of Unreasonable People: How Social Entrepreneurs Create Markets That Change the World.  You can listen here. Pamela also has launched a 5-part series on the Harvard Kennedy School Center for Public Leadership blog about social entrepreneurship.  You can read that here.

Tags: Social Entrepreneurship

Invest in Fundraising

As we embark on this year’s holiday season, usually a fundraiser’s best time of year, it can be tempting to stick your head in the sand and try to save money by just waiting out the economy.  To the contrary, now is not the time to turn our heads on fundraising, but rather for us to be smarter about how we spend our money to raise money.  There are some fairly inexpensive things you can do right now to make a huge investment in your fundraising function and generate new revenue.  Here are just a few ways that you could invest $2,000 or less and realize many times that in financial return:

• Create an e-communications tool.  There are several very inexpensive options online that will allow you to send e-newsletters, evites to events, and surveys to your donors, and even ask them for money.  Online communication is such an inexpensive way to communicate with and further invest your donors and future donors in your organization.  It saves you money and staff time, and people give larger gifts online.
• Conduct a half- or full-day fundraising training for your board.  Your board of directors can be key fundraisers for you.  Each of them has a network that they can tap into.  However, often they don’t have the tools or confidence to know how to tap into that network.  By bringing them together, providing the tools, background and skills they need, and being specific about what you want them to do, you can realize huge dividends.
• Send an additional gift letter to your top donors.  Often nonprofits sequester their best donors as soon as they’ve given their annual gift.  Nonprofits hide them away, fearing that somehow they will irritate the donor if they ask for another gift before the clock runs out on their first one.  However, often this is not the case.  The public broadcasting system has generated huge amounts of money through their ad gift programs for decades.  Pick out 10-20% of your best donors, create a compelling ask and make the argument for how their additional investment will allow your organization to do even more and create even more impact in the community.  You’ll be surprised at the results.
• Sign up with Kimbia.  Kimbia is an online fundraising tool that takes 5% of the funds your raise through their online widget.  You put the widget on your website, encourage others to put it on their blogs and websites and watch the money come in.  If you don’t make anything, you don’t owe anything.  It’s a no-risk way to get into online fundraising if you’re not there yet, or to boost your online fundraising if you already are there.
• Conduct a fundraising assessment.  Have an outside expert analyze your fundraising function: the areas you currently generate revenue, the costs to generate that revenue, the internal processes you employ, your staffing structure, the technology you use, the methods, the messaging, etc.  They will then create a list of improvements to all of the above that will allow you to generate more revenue, less expensively.

I would guess that any one of these investments of $2,000 or less would generate anywhere from 3 to 15 or more times that amount of revenue over the course of the next year.  That’s a net revenue gain of $4,000 to $28,000 or more.  And many of these ideas would continue to generate revenue for years after that.  That’s a great ROI.  One that a poor economy can’t make you ignore.

Tags: Fundraising

A Stimulus Plan for the Nonprofit Sector

The Columbus Foundation has a creative solution to the economic downturn and the possible impact on fundraising this holiday season.  Tomorrow they are launching Match Day 2.0, an attempt to raise $1 million for the Columbus nonprofit community in 48 hours.  They will match individual contributions up to $2,500 by 50%.  They tried this idea once before and raised over $800,000.  They are doing this through their online nonprofit marketplace PowerPhilanthropy which profiles over 400 nonprofit organizations in their area.  Donors can log on, read about the various causes and then make their donations.

A match like that could add an extra incentive to those hesitant to give their usual holiday donations.  It will be interesting to see how much the economy affects giving during November and December, months which typically enjoy the highest giving rates of the year.

Tags: Fundraising

Where Does Central Texas Philanthropy Go From Here?

