Note: Second in my list of esteemed guest bloggers this summer is Adin Miller. Adin is Senior Director of Community Impact and Innovations at the Jewish Community Federation and Endowment Fund, but his post is his personal viewpoint, not necessarily that of his employer. Here is his guest post:
Readers of the Social Velocity blog know of Nell’s clarion call for nonprofit financing not fundraising and her conviction that the current mode of nonprofit growth through fundraising is bankrupt. Today I want to examine another area I consider broken, namely the ineffective way in which philanthropy identifies and grows emerging organizations and projects – the domain of scaling innovation. I’ll focus on the Jewish federation system, in which I currently work, and then pull back out to the larger philanthropic sector.
To begin, let’s define innovation funding as the practice of funding an innovative venture – a new emerging organization or an iteration of an existing program within an established organization – that does not yet have evidence-based documentation of its approach but that points to the potential to generate significant social benefit. In my work, I also focus on the stages of funding an innovative venture goes through as it morphs into a scaled up nonprofit. Funding is generally aligned with the following stages:
- Pre-proof of concept
- Proof of concept
- Pilot stage funding
- Early stage funding
- Second stage funding, and
- Mezzanine stage funding.
By the time the organization has approached mezzanine funding, its annual budget will be growing from the $1 – 5 million level per year to the $10 – 50 million level per year.
The Jewish federation system represents one of the oldest philanthropic engines in the United States and Canada, tracing its history back to 1895. The system includes 153 Jewish Federations (local independent fundraising and grantmaking nonprofits) and over 300 Network communities (volunteer driven federations), which raise funds and distribute resources among programs serving the Jewish community. Per the Jewish Federations of North America (JFNA), each year the federation system raises and distributes “more than $3 billion annually for social welfare, social services and educational needs,” placing it among “the top 10 charities on the continent” in terms of grantmaking.
One would think that as units in an overarching system that the local federations would share a common agenda. And that’s true to a large extent – there is commonality of purpose (funding Jewish overnight camps, for instance), ongoing support for local Jewish organizations, and consistent funding support in Israel and other global Jewish communities. However, where the system fails to deliver is in scaling up innovative ventures.
Much of that failure in funding innovation is attributable to a confluence of factors such as limited geographic scope and funding periods. With the exception of international funding, for instance, each local federation fences its funding to the geographic area in which it operates. As such, a local federation won’t fund an emerging innovative venture unless it has a presence within the funder’s geographic area. That holds true even if the innovative venture has developed the best new approach to addressing a critical area of need because it operates on the other side of the figurative (and in some cases literal) river.
Additionally, many federations provide limited funding windows lasting between three to five years. The funding period is usually sufficient to help an innovative venture establish some basis to prove its concept. But it also forces these innovative ventures to focus on sustainability instead of continued growth, a syndrome similar to the starvation cycle experienced by more established organizations. This failure by the funders to adopt a long-term strategy to not only fund but also finance the continued growth of a successful innovative venture tends to prematurely end its ability to scale efforts and generate more impact.
The situation for the innovative venture is further exasperated if it concludes that continued growth can only be achieved through expansion to new locations. By virtue of each federation working independently, without an intentional approach to working collaboratively to scale an innovative venture, the “system” establishes unique markets. And each unique local market forces the innovative venture to reestablish its market opportunity. That involves seeking independent funding for each location, repetitive due diligence scrutiny (because, as we know, funders don’t proactively share due diligence data amongst themselves), and a faint hope that sustained funding or financing will materialize after the initial funding period ends.
In short, this is not an efficient method for scaling innovative ventures. It has generated pockets of nonprofit incubators in New York, Chicago, San Francisco, Los Angeles, and others. And any number of innovative ventures emerge each year – there’s even a handy guidebook to track some of the most promising ones. But there is no methodology or intentional effort on a national scale to support these innovative ventures at all stages of their potential development (from pre-proof of concept to mezzanine funding). In some sense, growth is based on a hope and prayer that another funder will step in and continue to fund the innovation venture as it looks to scale.
