There are some exciting things happening at Social Velocity. I have spent the last several months revising and expanding the e-books, webinars, and step-by-step guides I offer nonprofit leaders in the Tools store of the website. These Tools help nonprofit leaders, board members and donors understand the trends facing the nonprofit sector and how to become more strategic and sustainable at creating social change.
And we are moving to a brand new shopping cart system to make the purchase and download of the Tools much easier for you, with additional payment options, a streamlined process and more. I will reveal the brand new Tools store in the next week or so.
But if you want to hear about the launch of the new Tools store first (and enjoy a discount on Tools purchases) sign up now for the Social Velocity e-newsletter. Prior to the official launch of the new Tools store, we will send all subscribers an early bird announcement and discount code to use.
And, as an added bonus, if you sign up for the Social Velocity e-newsletter now you can immediately download the revised and expanded Financing Not Fundraising, volume 1 E-book (a $9 value) for free. Here’s what one reader of the e-book had to say about it:
“I felt a lot of affirmation when I read your e-book as I too believe fundraising as we knew it is history and sometimes that is hard for the board to understand and accept. Your series was incredibly powerful for me and will have a huge impact on us. I think your e-book will give [board and staff] some confidence to make tough decisions. On lots of different levels your e-book was exactly what I think we need right now.”
So if you haven’t already, sign up now for the Social Velocity e-newsletter.
And stay tuned for our new and improved Tools store coming soon!
I’m out of the office this week, so in my place I am offering you two interviews this month. Tuesday was my video interview with Hope Neighbor.
And today I’m talking with Geeta Goel, Director of Mission Investing at Michael & Susan Dell Foundation. In addition to traditional philanthropy, Michael & Susan Dell Foundation makes program-related investments across its India-based microfinance, health and education initiatives, and its US-based education initiatives. Prior to the Michael & Susan Dell Foundation, Geeta spent more than 12 years with the Corporate Finance Group of PricewaterhouseCoopers in India, advising large Indian and multinational clients on joint ventures, mergers and acquisitions, business plans, and valuations.
Nell: Why has Michael & Susan Dell Foundation decided to put an emphasis on program-related investments (PRIs)? How exactly does that particular financial vehicle further your mission?
Geeta: Our mission is to transform the lives of children living in urban poverty through better health and education. There are 2.4 billion people living below the World Bank’s poverty line of $2 a day, and more than 160 million children are suffering from malnutrition. To tackle those numbers and address deep-rooted complex problems, we need solutions that are both scalable and sustainable. And for that we need to tap into different and larger sources of funds – government and private. Program Related Investments (PRIs) are just one of several financial tools we use to further our mission.
The foundation has always sought to concentrate its limited philanthropic dollars to achieve direct, measurable, replicable and lasting systemic change. Early on we realized the power of markets as one lever for creating a more inclusive society. Free markets definitely increase access where it’s most needed. They can also help raise the bar for quality in terms of what customers expect and what they will pay for.
A great example is the microfinance sector in India. Today there are more than 30 million microfinance clients in India. These clients are accessing some $4 billion in credit to invest in income-generating assets such as trading businesses, tea/food stalls and livestock. We played a catalytic role in the Indian microfinance sector by influencing a market shift from rural to urban environments. Beginning in 2006 and continuing through 2009, we provided seed funding to some eight urban-focused MFIs. The success of these institutions helped prove that microfinance is a sustainable, scalable and investible asset class. There are now more than 25 MFIs active in urban India.
This scale has been achieved only because microfinance offers a market-based, sustainable solution that attracted private capital.
Nell: What methods do you use to find projects that make sense for a PRI, rather than a traditional philanthropic, investment?
Geeta: I love your question. It places things in perspective and in the correct sequence.
Our approach has been to first identify projects that can help achieve our desired mission (fighting urban poverty in order to improve children’s lifetime outcomes), and then decide an appropriate funding structure. This is in contrast to other organizations that have de-linked grants and investments; their grant strategy is distinct from their PRI strategy.
We view grants and investments, including PRIs, as part of the same toolset. When we are selecting any projects to fund, the main criteria are the level of their social impact, scale and sustainability. On sustainability, we ask a variety of questions pertaining to the project. Is there a strong business model, and has the product/service been tested? Can it generate revenue and remain true to the original intent? Will other funders—government, investors, and grant-makers, step in to help establish sustainability and scale? Are there adequate quality safeguards or do they need to be created?