I just spent the morning attending the Austin Community Foundation-sponsored gathering of philanthropists and executive directors from the Central Texas region, “21st Century Philanthropy in Central Texas.”  It was an overview of the trends in philanthropy and demographics facing our region.  There were various speakers and panelists including philanthropists, corporate and nonprofit leaders, health care professionals, and wealth managers.  There were several interesting things that came out of the discussions and presentations.  Here are just a few:

The Needs in our Community are Growing:

• 25% of the tremendous increase in the American children under 5 population over the past 6 years has happened in Texas.
• Texas’ population will move from 53% white and 32% Hispanic in 2000 to 59% Hispanic and 24% white by 2040.
• The vast majority of the 20% growth in US school enrollment over the past 20 years is from English as a Second Language student populations.
• The percent of the AISD population in poverty has grown in the last 6 years from 48% to 62%.
• Our supply of physicians, especially specialists, to meet our growing and aging population’s needs is sorely behind.
• Our un- and under-insured populations are growing dramatically.

But perhaps more troubling is that capital for the social sector is lagging behind the obvious growing need.

• Travis county has the lowest health care district tax rate in Texas, and one of the lowest in the country.
• While federal funding for nonprofits is projected to decrease by $21.5 billion between 2005 and 2010, private giving is only projected to grow by $600 million in the same time period.

While the organizations competing for this capital has increased dramatically:

• The number of nonprofits registered in the US has grown more than 7 times (300K to 2.2M organizations) in the last 25 years.

It was really encouraging to see funders come together to look at the trends and start to think about what they can do.  Unfortunately, there wasn’t time at the end for a broad discussion of where we go from here.  But I’m hopeful that the morning has encouraged thinking about how we grow the capital necessary to meet our changing population’s needs.

Austin is an incredibly wealthy community.  Not just in terms of finances, but also in terms of entrepreneurial savvy.  We are a smart, adaptable community.  I think the time is right for us to look at big, new solutions like growth capital, social investing, venture philanthropy, social entrepreneurship to solve these great challenges before us.  It can no longer be business as usual in the social or philanthropic sectors.  The challenges before us are too daunting.

To paraphrase one of the panelists today, we are at the crossroads of a political, economic and cultural watershed.  In the past, our country has created big, bold solutions to similar adversity and achieved great success.  We need to do so again.  We need big, bold solutions to the many challenges we face.  The time is right for social innovation.

Tags: Nonprofits, Philanthropy

Social Entrepreneurship Defined

Because social innovation is such a new field, terms are still being defined. At times terms are used interchangeably when in reality they have very different meanings. Academics and thought leaders are still hammering out final definitions, but in the interim a common language is beginning to emerge. In an on-going series, I’d like to explain and expand on different terms within the social innovation space. Today I will start with Social Entrepreneurship.

In their ground-breaking 2007 article, “Social Entrepreneurship: The Case for Definition,” two leaders in the field, Roger L. Martin & Sally Osberg, define social entrepreneurs as having three necessary components:

(1) identifying a stable but inherently unjust equilibrium that causes the exclusion, marginalization, or suffering of a segment of humanity that lacks the financial means or political clout to achieve any transformative benefit on its own; (2) identifying an opportunity in this unjust equilibrium, developing a social value proposition, and bringing to bear inspiration, creativity, direct action, courage, and fortitude, thereby challenging the stable state’s hegemony; and (3) forging a new, stable equilibrium that releases trapped potential or alleviates the suffering of the targeted group, and through imitation and the creation of a stable ecosystem around the new equilibrium ensuring a better future for the targeted group and even society at large.

Social entrepreneurship is also defined by what it is not.  Martin and Osberg see two types of organizations that are not social entrepreneurial.  The first is a “social service provision” organization where

a courageous and committed individual identifies an unfortunate stable equilibrium – AIDS orphans in Africa, for example – and sets up a program to address it – for example, a school for the children to ensure that they are cared for and educated. The new school would certainly help the children it serves and may very well enable some of them to break free from poverty and transform their lives. But unless it is designed to achieve large scale or is so compelling as to launch legions of imitators and replicators, it is not likely to lead to a new superior equilibrium. These types of social service ventures never break out of their limited frame: their impact remains constrained, their service area stays confined to a local population, and their scope is determined by whatever resources they are able to attract.