You can take my above critique and substitute the words “community foundations” for “federations” and you will see the same issues in the larger philanthropic sector. Just as the federation system does not effectively scale innovative ventures, neither do community, local family, and private foundations.
The absence of a coordinated national strategy to support the ongoing growth and potential impact of innovative ventures highlights the inherent inefficiencies of the philanthropic sector. The Social Innovation Fund was one potential hope that could address this challenge. But its focus remains centered on those ideas that have already generated evidence-based results. The newly announced White House initiative on impact investing with pooled resources of $1.5B might also point to a new opportunity, but it’s too early to tell.
So, what’s the potential solution to supporting scaled growth of innovative ventures?
One idea, which I first came across in the energy technology sector through a blog post published in 2011 by the Breakthrough Institute, would involve establishing an independent nonprofit investment bank to offer a range of financial tools (grants, loans, etc.) to help not only fund but also finance the growth of an innovative venture. If the federation system could pool 1% of its annual grantmaking budgets into this bank, that would create a $30 million annual fund. And if community foundations could do the same, we’d have an almost $50 million annual fund (this week’s Chronicle of Philanthropy reported that community foundations’ assets now total $66 billion and giving is nearly at $5 billion per year).
A second idea would involve creating a framework by which funders would actually work together to lower the structural and financial barriers limiting the continued growth and impact of innovative ventures.
Both ideas require more thinking and a willingness by philanthropic communities to come together to explore possible solutions. The investment bank would certainly require local funders to give up some autonomy of decision-making and local application of funding in order to provide resources for greater social benefit. The second idea would require a national or prominent organization to take the lead in organizing a coalition and developing the framework.
And if all else fails, perhaps we should consider a petition to the Bill and Melinda Gates Foundation to share its resources in more unique ways (this coming on the day the foundation received $2.1 billion from Warren Buffett).
At the end of the day, we should allow innovative ventures to succeed and fail on their own merits, instead of as result of a broken funding model.
Photo Credit: 401k2012
This week I attended the After the Leap conference in Washington D.C. and was blown away. As I mentioned in a post earlier this year, the conference was organized by Social Solutions and PerformWell partners Child Trends and Urban Institute and builds on the momentum Mario Morino has created around his book, Leap of Reason, published in 2011, and the companion book Working Hard & Working Well by David Hunter published this year.
This first-ever conference was an attempt to bring the nonprofit, philanthropic and government leaders who are on the cutting edge of the movement to create a higher-performing social sector together to, as Mario put it “grow a critical mass who can mobilize for greater change.”
What’s Government’s Role in Nonprofit Performance?
Day 1 focused on government’s role in driving social sector performance management. A fascinating panel of government agency leaders, moderated by Daniel Stid from the Hewlett Foundation, discussed various efforts at the federal, state and local government levels to drive evidence-based policy and practice. But some in the audience and Twitter-verse wondered whether government could really be the impetus for a greater push towards measuring and managing outcomes in the nonprofit sector.
How Do You Get Buy-In For Change?
From the big, systemic view, the day quickly shifted for me to the organization-level with the fantastic panel on “Getting Buy-In” from staff, board and funders for a shift towards performance management. Isaac Castillo from DC Promise Neighborhood Initiative, Bridget Laird from Wings for Kids, and Sotun Krouch from Roca explained how they had moved their nonprofits toward articulating and measuring outcomes. The most effective approach seemed to be to ask “Don’t you want to know whether the work we are doing is helping rather than hurting?” Isaac made the urgency to move toward performance management clear, “If you haven’t started doing performance management yet, in 12-18 months you will start losing funding to those who are.”
Can We Convince Funders to Invest?