The structure of our support is a complex decision emerging from these deliberations. The funding structure can be in the form of a grant, loan, equity or a combination. For instance we made an equity investment in Janalakshmi Financial Services when it was a start-up microfinance institution. We also offered grant support to their non-profit arm Jana Urban Foundation to conduct a detailed analysis of their client base. This helped Janalakshmi Financial Services to better understand the financial needs of their customers and offer additional products tailored to those needs, thus strengthening the company.
An example of a straight PRI is our support for Waterlife, a for profit company offering clean drinking water to low income customers in rural areas, to test the market in urban areas through a concessional investment structure. The goal of the project was to help Waterlife develop and scale an urban business model that would replicate its rural success, given the different challenges within an urban setting.
Nell: Only 1% of U.S. foundations make PRIs. What do you think holds other foundations back from experimenting with mission-related investing?
Geeta: You’re right. Our legal counsel often find themselves in an odd spot at foundation conferences, as we are in a minority group that does PRIs, and an even smaller minority that does direct PRI equity investments internationally. I can’t speak on behalf of other foundations, but based on my discussions over the last few years, I’ve witnessed that investing in market-based solutions is unfamiliar territory for most foundations. They are pushed outside their comfort zone.
Moreover, PRIs are more complex to design and structure than grants. We’re really looking at a culture shift in terms of staffing. PRIs require financial and investment skills that traditional grant teams might not necessarily possess.
Another possible reason is that for many philanthropists making a profit is viewed negatively. Anything that is grant based or in the non-profit space is seen as delivering a positive impact. Anything that is in the market-space is viewed as uncontrollable and exploitative. Lastly, I think it’s the risk of failure that holds back many foundations. Not only are PRIs more risky, their success or failure is transparent and easy to measure in more objective terms. At the foundation, we have seen the ways that PRIs and markets can support social progress. By setting up guardrails and standards, we have managed to contain the inherent risks of PRIs.
Nell: It seems like there is an enormous opportunity to connect impact investors and philanthropists, but that really hasn’t happened yet. How do we better pool philanthropic and impact investment capital for more social change?
Geeta: Traditionally, development efforts and markets have been viewed as two parallel tracks that are unlikely to converge. This has resulted in limited interaction between philanthropists (focusing on non-profits) and impact investors (focusing on for profits).
However, as we move towards recognizing that markets can bridge some of the existing inequalities in access and outreach, there is a definite need for increased connections between philanthropists and impact investors. A few organizations are now consciously working towards this end, especially the ones that are championing a sector based approach to creating and catalyzing markets, like FSG, Monitor Inclusive Markets, and Mission Investors Exchange.
And with impact investments set to reach between $400 billion to $1 trillion over the next decade (JP Morgan Global Research) there should definitely be greater collaboration between the two worlds. This needs to begin with defining “common ground” amongst the two stakeholders.
Today, we do not have an agreed definition of impact and how to measure it. This is a good starting point. Once we have this common terminology and performance assessment framework, appropriate forums and a structured approach to sector level change will go a long way in increased collaboration amongst donors and impact investors.
Nell: Michael & Susan Dell Foundation is obviously at the forefront of program-related investing, but what about other innovative financial vehicles? What is the foundation’s view on philanthropic equity investments (investing in growing or strengthening nonprofit solutions)? Is there promise in those kinds of investments?
Geeta: As I said earlier, we are very focused on our mission and the guiding principles of impact, scale and sustainability. We are open to adopting different tools and approaches that help advance the mission. Right now we are focusing our energies on traditional grants and PRIs.
Philanthropic equity investment is a fairly new concept that definitely holds promise. They are a one-time grant to nonprofits that help strengthen the capacity of the organizations and make them more sustainable. We do not rule out such investments. For the foundation, the key factors to evaluate the option of philanthropic equity are measurable and comparable outcomes and in-built mechanisms for quality and cost efficiencies. In non-profits, these are difficult metrics to achieve, but not impossible, especially as the development world ups the ante on measurement, transparency, and pay for success. We believe that strong governance, transparent reporting and incentives for achieving greater impact at lower costs will go a long way in building the field for philanthropic equity investments.
I am out of town this week, so in my place I am offering you two interviews this month in my ongoing interview series.
First, as promised, is my video interview with Hope Neighbor, CEO of Hope Consulting and author of the Money for Good reports exposing a $15 billion opportunity to direct more private money to high performing nonprofits.
This is the first video interview I’ve done, and I am very grateful to Hope for being the guinea pig. You’ll notice that unfortunately there is no video of Hope, only her voice and a picture of her with her fiance. That’s because we couldn’t get her computer’s camera to cooperate (you’ve gotta love technology!). But the interview is still well worth a watch because Hope has really interesting insights about how donors approach giving and how we might be able to change some of that.
