I have a new post up at the Change.org blog, “What Does the Handmade Movement Say About Social Entrepreneurship?”. Here is an excerpt:
Last weekend I went to the Renegade Craft Fair, the first time the traveling “edgy craft fair” has made it to Austin. As I passed booth after booth of creative, cool, handmade posters, paper, clothing, bags and other items, I was struck by how this craft fair is a fascinating microcosm of the convergence of three trends that are moving social entrepreneurship toward a tipping point.
The Renegade Craft Fair was started in 2003 in Chicago by Kathleen Habbley and Sue Blatt, two “crafters” who wanted a venue to sell their funky, homemade wares. In the past 7 years the fair has seen great success and expanded to four other cities, including this year’s foray into Texas.
Renegade is one of many examples of a handmade, or “do it yourself,” revolution that is sweeping the country. But I think that this revolution isn’t just about the homemade, it’s also about social entrepreneurship and the converging trends that are (we hope) taking it mainstream…
You can read this entire post at the Change.org blog.
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As I have written before, despite being the 3rd largest venture capital city in the country, Austin is slow to climb on the emerging social capital market bandwagon. Tremendous wealth and entrepreneurial expertise exist here, but there isn’t a lot of energy around creating a continuum of capital for social entrepreneurs. Perhaps that is about to change.
Slow Money is a national movement aimed at increasing the availability of risk capital to sustainable food-related social entrepreneurs. Austin recently established an affiliate of the movement here, Slow Money Austin, and their kick-off event is next month. Scott Collier, who has written on this blog before about mission-related investing and has been active in Austin’s venture capital community for years, is helping to lead this effort. I interviewed him about Slow Money Austin and what they hope to accomplish. Even if you don’t live in Austin, I think it is interesting to watch how one of America’s top 50 cities is responding to the increasing demand for a capital market for social entrepreneurs.
Nell: What is Slow Money Austin?
Scott: Slow Money Austin is a Central Texas affiliate of the national Slow Money Alliance focused on increasing the availability of risk capital to support the growth of sustainable food enterprises.
Nell: Why do you think Slow Money is a fit for Austin at this particular point in time?
Scott: Austin is one of several locations around the country where there is significant and growing interest in local food sources, organic farming that is better for people and planet, and sustainable food businesses that can provide much needed jobs and natural food alternatives. Slow Money is important to these businesses as they cannot grow to serve the increasing demand unless they have access to capital, especially patient risk capital that invests in partnership with food system entrepreneurs.
Nell: As part of a national movement, how will Slow Money Austin differ from other Slow Money organizations around the country?
Scott: Oh, I imagine we will find ways to make our Slow Money activities weirder than others. But seriously, Austin has such a national reputation for a healthy, entrepreneurial and well-educated population that I think it is obvious we should be national leaders in this process. Maybe it is because we are home to Whole Foods, the best entrepreneurial success story in the health food industry, or maybe it is because Austinites value community, health and a connection to nature like few other places in the country, but whatever the reason, this could be the start of a major new investment and entrepreneurship sector for Austin.
Nell: Your kick-off is in April, what do you hope to get out of this event?
Scott: The main objective is to get the Austin investment and entrepreneurial communities talking about the local and sustainable food sector in a serious way. The food industry, at over $600 billion, is a big part of the U.S. economy and it has a huge impact on hot-button issues like healthcare costs, carbon footprint and environmental health. With Slow Money, we want to awaken entrepreneurs and their funding sources to the great opportunity we have to use the power of free enterprise to tackle these major issues of our time.
Nell: What happens after the event? Where does Slow Money Austin go from there?
Scott: Great question. We are hoping to awaken some regional leaders to the opportunity with this event and after the event we would like to see ongoing events and investment activities proliferate that continue to build sustainable food enterprises. I like to draw a parallel to the efforts 20 years ago to bring attention to the opportunities for Austin entrepreneurs and investors to build technology businesses. As Texas struggled to come out of a dismal recession, thought leaders in this region launched the Austin Technology Incubator, The Capital Network, the Austin Technology Council and held events and venture conferences, all of which allowed Austin to claim a solid portion of the growth in the then-emerging tech sector. Cities all over the U.S. are still coming to Austin asking how we managed to pull that off. Well, hopefully this event will trigger some similar thinking as regional leaders see opportunity to create sustainable economic welfare in a large and growing sector: the sustainable foods market where margins and growth rates are high, but market penetration, at only about 3 percent, leaves tremendous room for further growth.
