New Results in the Social Media Fundraising Debate

There has been much debate about how effective social media, particularly Facebook, can be at fundraising for nonprofit organizations.  An article last April in the Washington Post touched off a heated debate by claiming that the Facebook Causes application, which helps supporters of a nonprofit get their friends to donate, has not done much to increase overall fundraising.  As the article argued:

The Facebook application Causes, hugely popular among nonprofit organizations seeking to raise money online, has been largely ineffective in its first two years, trailing direct mail, fundraising events and other more traditional methods of soliciting contributions. Only a tiny fraction of the 179,000 nonprofits that have turned to Causes as an inexpensive and green way to seek donations have brought in even $1,000, according to data available on the Causes developers’ site…[and] fewer than 1% of [people] who have joined a cause have actually donated money through that application.

Beth Kanter, Allison Fine, and many others jumped all over the article and its analysis.  Their ultimate argument is that social media is just another tool in a fundraiser’s toolbox with which to build relationships with potential donors.  Just as you build relationships over time offline, you have to do so online, and Facebook Causes (and Twitter, and blogs, etc) are another way that nonprofits can spread their net and spread their message and attract followers who can help spread the net, etc.  As Allison pointed out:

Causes on FB enables us to tell our own world – distinct from the world -  about the issues, campaigns, orgs that they are passionate about. We can bring our networks of friends, our ingenuity, our passion, our time, our expertise to support causes.  It enables lots and lots of people to learn about causes and to share them with their friends easily, quickly and inexpensively…The bottom line here is that Causes isn’t just about raising money, it’s also about raising friends and awareness, and in the long run turning loose social ties into stronger ones for a cause may be more important than one-time donations of $10 and $20 dollars right now. Our rush to judge this application effective or ineffective over a very short time period with a primary user base of very young people is off base.

So I am rehashing this argument because an online fundraising company, Charity Dynamics, (which happens to be headquartered in Austin) has just had some revenue-raising success with a new Facebook app they created called Boundless Fundraising. This app allows people to extend the fundraising activity they are doing for a nonprofit into their social media profile pages.  Charity Dynamics just announced this week that the application has seen some pretty impressive financial results just in its first 6 months.  36 organizations currently use the app to increase support and giving for more than 2000 events, and they’ve raised $2.5 million so far this year.

That’s a pretty impressive number, so I asked Donna Wilkins, President of Charity Dynamics, how much of this is new revenue for these nonprofits, and she replied:

The great thing is we’re finding that about 75% of the donations are from new constituents vs a range of 40-60% for other donations for these events. Traditionally when someone fundraises for one of these events through Convio or Blackbaud, they send an email to friends and family requesting support.  The biggest hurdle for participants is sending the email and deciding who to send it to.  Boundless Fundraising application sends a newsfeed that all your Facebook friends see with just a couple of clicks. For most participants this means more friends are hearing about their participation and fundraising.  We had one great story where a participant told us she got a gift from someone and she doesn’t even know the person’s email address.  This is a great example of a friend of a friend who supports the cause. We’re also seeing that participants are now becoming multi-channel marketers and they’re asking for support both in email and on Facebook.  In some analysis you can see where a donor made a gift both in response to an email and through Boundless Fundraising.

So 15-35% (or $375-875K) of the money raised is new money. And that’s just in 6 months.  That seems pretty impressive to me.

The point is that social media is a new tool available to fundraisers.  It’s not a magic bullet, but it if you view it as a new, effective way to find and further connect with donors, you could be on your way to raising more money over time.

Tags: Allison Fine, Austin, Beth Kanter, Boundless Fundraising, Charity Dynamics, Facebook Causes, Fundraising, social media, Washington Post

A Gathering of Funders

I was invited to speak at the Central Texas Education Funders monthly meeting about social innovation yesterday morning.  It was an honor to talk to this engaged, savvy, thoughtful group of philanthropists who are passionate about making education better in Central Texas.  Some of the foundations present were: Webber Family Foundation, Aragona Foundation, RGK Foundation, KDK Harman Foundation, Applied Materials Corporate Giving, United Way, Impact Austin, Still Water Foundation, among others.

My presentation provided an overview on social innovation (social entrepreneurship, growth and capacity capital, social investing, etc.) occurring nationally and here in Austin.  After the presentation there was a great discussion among the group that covered exciting experiments in growth and sustainability in our region, why Austin seems to be behind other cities in social innovation activity, the impact of the recession on growth, and the need for collaboration and mergers, and much more.

Ellen Ray from the Still Water Foundation announced an experiment that she and a few other local foundations have launched to grow the scope and capacity of arts education organizations in town.  I hope to have more information on this exciting project in a later post.  In addition, Jessica D’Arcy from the Webber Family Foundation explained how the Central Texas Education Funders group is putting together a funding matrix so that the group can understand which of their membership is funding which projects in town.  Compiling this knowledge could be the first step in understanding how to leverage the resources of the group to make a greater impact.  And Chris Earthman from the Aragona Foundation shared some interesting data about how hypercompetitive Austin really is in terms of foundation funding for our nonprofits.  Austin has one of the highest nonprofit to foundation ratios in the country, which furthers the argument that we have to expand the social capital market here.

