A More Transformative Corporate Philanthropy

Deloitte, the consulting firm, just released a new series of documentaries about the nonprofits they support. Two years ago they made a three-year commitment of $50 million in pro bono nonprofit work. They’ve already completed 200 projects, with many more in the pipeline. Their focus is taking the specific skills their employees have and applying them to capacity and efficiency constraints in the nonprofit sector. This approach is not new. New Profit, the nonprofit venture philanthropy fund, has enjoyed a 10+ year partnership with Monitor Group, who provides signficant pro bono consulting to the nonprofits in New Profit’s portfolio, which will total a $50 million commitment by 2012.

To promote their work, but also to encourage other companies to think about how they could do similar skills-based volunteering, Deloitte has made a series of short documentaries about their nonprofit projects. As Evan Hochberg, national director of community involvement for Deloitte said:

We made these films primarily to help our own people recognize just how much they have to offer, and to encourage others in the business community to embrace skills-based volunteerism. [We are] committed to helping advance the field of community involvement by focusing on volunteerism that achieves very tangible outcomes, and this film series is an opportunity for us to spark dialogue that makes people think about the value of their professional skills in a different way.

Sure it’s a public relations campaign, but I also think there is something interesting in the philanthropic commitment Deloitte has made and in the films they have created. The film below is about College Summit, a great organization that encourages high school students, who never viewed themselves as college material, to apply, attend and graduate from college. Deloitte has done a number of pro bono projects with them and has made a significant commitment to this organization. Take a look at the video that showcases a really great nonprofit and an interesting way for a corporation to make a much deeper, and more transformative commitment, than just writing a check.

Tags: College Summit, corporate giving, corporate philanthropy, Deloitte, Monitor Group, New Profit, nonprofit capacity building, pro bono consulting, skills-based volunteering, Venture Philanthropy

My Wish List for SoCap 2011

Despite my frustration in an earlier post about this year’s Social Capital Markets Conference inability to fully integrate philanthropic and government capital into the discussion, I was reminded by a friend that we have actually come a long way in three short years. A keynoter at the first SoCap conference in 2008 noted that “we aren’t here to talk about nonprofits.” The fact is that just two years later not only were nonprofits and their philanthropic and government funders present in large numbers at the conference, but they had their own track. It was a huge step forward to have a devoted track focusing on the philanthropic capital market with Sean Stannard-Stockton at its head this year. The track brought some great work to light and started some important conversations.

In the spirit of continuing and expanding that conversation, here are the conversations/sessions I’d like to see at SoCap 2011:

• More case studies like the Evergreen Cooperatives in Cleveland and the Evergreen Lodge in Yosemite (not related) that demonstrate innovative collaborations of capital across the philanthropic, government and private sectors
• A working session that looks to compare/combine the nonprofit rating systems and GIIRS (Global Impact Investing Rating System)
• Case studies of nonprofits who have crafted a growth or capacity capital campaign to unlock philanthropic capital for scale and change
• A discussion about venture philanthropy. New Profit, Venture Philanthropy Partners and others pioneered the nonprofit capital space. Where are they now, what have they learned, and what are they doing to revamp the venture philanthropy model?
• An update on the Social Innovation Fund (SIF), what they’ve learned, what the government’s plans are to revamp and scale it.
• Beyond SIF, examples of what local, state and federal governments are doing to partner with philanthropists to expand capital for social entrepreneurs. Council of Foundation’s Public/Philanthropic Partnership is a place to start.
• Stacked deals involving philanthropic and private capital are very tricky to create, as Julie Sunderland and others have argued, but what can we do or develop to make this less difficult? What sorts of terms are people playing around with? What’s working and what isn’t and how can we evolve this?
• Donor-Advised Funds hold tremendous opportunity to unlock philanthropic capital, but are underused currently. What can we do to unlock that potential?
• Where do community foundations fit into all of this? Often the nexus of a city’s philanthropic activity, they have been slow to climb aboard the social capital market train.  How can we unlock this potential capital for social impact?
• Discussions about how we educate philanthropists about the need for capacity and growth capital in the nonprofit world. How do we make more philanthropists builders instead of buyers?
• How do we get more foundations to use Program Related Investments and Mission Related Investments?