Nell: I’m fascinated by the funding piece of this. Is one of your goals to create a fund for sustainable food-related entrepreneurs in Austin? And if so, how does that fund work, how big is it, how are investments made, what do the investments look like?
Scott: I would again point to the example of 20 years ago and say it is not about creating a single fund to answer the opportunity. Instead, it is about creating a continuum of angel and fund investors and a support network of legal and other services that can support ventures ranging from dozens of small farms that want to bootstrap healthy lifestyle businesses all the way to scalable production, processing or distribution companies that can produce strong returns and substantial social benefits. What the funding for these business should look like varies from simple equity or unsecured debt investments of tens of thousands of dollars to larger amounts coming from investment firms managing tens of millions. Considering the scale of the opportunity across the country, it is not hard to see dozens of funds emerge managing amount of $10 million to hundreds of millions. This is pretty much what has happened in the Cleantech sector, which 10 years ago was hardly a sector at all and now accounts for about a fourth of the $20 billion in venture capital that is invested in a year’s time. Of course I think there is room in Austin for a couple of funds especially focused on Texas, and I would hope that some of the existing venture and private equity firms would allocate some attention to the sector.
Nell: How do you think such a fund or funds will fit into Austin’s current “emerging” social capital market?
Scott: That raises a very important distinction that will be made in Slow Money activities. The book that Woody Tasch wrote, called Inquiries into the Nature of Slow Money, addresses this in a more comprehensive way, but in a nutshell, Slow Money investors will mostly be investors that are seeking a financial return as well as a social impact. This raises the potential for the sustainable food sector to be a major target for philanthropists and private foundations as they launch Program Related or Mission Related Investment practices deploying funds to generate not only a financial return but also a positive impact to human health, environmental and animal well-being, and employment opportunities. A dramatic example of such fresh investment thinking is the Gates Foundation’s recent move to deploy $400 million into such impact investments. While this represents just 1% of Gates Foundation corpus, imagine the impact that could result if the other $500 billion or so of foundation capital in America invested with similar expectations. We would see the deployment of $5 billion of investment capital seeking positive social impact and a financial return of capital, thus creating a sustainable, perpetual virtuous cycle.
Nell: Besides you, who is behind bringing Slow Money to Austin?
Scott: We have great underwriting sponsors in Whole Foods Market, a global leader in the healthy and sustainable food sector, and Barr Mansion, one of the country’s first USDA Certified Organic events facilities, where we will be holding an investor-focused local food dinner April 22nd. And of course we have great partners in the Sustainable Food Center and the City of Austin, who will host the Showcase event on the 21st in our own LEED Gold-certified City Hall. We have great support from Austin Ventures, The RGK Center for Philanthropy and Community Service, Greenling, Dai Due Austin, and too many others to name here. And of course we will have Woody Tasch representing the national Slow Money Alliance in attendance to kick things off. It should be an interesting discussion, and an amazing dinner! Sign up at www.slowmoneyaustin.org.
Today wraps up the Social Entrepreneur track of RISE, Austin’s SXSW-style conference for entrepreneurs. It was a lot of fun putting together the track with Jessica Shortall, with lots of help from Annie Frierson, Suzi Sosa, Andy White and the many amazing, inspiring social entrepreneurs in our area. I’m so impressed with the speakers and panelists that made up the track. From design-thinking for social entrepreneurs, to domestic microfinance, to technology for social impact, to social investing, to balancing mission and profit, and much, much more. It was so great to see those working in the gray area between social impact and entrepreneurship together sharing insights, ideas, knowledge, discussion, debate.