Day 2 of the conference kicked off with an inspiring keynote address by Nancy Roob from the Edna McConnell Clark Foundation that really served as a call to action for the foundation world. Nancy painted a pretty stark picture of the disconnect she saw between how much money we’ve spent on solving social problems in the last decades and how much actual progress we’ve made. She blamed this disconnect on “our piecemeal approach to solutions.” As she bluntly put it, “We are woefully under-invested in what we already know works.” She laid out 5 steps funders can take to move away from piecemeal and toward transformational social change:
- Make bigger, multi-year investments
- Provide more upfront, unrestricted, flexible capital
- Invest in nonprofit evidence building
- Scale what works with innovation, and
- Adopt an investor mindset
But for Nancy, it’s not just up to funders, nonprofits also need to change. She urged nonprofits to:
- Shed the charity mindset
- Focus on the larger context
- Create a performance management culture, and
- Ask for help to achieve performance
From there, Phil Buchanan from the Center for Effective Philanthropy led a panel with Carol Thompson Cole from Venture Philanthropy Partners and Denise Zeman from Saint Luke’s Foundation asking “Do Funders Get it?” While a few funders are willing to invest in helping nonprofits articulate, measure and manage to outcomes, most are not. The panel suggested that some of this reluctance stems from funder’s lack of humility and fear of what they might find. Audience members suggested that it might also be funders’ lack of performance expertise. (You can read Phil Buchanan’s blog post giving more detail on this panel here.)
From there I attended a breakout session “Funder Investment Strategies to Strengthen Nonprofit Performance Management Capacity” where Victoria Vrana from the Gates Foundation and Lissette Rodriguez from the Edna McConnell Clark Foundation and two of their grantees discussed how they worked together to fund and create performance management systems.
The final panel of the day brought an impressive group of nonprofit CEOs together (Mindy Tarlow from Center for Employment Opportunities, Sam Cobbs from First Place for Youth, Cynthia Figueroa from Congreso de Latinos Unidos, Bill McCarthy from Catholic Charities of Baltimore, and Thomas Jenkins from Nurse-Family Partnership) to talk about how they each had built a performance management system at their organizations, the hurdles they encountered, how they funded it, and where they are now.
Where Do We Go From Here?
Mario Morino rounded out the conference with an inspiring call for us to build momentum. He outlined some new ideas coming out of the conference that he’d like to see developed by 2020, including:
- A “Manhattan Project” of social sector evidence
- A National Commission on Nonprofit High Performance
- An Aggregated Growth Capital Fund to deploy billions to solve entrenched national problems
- A Performance Academy for Social Impact
- Presidential Performance-to-Impact Awards
- Social Sector Center for Quality Improvement
- A Solutions Journalism Network to “lift up the hope spots” in the country
- Leap Learning Communities in local settings connected in a national web
This was one of the best conferences I’ve been to in years. The caliber of the presenters and audience was amazing. It felt like I was witnessing the birth of the next generation of the social sector. Buoyed by the ability to see the writing on the wall, this group is determined to lead the fundamental, and critical, shift towards a more effective sector.
The urgency of this movement became increasingly clear through the course of the two days. Our country is witnessing mounting disparity and crippling social challenges. It is increasingly up to the social sector to turn the tide. And the time is now. As Mario charged at the end of the conference “If we don’t figure out how to build high performing nonprofits, nothing else matters. This is the last mile. Our nation depends on it.”
Photo Credit: tableatny
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!
There is a new conference in the social innovation space that I’m pretty excited about. After the Leap is the brainchild of Social Solutions CEO Steve Butz and his PerformWell partners, Child Trends and Urban Institute. The conference builds upon the momentum Mario Morino has created around his book, Leap of Reason, published in 2011.
Since writing Leap of Reason Mario has been on a crusade of sorts to the get the nonprofit sector to acknowledge that our new Era of Scarcity requires nonprofits to “literally reinvent themselves…[and] respond with greater discipline, unity, and focus on making a quantum change in the effectiveness and impact of our entire sector.” In essence he is encouraging nonprofits to determine what they exist to change and whether they are actually creating those changes.
As part of this movement, Mario and others have organized the After the Leap conference that will allow you to learn from experts in the field about how executives, practitioners and funders are advancing outcomes measurement and performance management, and what you can do in your own organizations and communities. The After the Leap conference will be held in Washington, D.C. on December 3rd and 4th.