The second type of organization that is not social entrepreneurial is “social activist organizations.”  These are different from social entrepreneurial organizations because

instead of taking direct action, as the social entrepreneur would, the social activist attempts to create change through indirect action, by influencing others – governments, NGOs, consumers, workers…to take action. Social activists may or may not create ventures or organizations to advance the changes they seek. Successful activism can yield substantial improvements to existing systems and even result in a new equilibrium, but the strategic nature of the action is distinct in its emphasis on influence rather than on direct action.

Thus, a social entrepreneur is someone who creates and scales a new solution to a social problem. In his book How to Change the World: Social Entrepreneurs and the Power of New Ideas, David Bornstein defines a social entrepreneur as:

[an] obsessive individual who sees a problem and envisions a new solution, who takes the initiative to act on that vision, who gathers resources and builds organizations to protect and market that vision, who provides the energy and sustained focus to overcome the inevitable resistance, and who-decade after decade- keeps improving, strengthening, and broadening that vision until what was once a marginal idea has become a new norm.

Take Teach for America for example. Wendy Kopp recognized that the old model of teacher recruitment was not working in low-income schools. They had tremendous teacher shortages, many of the teachers who stayed were demoralized, and the end result was tremendous inequalities in education. She estimated that 13 million children growing up in America suffered from educational disparities.  Wendy came up with the idea to take recent college graduates who have the energy and mobility of youth and place them in these poor schools for two years. The results were dramatic. Kids became more engaged, stayed in school, and improved their test scores. Wendy then built on that model and raised growth capital to expand the program to other school districts.

At inception in 1990 they had 500 teachers in 6 communities.  18 years later they have 6,000 current teachers in 29 communities, count 14,000 teachers among their alumni, and have impacted 3 million students.  Teach for America is a pattern-changing idea that is being implemented and growing to scale throughout the country in order to dramatically improve educational outcomes.  They are currently reaching almost 25% of those in need (3 million of 13 million children) and have aggressive growth plans to eventually reach all students affected by educational disparity.  That is social entrepreneurship.

Absolutely essential to the idea of social entrepreneurship is the idea of scale. A pattern changing idea, by definition, creates a new model. And to do so, it can’t just exist in one school, in one district, in one city. To truly be social entrepreneurship, the new idea must grow to scale, to reach all of those who can benefit from the solution.

A social entrepreneur is part program visionary, part implementer, and part marketer, because to grow the solution to scale it takes buy in and investment from many, many people. The social entrepreneur works tirelessly to convince people to try the solution, to invest in the solution, to grow the solution, to tell others about the solution.

But social entrepreneurs cannot work alone. Yes, marketing and fundraising is critical to their success. But they can’t be expected to do it all. The capital available to social entrepreneurs must grow. And it must be a particular kind of capital–growth capital–large amounts over a limited period of time. Wendy Kopp was able to expand Teach for America with growth capital like the $2,000,000 over 5 years from New Profit, a venture philanthropy fund in Boston.  This capital allows a social entrepreneur to build the infrastructure necessary to create a sustainable, scaled organization.

The end goal of social entrepreneurship is to solve the root cause of a social problem. Not all problems can be solved, and not all problems require this direct action approach.  That is why social service provision and social activist organizations are a necessary part of the sector and critical to the strength of our country.  Social entrepreneurship is not and can never be the answer to all problems.  But it is a fairly exciting approach to some seemingly intractable ones.

Tags: growth capital, scale, Social Entrepreneurship

The Coming Fourth Sector

In the last couple of years there have been discussions about the convergence of the public, private and nonprofit sectors, some call this The Fourth Sector.  Up until now, there have been, for the most part, 3 separate sectors.  The government sector was separate and distinct from the private (or for-profit) sector which was separate and distinct from the nonprofit sector.  That’s not to say that there weren’t crossovers and partnerships and joint ventures.  There absolutely were.  Government has always been a huge funder of the nonprofit sector.  The business sector has always helped fund and lead (via board seats, etc.) the nonprofit sector.  The government provided incentives to the growth and development of the business sector, and so.