So take a look:
I’m really excited to announce that, as promised, I’m starting to move the Social Velocity Interview Series to video interviews, via Google Hangouts (for those interviewees who are willing). I launch next week with an interview, on the Social Velocity Google+ page, with Hope Neighbor, CEO of Hope Consulting and author of the Money for Good reports exposing an $15 billion opportunity to direct more private money to high performing nonprofits.
In 2010 and 2011 Hope, and her team of partners (like GuideStar and Charity Navigator) and funders (like The Gates Foundation and The Hewlett Foundation), conducted comprehensive studies of donor behavior, motivations, and preferences for charitable giving in order to understand how to effectively influence giving behaviors.
Money for Good I found that 90% of donors say how well a nonprofit performs is important, but only 30% of donors actively try to fund the highest performing nonprofits. So there is a disconnect.
In Money for Good II, Hope and her team set out to figure out what it would take to change donor behavior and direct more money to high performing nonprofits. What they found is that more information about performance and more “Consumer Reports” style reporting could encourage more donors to switch their giving to higher performing nonprofits.
This is all fascinating and helps inform the on-going question, “How do we funnel more money to social change?” Needless to say I have lots of questions for Hope.
Here is my list of questions for Hope, but I imagine since it’s a conversation the questions will evolve:
- With Money for Good you are hopeful that we can change donor behavior and shift more money to high performing nonprofits. But what will it take beyond providing more (and better information) to donors? How do we create incentives for donors to change?
- Money for Good estimates that $15 billion could shift to high performing nonprofits, but that is only 5% of the total private money flowing to nonprofits. And only 12% of all money flowing to the nonprofit sector comes from the private sector, so we are really only talking about shifting 0.6% of all the money in the sector to high performing nonprofits. Is that piece of the pie worth the kind of donor behavior change effort required? What about expanding the overall pie (only 2% of the annual Gross Domestic Product has historically gone to the nonprofit sector)? Is there any hope of growing the 2%?
- Where does impact investing fit in all of this? Typically only 5% of a foundation’s money is directed to social change efforts. What about the opportunity to encourage foundations to tap into their corpus and do more program-related and other mission-related investing?
- How do we ensure that more information means better information? What if low performing nonprofits simply start mimicking high performing reporting? How do we ensure that accurate performance evaluation is conducted and reported across the sector? And how do we fund that?
- What about the problem of donors misconstruing information? For example, if nonprofits provide more financial information, and donors still have a bias against overhead spending, could that just shift more money to nonprofits with lower overhead, not necessarily higher performance?
Watch for the interview on the Social Velocity Google+ page next week.
And stay tuned for more video interviews soon!
I mentioned earlier this year that I would start using Google Hangouts (on the Social Velocity Google+ page) for interviews, videos, Q&As, etc. Well, I’m excited to share with you my first video from the Social Velocity Google+ page. I want to begin doing regular videos that describe an aspect of moving your nonprofit forward. And next week I’ll share my first video interview.
Today, I’m talking about why I think every single nonprofit board member should be involved in bringing money in the door. I know this is a controversial topic, so take a look at why I believe it so strongly.
My hope is that these videos will spur new discussion in your nonprofit. So, you might consider having your board watch this video at an upcoming meeting and then discussing whether your board starts moving in this direction. If nothing else, it’s food for thought.
If you have a topic, issue or question you’d like me to cover in an upcoming short video, let me know in the comments below. And if you want to be notified whenever there is a new Google Hangout, join the Social Velocity Google+ page.
There were some really great articles and discussions in the social change space this past month. From new attempts to put philanthropy under the microscope, to analyses of Silicon Valley’s contributions to social change, to the difference between market innovations and social innovations, to Millennial giving, there was a lot to think about.
Below are my picks of the 10 best reads in the world of social innovation in September. But please add what I missed in the comments.
The 10 Great Reads lists from past months are here.
- Silicon Valley has been getting into the social change game, but some aren’t impressed with their contributions so far. David Henderson takes Silicon Valley to task for focusing their technology “innovations” only on broken nonprofit fundraising models (Google’s announcement in September of a new fundraising app, One Today, is an example of what he’s talking about). And Charles Kenny and Justin Sandefur seem equally unimpressed arguing that Silicon Valley’s view that technology can end global poverty is “wildly overoptimistic.”