Some of the keynote speakers include:
- Melody Barners, Former Director of the White House Domestic Policy Council
- Nancy Roob, President of the Edna McConnell Clark Foundation
- Daniel Cardinali, President of Communities in Schools, and
- Mario Morino
And the breakout sessions will cover everything from the Social Innovation Fund, to finding money for evaluation, to nonprofit case studies, to how to implement performance management systems, to effective leadership and much more.
Breakout session speakers are coming from the Gates Foundation, the Urban Institute, the Center for Effective Philanthropy, the Promise Neighborhood Initiative, and other foundations, nonprofits and agencies at the leading edge of the outcomes movement.
I’m so excited about the conference that I’ve already registered. And I’ll be blogging and Tweeting from the conference as well.
If you are a nonprofit leader, board member, or funder interested in pushing your nonprofit towards measuring outcomes, this conference is for you. You can register here.
I hope to see you there!
In this month’s Social Velocity blog interview, I’m talking with Brian Sasscer, Senior Vice President of Strategic Operations at The Case Foundation. Brian is responsible for the Case Foundation’s web presence strategy and overseeing the Foundation’s operations. His passion for his job is fueled by a desire to continually push new technologies and for-profit thinking into the nonprofit sector.
I wanted to talk to Brian because of the very exciting new Giving Graph project they announced last March at SXSW. The Giving Graph would help the social sector use data and technology to connect people to causes they are passionate about in a seamless way.
You can read past interviews in the Social Innovation Interview Series here.
Nell: When you presented about the Giving Graph at SXSW last March it was just an idea. Where does it stand now? Is the Case Foundation moving forward to execute on the concept?
Brian: The Case Foundation has been thrilled by the positive response we’ve received since introducing the concept of the Giving Graph in March. We’ve had multiple conversations with folks from the tech and social good community that have surfaced some exciting opportunities to help advance the project. For example, we were approached by Rayid Ghani, who served as Chief Data Scientist from the 2012 Obama for America campaign. He is spearheading The Erich & Wendy Schmidt Data Science for Social Good Summer Fellowship program at the University of Chicago. This new program is bringing together 36 aspiring students in the fields of computer science, programming and statistics to seek out opportunities to use data science as a tool to solve complex social issues. The Giving Graph was selected as one of the projects collaborators and these students will experiment with over the summer.
Through conversations with other nonprofits, for-profits, foundations and technology companies, we’ve made great connections and relationships that have helped us understand the possibilities the graph could provide for a stronger infrastructure within the social good sector. Specifically, we have opened dialogue with the Gates Foundation, as well as Guidestar CEO Jacob Harold. Michael Lewkowitz of Igniter is another individual who has done an exceptional job of exploring the concept of an impact graph, and understanding the landscape of this data play in the social good sector.
We also reached out to other organizations such as Network for Good and Global Giving in an effort to survey the space and understand the big data players in social good data. There are a number of talented individuals who share our vision of helping to further develop a concept that supports and encourages growth in the social sector. As for the Graph itself, we will continue our discussions and experimentation with the University of Chicago fellows assigned to the project with a goal to produce key findings from the experiment sometime in the fall.
Nell: You have sought a good deal of public input on the concept of the Giving Graph. How has that input altered the initial concept?
Brian: We have received excellent feedback from the public related to the SXSW presentation and our blog post. The majority of the input we have received is from thought leaders, nonprofits and foundations, for-profits, and other individuals already working in the data space as it relates to the social sector. Their feedback has validated the need for a tool like this for the sector. The first part of the Giving Graph concept itself was focused on identifying the key players in the data space for social good, understanding the space, and analyzing data location in the social good sector. Through research and discussions with other organizations, we have concluded that our end vision and goal is aligned with the goals of numerous other projects.
We found one project that is working to reform the sector from an information infrastructure point of view, another is helping to facilitate data-sharing amongst organizations, and another is working to match social good opportunities to an individuals interests. Each project can support and build off the others, propagating the number of resources available for the social good sector. From our findings, we have validated our concept and identified different projects out there that satisfy different components of our vision. The hope is to bring these different initiatives together and see this concept come life.