I couldn’t get to all of the sessions in the track, and so I’d love recordings of those I missed. But because RISE is a free conference there is little budget for “extras” like recording equipment and staff. However, I heard a rumor that some of the sessions were unofficial taped. If you know of any taped sessions, let me know, and I’ll post them to this blog. And I will definitely make the case to the organizers of RISE that next year we find a way to tape sessions. Because this content is just too rich to be shared by only the 25-40 people in the room.
So I wanted to share my takeaways from the RISE Social Entrepreneurship track and thoughts about where we go from here.
First, the takeaways:
- There is tremendous interest and energy around social entrepreneurship in Central Texas
- However, there is little infrastructure or eco-system to effectively support those entrepreneurs
- More social entrepreneurs in the track and attending sessions were women (that could entirely be based on the fact that the leaders of the track are women, but I think there’s more to it than that)
- There is a debate about whether social entrepreneurs need to bootstrap as long or as hard as traditional entrepreneurs since the same end reward (financial profit) does not really exist for SEs
- Funders of social entrepreneurs are not present in nearly as many numbers as social entrepreneurs
- An “investment banker” or “broker” vetting and connecting social entrepreneurs to potential investors is a key part of the needed ecosystem
And that’s just a beginning list. There were far too many conversations, insights, war stories, and needs to catalog here.
Which brings me to where we go from here. There is a disconnect for Austin in the realm of social innovation. When I talk with people in the social innovation space outside of Texas they are always interested to hear that I am from Austin and are sure that Austin is well along the path of launching and growing social entrepreneurs. Because of Austin’s reputation for progressive ideas, its wealth, its technology background and its rank as the third largest venture capital city in the country, people assume that social entrepreneurship, which often follows from these things, is burgeoning here. When I tell them that isn’t the case, they are shocked. What is holding Austin back?
We heard some provocative conversations this week and saw some inspiring examples of social entrepreneurs who are making it and funders who are helping them along. But that’s not enough, not even close.
Social entrepreneurs need access to significant funding at every step of the game from seed to growth, whether their model is nonprofit, for-profit or a hybrid. We need to give social entrepreneurs the skills to create solid business strategy around a great idea, language for creating a compelling pitch, infrastructure to grow results. We need to create communities for social entrepreneurs and social investors to interact, network, learn from each other, forge partnerships. But most of all we need to collectively say, it’s not enough. One week a year is not enough. A handful of social entrepreneurs and social investors in a city of 1.7 million is not enough. Social innovation is a growing industry, one that Austin should and must climb on board. I’m not satisfied. I want to see more. A lot more.
The kick-off of Austin’s MindPop collaboration was this morning. MindPop, which I’ve written about before, is a collaboration of a handful of leading Austin philanthropists hoping to improve access to arts education for all Austin children. They want to understand what is holding our kids back from learning about and experiencing the arts and what needs to change in the infrastructure of the city in order to fill those gaps.
The project has 3 phases:
- Gap Analysis to determine what is missing in the arts education ecosystem in Austin
- Creation of 4 bold goals to solve those gaps
- Distribution of close to $180,000 in grants to fund capacity building of the overall system and of individual nonprofit arts organizations
So today was the launch of the project with about 75 of the who’s who in Austin’s philanthropic, education, and arts worlds in attendance. The keynote speaker was our new Austin Independent School District superintendent, Meria Carstarphen, who obviously has tremendous passion for the importance of arts education. Her recent arrival in Austin is itself a real opportunity for change to the system.
As inspiration for Austin’s foray into building this collaboration, Gigi Antoni, CEO of Dallas’ Big Thought, was there to explain how her organization led Dallas from a community that dismissed most of their art and music teachers in the 1970s, to a comprehensive, fully funded in- and out-of-school arts learning environment. Over the course of the last 12 years, Big Thought has brought together philanthropists, educators, arts organizations, schools, parents, and community leaders to create an ecosystem for arts education that ensures that all Dallas children have a rich art-centered learning environment both in school (90 minutes of arts instruction for every student every week) and in their communities (music camps, rehearsals, rec center activities, etc). For Gigi, the big transformation was that Dallas went from a bunch of individual solutions and organizations that were providing “random acts of change” to a “completely changed environment that works as a SYSTEM” to create arts education for every child in Dallas.