So much money exists in Austin, yet at the same time those organizations working towards solutions to our social problems are tripping over each other to get enough capital.  That is a huge disconnect.  If we can learn from other cities about the new financial vehicles that are emerging to help social entrepreneurs, we might begin to see more of Austin’s wealth transfer into the social impact space.

This was a great gathering of funders talking about how to move the needle forward and get Austin more prominently in the social innovation game.  I’d love to see more discussions about how we do just that.

Tags: Applied Materials, Aragona Foundation, Austin, Central Texas Education Funders, Impact Austin, KDK Harman Foundation, nonprofit, RGK Foundation, social capital market, Still Water Foundation, United Way, Webber Family Foundation

A PRI Experiment in Austin Pushes the Social Capital Market Forward

I am so excited I can hardly contain myself.  There is something pretty amazing going on in the world of philanthropy in Austin, Texas.   I have been talking for awhile about how PRIs (Program Related Investments) could be used by foundations in new ways to build the revenue sustainability of a nonprofit organization.

Just to recap, PRIs are loans that foundations make to nonprofits at low, or no interest.  At the end of the loan period (typically 2-3 years) the loan is repaid, or forgiven.  PRIs are usually used for capital projects or land purchases, among other things.  But they could also be used to increase the revenue-generating capacity of a nonprofit organization, through improved fundraising function or launch of an earned income enterprise.  The current economic climate seems like the perfect opportunity for this new use of PRIs when foundations are trying to hold on to their dwindling corpus while maintaining their past level of community support.

As I wrote in an earlier post here’s how it could work:

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.

Well, the KDK Harman Foundation, an Austin foundation started by Janet Harman, who has been on the cutting-edge of Austin philanthropy before, just launched a PRI program to do just this.  According to their website:

KDK-Harman Foundation is seeking proposals from current grantees for Program-Related Investments (PRI) for its August and November board meetings…to (1) develop or expand their social enterprise efforts; or (2) expand their development and fundraising team. Although PRIs are used primarily for real estate loans for affordable housing or community facilities, the KDK-Harman Foundation will utilize PRIs to support loans to established, financially strong nonprofit organizations within the Foundation’s program areas to help grantees expand their scope of services and/or to become more sustainable. Specifically, the Foundation is seeking ways in which grantees could embrace social enterprise as a means to financial stability. Through a loan from KDK-Harman, the grantee could develop or expand its revenue generating operations and within three years repay the loan. Another example is to enhance the development team whereby the Foundation loans funds to hire additional fundraising staff. Within three years, the loan can be repaid through the additional funds raised. Over time, the organization should be much more financially secure with either a financially successful revenue stream or a larger development team.

I love it.  KDK Harman is doing two things with this new program.  First, they are increasing their ability to meet past levels of giving, despite any losses they might have met in the market, because the loaned money will eventually come back to them.  And second, they are encouraging nonprofit organizations to be proactive in creating revenue streams that will make them more sustainable.  Did I mention I was excited about this?

PRIs are used by other foundations (although according to the Foundation Center only a few hundred of the thousands of grantmaking foundations in the country use them), but I haven’t seen PRIs used in exactly this way before.  If you know of other examples of PRI programs elsewhere in the country that are used to increase a nonprofit’s revenue-generating ability, let me know.  But in the meantime, I’m so impressed with KDK-Harman. They are seizing the opportunity of challenging times to create a more sustainable nonprofit sector.

Tags: Austin, earned income, Foundation Center, Fundraising, KDK Harman Foundation, nonprofit, Philanthropy, PRIs

Capital for Social Entrepreneurs

I have written before about the importance of creating a social capital market in order to truly make social innovation possible.  A social capital market provides the same depth and breadth of financial vehicles to social entrepreneurs (both nonprofit and for profit) that traditional businesses enjoy.  This means that financial vehicles such as debt, growth capital, seed funding, equity deals and so on would be in ready supply to those organization’s whose business model includes a social impact component.  The upcoming Social Capital Markets Conference (the second annual this September in San Francisco) is a step in the right direction by bringing philanthropists, social investors, social entrepreneurs and others together to talk about how we bring such a market to fruition.

But there are many other examples of entities that are already out there experimenting with new financial vehicles.  Investor’s Circle is one of these.  Investors’ Circle is a network of over 200 angel investors, professional venture capitalists, foundations, family offices and others who are using private capital to promote the transition to a sustainable economy. It is the largest and oldest network of early-stage investors dedicated to funding mission-driven companies. Since 1992, Investors’ Circle has facilitated the flow of over $130 million into 200 for-profit companies and small funds addressing social and environmental issues. Investors’ Circle members have been behind Zip Car, TerraCycle, United Villages, and Verdant Power among others.