Nell: Do you think something like the Giving Graph could cause an appreciable increase in the amount of philanthropic dollars available in the sector, or would it simply alter where philanthropic dollars get spent?
Brian: We think the Giving Graph concept has the potential to drive both outcomes – both shifting of philanthropic dollars, as well as increasing the overall dollars being given to philanthropic causes. We believe the Giving Graph could help identify new spaces for social good and new campaigns and programs to live in those spaces – leading to potential shifting of philanthropic dollars, as well as bringing in new audiences that would help bring more dollars to the space. And by leveraging data to more effectively connect individuals with causes and organizations that are relevant to them, we can increase the potential for both financial contributions as well as people to give back in other ways – whether spreading the word about a particular campaign or organization, or volunteering in some capacity.
Nell: A huge challenge of any new social media application is getting a critical mass of people to actually start using it. How do adoption rates factor into your plans?
Brian: That is absolutely correct – the Giving Graph concept will be a collaborative effort in many ways. One aspect is the data. In addition to tapping into different data sources, partnerships among additional organizations will be necessary. We need a series of nonprofits, for profits, cross-sector foundations, and other companies to contribute and share information into this graph to maximize the potential. This can be a challenging component, as data in today’s world is very valuable. Nevertheless, we have started conversations with various organizations about sharing data for the benefit of the graph and we’re optimistic. We’re at a turning point in data sharing, as organizations are becoming less reluctant to share than they have been in the past.
Another aspect of the project is end-users, and they appear in various ways. It could be a program manager at a nonprofit who is identifying a program to implement at her organization. In another instance, it is a college student trying to find out a local seminar to attend based on his charitable interests. For individuals, we are not going to put a front end on this database. The idea is that applications/platforms will be able to tap into this graph and ultimately provide users the ability to plug in their information, and for platforms to then integrate this information into the larger graph.
So absolutely, critical mass from both a data and usage point of view will play an important role in this project. It will take a lot of relationship building and trust, especially around data. The web is transforming into an experience that truly knows the end-users. The Giving Graph is unique because it not only represents another way for the web to understand end-users, it also provides the ability to give insight into and improve the entire social sector as well.
Nell: Why did the Case Foundation decide to spend time and resources on creating a new technology for the overall philanthropic sector? How does this effort fit into the Foundation’s larger and longer-term goals?
Brian: Our founders Steve and Jean Case were responsible for bringing America online decades ago. They believe in the potential of technology, and particularly the Internet, to connect people together to drive positive social change. The Case Foundation has a storied history of investing in and leveraging new technology platforms for social good – from our investments in online giving platforms like Network for Good, Causes and MissionFish, to programs like the Make it Your Own Awards and America’s Giving Challenge. Our intent is not to create the graph ourselves, but rather to seed the conversation and collaborate with our partners to provide the sector with a new tool in their tech for good arsenal. We think this Graph concept has the potential to change online philanthropy and revolutionize the sector, sparking innovation in ways akin to the commerce and entertainment industries.
There was much discussion in August about money. We heard that foundations should be more open to risk and should engage with nonprofits to find the best solutions. And we found out some fascinating information about how Americans give. And there were some exciting developments in the newest social sector funding vehicle, the social impact bond. What a great month!
Below are my top 10 picks for what’s worth reading in August in the world of social innovation. But please add what I missed to the comments. And if you want to see more of what catches my eye, follow me on Twitter, Facebook, LinkedIn or Pinterest.
You can see the 10 Great Reads lists from past months here.
Here’s August’s 10 Great Reads in Social Innovation:
- It looks like social impact bonds are starting to take off in America. This innovative social financing partners private investors, public bonds and nonprofit organizations to solve social problems. Goldman Sachs has gotten on board with a $10 million investment in a New York City program to reduce prison recidivism rates.
- Writing in the New York Times, Georgetown University professor Peter Edelman breaks down the factors contributing to a 15% poverty rate in America and what needs to change to improve it.