But the concept of the Fourth Sector is that the three sectors can no longer be separate entities.  In the Fourth Sector you have concepts like social capital markets where the nonprofit and for-profit sectors find and channel their capital in almost the same way.  Just as we invest in and grow successful businesses to scale, we will invest in and grow successful nonprofits to scale, often with the same sources of capital.  Good Capital and Investors Circle are just a couple of examples of this.  Also in the Fourth Sector, government becomes a venture capital fund for social innovation.  Government, along with business partners, provides growth capital to nonprofit organizations just as a for-profit venture capital fund would provide growth capital to a business.  I discussed Obama’s platform on a Social Innovation Fund like this in an earlier post.

In the Fourth Sector, the old rules don’t apply.  Government can act like a venture capitalist.  Nonprofits can scale their solutions like an entrepreneur scales her business.  Wealthy individuals can invest for financial return or social return or both.  Nonprofit fundraisers are no longer looking purely at philanthropic revenue; they are also exploring business revenue, investment revenue, growth capital, and other vehicles that in the past were only available to their for-profit counterparts.  The lines are blurred.  The idea is that each of the three sectors can build on the assets of the other two.  Businesses can and should start taking the social and community effects of their business into consideration as they grow.  Nonprofits should start thinking about exponential, not just incremental, growth and strategy, as successful businesses do.  Government should use their tremendous resources in more effective and efficient ways to achieve greater impact.-

The idea behind the Fourth Sector is a simple, yet profound, one.  By merging the three sectors we can, perhaps, have the best of three worlds.  At the very least, we can learn a lot from each other and move solutions to the many problems that plague us forward.

Tags: for-profit, Fourth Sector, government, nonprofit

What Does the Election Mean for the Social Sector?

There is a lot to think about and chew on post-election as we wait for indications about the direction the new administration will take and what all of it means for the social sector.

To help us bide our time, some writers have given us very interesting things to consider.  First, David Brooks, conservative columnist for The New York Times, has written today in his column, “Change I Can Believe In,” about what he hopes the new administration will do.  Amid Brooks’ calls for bi-partisan politics, reformed healthcare, economic stimulus, curbed spending, is his hope that the Obama administration will take an entrepreneurial approach to social problems:

Walking into the Obama White House of my dreams will be like walking into the Gates Foundation. The people there will be ostentatiously pragmatic and data-driven. They’ll hunt good ideas like venture capitalists. They’ll have no faith in all-powerful bureaucrats issuing edicts from the center. Instead, they’ll use that language of decentralized networks, bottom-up reform and scalable innovation.

It’s a great dream.  Wouldn’t it be amazing to have an administration that thought and acted like a social venture capitalist, seeking out and helping to fund and scale solutions to the many problems that face our country?  A radical idea, but very exciting.

Then you have Paul Schmitz in the Nonprofit Quarterly, “In A Successful Campaign: Lessons for Nonprofits,” drawing lessons for the nonprofit sector from the campaign.  He argues that the nonprofit sector could learn a lot from a campaign that came from behind and completely changed the status quo of how campaigns are fought and won.  He delineates 5 best practices that nonprofits could employ:

1. Find and promote a powerful brand.  Obama’s was Change and Hope.
2. Create a clear, measurable strategy.  The campaign’s focus was always on getting to 2,025 delegates in the primary and 270 electoral votes in the general election.  No matter what happened, they stayed focused on their strategy to do this.
3. Use disciplined management.  The organization that Obama built rivaled that of some of the most successful corporations.  There was a clear chain of command, clear focus and disciplined strategy to get to the end goal.
4. Use both in-person and online organizing.  They coupled block walking,  canvassing, phone calls, and direct mail with very effective online fundraising and social networking efforts.  This dual approach was unprecedented and extremely effective at building support.
5. They tapped into the energy and drive of youth at all levels of the campaign.

I know that there will be much more dissection of the campaign and how they were able to overcome what at times seemed like insurmountable odds.  We should pay attention to the analysis of the campaign because I agree there are lessons for the social sector.  Nonprofits face insurmountable odds every single day. By analyzing and employing those elements that worked, there is the potential for greater reach and deeper impact.

Tags: election, management, nonprofit, Obama