Investor’s Circle is an exciting example of what a social capital market begins to look like.  The capital investments that these investors make are different than traditional angel or VC investments.  For these investors, the social impact is critical, so they are willing to be patient about the financial return in order to make sure that it comes with social return.  As one of their investees, Jere Kolstad, CEO and President of Montana Renewables, has said:

IC Members are…investors who share our vision for more sustainable industry, and who express their commitment with patient, long-term investments.  It’s about more than money for this group—they want you to succeed financially, but not at the cost of forfeiting your social and environmental values.

Investors’ Circle is currently doing a Call for Applicants for its Fall Conference and Venture Fair to be held November 15th – 17th, 2009 in Washington, DC.  If you are an early or expansion-stage companies whose business addresses significant social or environmental issues and are in need of capital submit an application by July 31st. Companies that are selected to present to the investors receive:

• Pre-event coaching on your presentation from IC investors
• The opportunity to present to 150 angel and institutional investors interested in socially-responsible deals
• Extensive formal networking opportunities with investors

It’s a pretty great opportunity.  And a great model for bringing more capital into the social innovation space.  I’d love to see more groups like them, especially in the Southwest.

Tags: Investors Circle, Montana Renewables, Social Capital Markets conference, social entrepreneurs, TerraCycle, United Villages, Verdant Power, Zip Car

The Significance of the Social Innovation Fund

While many were starting their 4th of July vacations last week (me included) President Obama had a remarkable event at the White House.  He invited a very impressive list of nonprofit leaders, philanthropists, social entrepreneurs, and thought leaders to launch his “Community Solutions Agenda.”  Key to this agenda are the White House Office of Social Innovation and the Social Innovation Fund.

Sean Stannard-Stockton of the Tactical Philanthropy blog gives an excellent description of exactly what the Social Innovation Fund will do.  Essentially the Social Innovation Fund is a $50 million federal government fund (assuming Congress actually appropriates the money) that will be granted, via the Corporation for National Service, to “grantmaking institutions” to then regrant (and match the regrant 1 to 1) to nonprofit organizations.

The nonprofits that receive the regranted funds are required to:

• Match the grants 1 to 1  through state, local, or private sources (thus resulting in an overall 2 to 1 match of federal dollars)
• Grow proven programs, or support new programs, in low-income communities
• Demonstrate that they can sustain the program at the end of the grant period
• Use performance metrics to evaluate and improve the program
• Contribute the resulting knowledge to their field

In addition, the grantmakers that receive the Social Innovation funds must provide technical assistance to their grantees.  And the Corporation will 1)provide technical assistance to both the grantmakers and the nonprofits receiving the regranted funds and 2) create a clearinghouse for best practices from the funded projects.

There has been much debate (here and  here for a start) about whether the Social Innovation Fund will have a positive, negative, or any effect on the nonprofit sector and its ability to find and grow solutions.  The most pessimistic of these is Jeff Trexler, professor of Social Entrepreneurship at Pace University, who writes:

At its core, the [Social Innovation Fund] follows a model that’s all too familiar from comparative administrative law–a government program that gives money to subgrantees who in turn give money to other subgrantees, managed through the relentless documentation of how stated program goals were met.  For example, Russia moved to precisely this model recently, channeling social funds through grantmaking intermediaries, and USAID has been doing it for years.

True, the mechanisms of the Fund are probably not that innovative.  And the relatively small size of it ($50 million compared to the hundreds of billions of dollars of federal funding that annually goes into the nonprofit sector) is not very impressive.  But what is interesting and exciting is that the largest nonprofit funder (the federal government) is turning a page.

As Bob Ottenhoff points out on the Guidestar blog, the federal government is by far the largest funder to the nonprofit sector, providing over 29% of its funding, compared to the 12% that comes from charitable giving, which we spend most of our time talking about.  If the federal government could take an interest in innovation in the nonprofit sector (when was the last time that that many nonprofits and philanthropists were assembled together at the White House?), try and succeed at some new funding vehicles, take a lead role (or, really, any role) in the creation of a social capital market to seed and scale social innovation, THAT would be tremendous.

The Social Innovation Fund, in and of itself, is maybe not that impressive. But what is impressive is that the federal government has recognized social innovation as a force for change, is willing to take a risk (albeit small) in this new realm and may be willing to use this test case as R&D for a future, much larger, more innovative stab at getting itself pointing in a new, more helpful direction.  If we are truly going to scale social solutions then the largest funder of those solutions has to be on board. So let’s see what happens when the federal government dips its toe into the waters of social innovation.

Tags: Corporation for National Service, federal government, Jeff Trexler, nonprofit, President Obama, Sean Stannard-Stockton, social entrepreneurs, Social Innovation Fund, White House Office of Social Innovation