- I can’t tell you how many times I hear complaints from nonprofit leaders that social media won’t really improve fundraising. Try these on for size. Geri Stengel (guest posting on Beth Kanter’s blog) shows how the Genocide Intervention Network found major donors through social media, HubSpot offers 7 Creative Ways Nonprofits Can Use Social Media to Drive Donations and Kivi Leroux Miller explains How Social Media and Fundraising Fit Together.
- Guest blogging on the PhilanTopic blog, Derrick Feldmann argues “We need donors who are truly willing to embrace risk and invest significant dollars in potential solutions that may not yield immediate results but get us closer to our ultimate objective, even if it’s only by demonstrating what doesn’t work.” Amen to that! And Rodney Foxworth seems to agree.
- On the Stanford Social Innovation Review blog Sheetal Singh writes that there is a new active, engaged citizen movement in America, but that nonprofits are missing the opportunity to participate. She argues that “nonprofits need to realize that the “new citizens” are no longer passive recipients of their services; they demand engagement and inclusion. If nonprofits don’t adapt to this paradigm, they will be left out of the conversation.”
- One of my new favorite bloggers, Mark Hecker, does it again with a great post encouraging nonprofit and government leaders to be “fearless” in setting goals that will knock social change out of the park.
- A new study by the Chronicle of Philanthropy reveals how Americans give to charity. It turns out you give more if you have less or live near those who have less. But there is much more data to explore on their website. Fascinating.
- Forbes uses the World Wildlife Fund of The Netherlands as a case study to demonstrate the Five Steps to Growing Your Social Impact.
- Lucy Bernholz takes issue with foundation application processes and calls instead for a model “where foundations and nonprofits are working together – from idea generation through proposal, implementation and assessment – to actually solve problems.” Wow, imagine that.
- The Gates Foundation blog demonstrates how support of public libraries is a critical part of transforming developing countries.
Photo Credit: Library of Congress Archives
Day 2 of SoCap was by far my favorite. It started with an interesting keynote from Julie Sunderland of the Gates Foundation. She offered a perhaps more realistic, bordering on the pessimistic, view of the social capital market space. She said that Gates struggles to find entities that can absorb the size investments they want to make. They get excited about the idea of bringing together foundation, government and private dollars in stacked deals, but that the work is complicated and hard and they have yet to craft one of these deals simply because it is extremely difficult to determine the terms. All of this underlines what I’ve said in a previous post: in the nonprofit, philanthropic and government worlds there is still much work to be done to unlock capital.
The first session of the day for me was “Lessons of Behavioral Finance: Understanding and Overcoming Barriers to Impact Investing” with Hope Neighbor and her ground-breaking research, Money for Good, released earlier this year calculating a $120 billion pool of potential impact investing money that is sitting on the sidelines. Hope said that despite our desires to the contrary, people still very much think of their charitable giving as separate from their impact investing, “the reality is that people compartmentalize their money.” And only 3% of the population uses data to compare the organizations they give to.
My favorite session of the day, by far, was “Deep Dive Into the Evergreen Cooperative Initiative.” This session was exactly what I was hoping to see more of at SoCap this year. A group of leaders in Cleveland realized that the heart of their city was quickly deteriorating and no one was doing anything about it. They formed a coalition of the anchor institutions in Cleveland (Case Western Reserve University, Cleveland Clinic, etc), foundations, city leaders and others to create the Evergreen Cooperatives that brings career-track jobs and green, employee-owned businesses to the inner city, transforming a city that has lost 50% of its population in the last 50 years. Beyond the fascinating coalition, business model and results this project is achieving, lies its impressive financing. A combination of bonds, foundation grants, loans, HUD money and others launched this project and financed the 3 businesses they currently operate (a green laundry, an organic greenhouse, and a solar power company). According to Evergreen leaders, “Cleveland wants to be where the world is going, not where the world is.”