- And speaking of social change and business, Daniel Goldberg makes a very interesting (and helpful) distinction between “market innovations” (“an opportunity for profit that also happens to help people…and [is] effective precisely because [it] so cleverly ride[s] the market wave”) and “social innovations” (which “produce value by filling gaps left by the market…a business opportunity in the classic sense, but a systematic market failure that required a social purpose to address”). Much of impact investing, he argues, falls into the first camp, whereas social impact bonds fall into the second.
- It is crazy (and terrifying) how the wealth of America is increasingly concentrated in a small group of people at the top. The rate at which it is happening is mind blowing. The 400 richest Americans are worth $2 trillion, which is a $300 billion increase from last year and double what it was a decade ago. And in 2012 the top 10% of earners brought home more than 50% of the total U.S. income, which is the highest level ever recorded. Kind of depressing, isn’t it?
- But there is hope. Clara Miller, formerly head of the Nonprofit Finance Fund and now head of the F.B. Heron Foundation, is one of the leading visionaries in the social finance space. Her recent article is a must read and explains the dangers of nonprofit growth without adequate capital and what funders can do to prevent it.
- Paul T. Hogan, VP of the John R. Oishei Foundation, argues that funders should focus on building nonprofit organizations: “The development of the nonprofit organization provides plenty of factors to evaluate and many outcomes to strive for. It can also satisfy the funder’s obligation to effectively steward resources insofar as an organization is being helped to last for the long term and have a much greater chance of effectively achieving its, and therefore the funders’, goals.” Oh, if only more foundation leaders thought that way!
- Pablo Eisenberg writes a fairly vehement rant against philanthropy for being an increasingly closed loop. He argues that their insularity “keeps philanthropy from solving serious problems” and that we need “foundations and big donors to realize they don’t have all the answers. Nonprofits should have a greater role in driving the agenda.”
- September saw the annual Social Capital Markets Conference and one of the interesting things to come out of it was a new Community Capital Symposium that immediately preceded SoCap this year. CoCap brought non-accredited investors (with a net worth below $1 million) and social entrepreneurs together to talk about community-focused investing. It’s an interesting financial innovation to watch.
- Over the month of September, GrantCraft, a project of the Foundation Center, ran a 4-episode podcast series talking about and with Millennial philanthropists as a complement to the Johnson Center NextGen Donor Report about Millennial giving that came out earlier this year. Fascinating stuff.
- And then on the tactical side, HubSpot offers some great insight on What Millennials Really Want From Your Nonprofit’s Website.
- I always love urban food innovations, perhaps it’s because they are addressing several social problems at the same time (urban decay, obesity, economic decline, environmental degradation). And so I was interested to see that urban rooftop farming is a new trend.
Photo Credit: UWW ResNet
I love to read, and when I’m not reading about nonprofits, philanthropy, and social innovation, I like to read pretty far outside that world to get a new perspective. In the last few months, four books in particular altered my worldview in pretty fundamental ways. And although these four books don’t discuss the social change sector, I share them with you because I think they hold real insight for social change leaders.
Steven Pressfield wrote this groundbreaking book in 2003 as way to help artists move beyond their blocks and create the art they were put on earth to make. But really this book is about much more. It is for anyone who struggles to find your true calling. For those of us working on social change, it’s a hard, hard, hard battle every single day. This book helps you determine exactly what your contribution is supposed to be and how to move beyond the barriers keeping you from making it happen. “Our job in this life is not to shape ourselves into some ideal we imagine we ought to be, but to find out who we already are and become it.” This book will help you get there.
I know, there’s been much controversy about Sheryl Sandberg’s feminist manifesto about how women need to take charge of their careers. Honestly, I don’t really get the controversy because I think confidence (essentially what she is talking about) is a prerequisite to accomplishing anything in life. If you are only partially sure that you are where you need to be, and if you are only weakly asking for the change you seek, and if you are only mildly suggesting that people to join you, it won’t happen. This book could almost be about the nonprofit sector standing up and demanding to take their rightful seat at the table of economic growth, social change, public policy. “We hold ourselves back in ways both big and small, by lacking self-confidence, by not raising our hands, and by pulling back when we should be leaning in.” Come on social change leaders, Lean In!
Quiet: The Power of Introverts in a World That Can’t Stop Talking
A book about introverts may seem out of place in this list, but I found it tremendously insightful. I fluctuate between being an introvert and an extrovert, and I’m not a huge fan of labels, but Susan Cain helps you understand that your qualities are a tool to use in your work. As a social change leader, you must understand and tap into your unique skills and abilities (whatever they may be) in order to make real change happen. “We know from myths and fairy tales that there are many different kinds of powers in this world. One child is given a light saber, another a wizard’s education. The trick is not to amass all the different kinds of power, but to use well the kind you’ve been granted.” I loved the quiet wisdom of this book – it really makes you think, which introverts often encourage us to do.