I have to admit that I am a bit skeptical about whether what worked in Dallas will work in Austin. We have a tendency in this city that I love to talk and plan and envision a future, but sometimes find it difficult to move towards action, perhaps part of that stems from a lack of infrastructure and capacity. So what I am really excited about with MindPop is not the gap analysis and the creation of 4 ideas for solutions. I have no doubt that the gap analysis will be thorough and the ideas for solutions creative and exciting. I am most interested that a group of five very influential philanthropists (family foundations, a corporate foundation, and the Austin Community Foundation) is pooling their resources and efforts toward a common goal, and more importantly, toward building infrastructure and an ecosystem for the arts education sector. Often it is the infrastructure that is missing in true solutions. Ideas are great, and so many fabulous ones exist. But the real hurdle is taking a great idea and building the infrastructure, support, ecosystem behind it to create results.
The other exciting thing about this project is that it could become a model for funder collaboration and ecosystem creation that could be replicated in other nonprofit issue areas. What if all of the education, or healthcare, or youth development, or environmental funders in town got together and decided that they wanted to create an ecosystem of money, expertise, organizations, solutions that could work together towards system-level, not individual program level, change? That would be pretty interesting.
I’m thrilled that these philanthropists are working so closely together, putting money and resources behind this collaboration, and being very public and transparent about the process. I would love to see more philanthropists putting their resources behind big picture, infrastructure-building solutions.
I plan to keep my eye on this project, and I’ll keep you posted.
I mentioned earlier that a group of Austin philanthropists is working on a collaboration around building the capacity of local arts education organizations. I now have more information on the project, and as an example of philanthropic collaboration and capacity building it’s pretty interesting. The project, called Mind Pop, is a $225,000+ collaboration among Still Water Foundation, Webber Family Foundation, Applied Materials, Tapestry Foundation, the Education Foundation of America and additional funders who they are still working to secure. The leaders of Mind POP hope to improve the unequal access Austin students have to high quality arts education and the lack of capacity and collaboration among arts education organizations in town.
Their goals for the project are to:
- Establish a baseline for measuring improvements in access and quality
- Pinpoint inequities in the community to design targeted solutions
- Strengthen relationships between key community partners
- Fund four pilot projects designed by the key partners to address systemic change
- Improve the capacities of 25-40 arts education orgs and provide seed funding to strengthen their programs
- Act collaboratively, laying a foundation for ongoing coordination and potential national funding going forward
The project has three phases over the next year. Phase One is an analysis to understand gaps in resources in the current arts education landscape. Phase Two is a series of professional development sessions for arts education organization leaders to address the four most critical barriers to capacity that they see. These two phases will happen concurrently. Then, Phase Three will be the distribution of $150,000 in grants to the arts organizations that participated in the capacity building sessions. This money is comprised of four systemic change grants at $25,000 each and 40 mini-grants at $1,000-2,500 for organizational change projects.
The details, partnerships and funders are still being worked out, so this is all subject to change, but I imagine the basic overall design of the project will stay the same.
Although the scope and dollar amount of the collaboration and capacity building project is relatively small, it is impressive for two reasons. First of all, I like to see philanthropists pooling resources for greater leverage. Particularly in Austin, where our foundation assets are small compared to the foundation assets of other cities, collaboration is crucial to achieve broader and deeper social impact. So the fact that these family and corporate foundations are creating a pooled fund of money means a greater amount of capital working for the same goal, which hopefully means a greater chance that the goals are realized. And secondly, this project is interesting because it seeks to understand AND remedy problems of capacity within the nonprofit sector. I have talked at length about the need for greater capital to fund organization building in the sector. Philanthropists are often hesitant to see their money go anywhere other than direct program services. But when philanthropists like those in Mind POP recognize how important capacity and organization building is to addressing the root cause of social problems (like unequal access to arts education) they are moving the sector forward. They are recognizing and demonstrating to their colleagues that capacity can and should be supported.
It will be interesting to see how this project progresses and the outcomes it achieves. I’ll keep you posted.
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.
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.
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.
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