To scale this project to create 5,000 jobs (the area needs 46,000 jobs), which will be the impetus to truly transform the inner city economy, they are creating a CDFI and looking to use PRIs and MRIs. What excites me so much about this project is not the spirit of collaboration and tremendous results, but how they are bringing public, private and philanthropic money together in a truly innovative convergence. THIS is the kind of social capital market I’m talking about. Impact investing is great, but it is only ONE piece of the puzzle. I would love to see more examples like Evergreen at SoCap.
The last breakout session I attended for the day was “Nonprofit Analysis: Beyond Metrics,” which gave a great overview of the growing nonprofit evaluators market through the lens of rating one nonprofit, DC Central Kitchen. It was interesting to see how Charity Navigator, the most well-known nonprofit evaluator, has evolved from a system driven purely by IRS 990 form overhead ratios to a three-pronged review including transparency and impact evaluations.
The end of the session gave me serious pause, however, when a member of the audience asked whether any of the evaluators might use the GIIRS system coming out of the impact investing world to rate nonprofit impact. Ken Berger admitted he wasn’t familiar with GIIRS and Tim Ogden of GiveWell said he was skeptical of social return on investment (SROI) calculations in general. Again, my point that the philanthropic and impact investing worlds aren’t communicating and collaborating becomes apparent. Wouldn’t that be amazing if impact in both the philanthropic and impact investing worlds could be measured in a comparable way? That would be truly innovative!
So, although Day 2 of SoCap provided much more conversation and examples of how the philanthropic and government capital markets are evolving, there is still much work to be done to bring both capital fully into the social capital market. Perhaps at SoCap 2011?
Photo Credit: Markets for Good
So it’s my favorite time of year again, well at least in the world of social innovation. The Social Capital Markets Conference in San Francisco starts Monday. There are a lot of social innovation conferences, in fact you can read a great rundown on many of this Fall’s best. But SoCap is by far my favorite. It is the one place where the disparate array of people who are interested in how to get more money flowing to social impact come together for 3 days. There are nonprofit, for-profit and hybrid social entrepreneurs; philanthropists; social investors; government bureaucrats and anyone in between. It seems this conference more than any other is a microcosm of the convergence that is happening in the world of social innovation between the public, private and government sectors.
I’ll be honest, the first two years of the conference were a little heavy on the for-profit social entrepreneurship side, leaving somewhat behind government and nonprofit. There were sessions and speakers from those worlds, to be sure, but the emphasis of the conference in the beginning was how to get money flowing more readily to double bottom-line businesses (for-profit businesses that are making money AND creating a social impact).
This year’s conference promises to open wide the doors of the social capital market. For starters, SoCap organizers have developed 6 “tracks” that each focus on a particular area of the social capital market. The track that interests me the most, of course, is the one focusing on nonprofit/philanthropy. Sean Stannard-Stockton of Tactical Philanthropy has put together a nice track with cutting-edge topics in the world of making money work better in the nonprofit sector:
- Decriminalizing Fundraising
- Scaling Social Impact
- Individual Donors Practicing Unconstrained Philanthropy
- The Lessons of Behavioral Finance
- When to Invest and When to Give
- Nonprofit Analysis: Beyond Metrics
In addition there are several other tracks that hold great appeal: Impact Investing, New Money, Metrics and System Thinking and so on. And then there are some fabulous speakers including Jacqueline Novogratz from Acumen Fund, Matt Flannery from Kiva, speakers from the Gates Foundation and Root Capital and many others. Add to that the side sessions, pitch events and more, and my head starts to spin. Three days is just not enough.
What I love so much about SoCap is that it really challenges this burgeoning community/movement/space to do more, to ask harder questions, to push the momentum forward. You come out of a session with many more questions than you had going in. But also, so much more energy to break out of the normal way of thinking and envision a different path forward. Because at its essence, SoCap is about creating something completely new. It’s about creating a space where money and social impact meet and create a synergy that can, we hope, change the world. The old rules and constraints don’t apply. This conference and all the people attending it, in person or via social media networks, are writing the new rule book. And that’s exciting, challenging, exhausting and exhilarating all at the same time.
If you are attending SoCap too, let me know. See you there!
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