The Big Enough Company
This book is targeted to women entrepreneurs, which is why it originally appealed to me. But really, it redefines entrepreneurship. Adelaide Lancaster and Amy Abrams argue that the right business model is the one that fits your goals and passions. You should never make strategic decisions based on what people think you “should” be doing. And I would extend that to social change efforts as well, which are often led by a single individual who recognizes a problem and is passionate about a solution. Along the way they are told how “impossible” their solution is. But it’s critical to hold fast to your passion and build momentum around it. “It’s easy to let popular advice cloud your vision and confuse your goals, losing sight of what you sought to achieve in the first place…Deep down, we know better. We know that the real goal isn’t size (necessarily); it’s success. ”
These four books did what I think good writing should do, they made me really think (long after the last page) about my assumptions, my behavior, and the barriers standing in my way. They encouraged me to recalibrate and emerge stronger and (I hope!) more savvy.
What books have you read lately that made you think about your work differently? Please add to the list in the comments.
ArtsFwd, an interactive online platform where arts leaders can learn from each other about the power of adaptive change and the practice of innovation, is holding a first-ever National Innovation Summit for Arts + Culture October 20th-23rd in Denver and online. (I interviewed the head of ArtsFwd, Karina Mangu-Ward, on the blog in 2012 and co-led a Chronicle of Philanthropy Live Chat about connecting money and mission with her last spring.)
The National Innovation Summit for Arts + Culture will bring together arts leaders from around the world to explore the challenges, discoveries, and achievements of daring to depart from traditional approaches. Although the Summit will take place in Denver there is also a robust virtual component. The on-site conference will bring together 250 pioneering arts leaders and funders from 14 communities who were selected based on their track record of innovation and well-developed adaptive capacities.
But the Virtual Summit is open to everyone. All 27 powerful Summit Talks will be available via livestream. The dynamic series of thematically linked 12-minute talks by bold leaders from across the country will highlight the remarkable and mostly untold stories of innovative projects unfolding in arts and culture organizations.
The themes are:
- Taking Collective Action (6p ET on 10/20)
- Co-Creating with the Public (11a ET on 10/21)
- Artists as Agents of Change (1p ET on 10/21)
- Animating Neighborhoods (5:30p ET on 10/21)
- Citizenship and the Arts (11a ET on 10/22)
- Transforming Organizational Structure (5:30p ET on 10/22)
I will be leading an online discussion in the Transforming Organizational Structure theme. In this theme, six speakers will each spend 12 minutes talking about their stories of radical restructuring inside their organizations, including new staffing structures, the creation of innovation capital, embracing risk, and redefining the meaning of success in order to support innovation. Some of the speakers include Susan Medak, Managing Director of Berkeley Repertory Theatre; Steven Matijcio, Curator of Contemporary Arts Center Cincinnati; and Lori Fogarty, Director and CEO of Oakland Museum of California.
Instead of asking the question, “How do we survive?” these arts leaders asked the question “What do we want to accomplish and how can we rethink our work to get there?”
The Transforming Organizational Structures theme is all about breaking free from small thinking. Small thinking handcuffs organizations to the ways things have always been done, the staffing structures that have worked before, financial models that once were profitable, programs that used to draw an audience. In order to stay relevant and continue to make an impact in our communities, arts organizations increasingly need to scrap the old structures and reinvent themselves.
This is not easy work, by a long shot.
So I am eager to hear these arts leaders talk about how they stayed true to larger, longer-term goals while throwing out old structures. How they found consensus around an ultimate goal and then began to build structure around it. And how they found funding for this transformational work. Arts organizations are notoriously resource constrained, which often breeds an aversion to risk. So I look forward to hearing how these organizations broke free from that risk aversion and found a way to innovate forward.
At the end of the six talks, I will lead an online discussion among the group. My questions will include:
- What elements need to be in place in order to completely rethink organizational structure and purpose?
- How can organizations move away from thinking about structure and instead think about the ultimate end goal of the work?
- How do we move beyond the inherent risk-aversion of a financially strapped sector in order to embrace innovation?
- How do we convince funders that risk and innovation are worth funding?
The National Innovation Summit for Arts + Culture promises to open our minds to new possibilities and ways forward. To participate in the Virtual Summit, register here.
I hope to see you there!
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