SoCap10 did a great job of starting the conversation, now I’d like to see that conversation move to the tactical. Let’s create new structures, incentives, partnerships, tools to unlock philanthropic and government capital for social impact.

What do you want to see at SoCap11? Add to the list in the comments.

Photo Credit: paratiger

Tags: builders instead of buyers, community foundations, Council of Foundation Public Philanthropy Partnership, Evergreen Cooperatives, Evergreen Lodge, GIIRS, Julie Sunderland, Mission Related Investments, MRIs, New Profit, philanthropic capital, PRIs, program-related investments, Sean Stannard-Stockton, SoCap, Social Capital Markets conference, Social Innovation Fund, Venture Philanthropy Partners

The Controversy: Small Nonprofits and Growth Capital

The issue of whether small and medium size nonprofits can or should raise growth capital seems to be a controversial one. Steve Goldberg, author of Billions of Drops in Millions of Buckets: Why Philanthropy Doesn’t Advance Social Progress, speaker, and consultant to Charity Navigator, New Profit and other leading entities in the nonprofit and philanthropic sectors, took issue with my post Can’t Small Nonprofits Raise Capital Too? He believes that capacity capital, not growth capital, is right for smaller nonprofits. I, however, believe that capacity capital isn’t enough.

Steve argued:

Small nonprofits are no less deserving than larger ones, but only the larger ones can undertake the kinds of planning and demonstrate the capacity to make effective use of funding designed to enable organizations to grow by factors of 2, 3 or more over the course of several years.

Steve goes on to argue that capacity capital, not growth capital, is the way to go for smaller nonprofit organizations and that we need to expand the availability of capacity capital in the nonprofit market. While I definitely agree with that last statement, I still believe that small and medium nonprofits that have a great solution and a vision for growth should have access to growth capital to get them there, as I responded:

If there is a small organization that is providing a powerful and unique solution, shouldn’t they be able to expand that solution, not through incremental growth, which is the nonprofit norm, but by factoral growth, which growth capital allows?…Small nonprofits who have a great solution and a vision for growth don’t have the luxury of sitting around waiting for the nonprofit capital market to evolve to a place where the bottom 80% of nonprofits have access to growth capital. Second, creating a growth capital campaign doesn’t have to be prohibitively expensive for smaller nonprofits. Sure they can’t afford the larger fees that Nonprofit Finance Fund might charge, but they also don’t need that kind of money to be able to grow.

You can read the whole debate here, or on Steve’s blog here.

I believe this debate is really important because it is not enough to help the largest, most successful nonprofits to reach scale. There are countless smaller nonprofit organizations whose solutions are just as critical, but lack the expertise and capital to bring them to scale. We can’t just have a top down approach. To truly transform the nonprofit capital market we have to create access to growth and capacity capital throughout the sector, wherever great ideas and strong leaders exist. Because, really, do we have time for the trickle down approach?

Photo Credit: Michael

Tags: Billions of Drops in Millions of Buckets, Charity Navigator, New Profit, nonprofit capacity building, nonprofit capital market, nonprofit growth capital, Philanthropy, Steve Goldberg

Beating Innovation to Death

There is a tendency in America of late, or maybe for awhile, to over-analyze to the point of distraction. So too is the case with the Social Innovation Fund, the federal government’s $50+ million experiment in providing growth capital to nonprofits. This great experiment to see whether government can do something pretty different to address social problems is in danger of being railroaded by leaders of the social innovation community who should be the ones most supportive of a new day for government.

The Social Innovation Fund (SIF) was modeled after the idea of venture philanthropy funds who were themselves modeled on venture capital funds. The idea with the SIF is to grant $50 million to private grantors (foundations, venture philanthropy funds, etc) who match the money and then turn around and grant it to promising nonprofits to scale their proven programs. Is the idea really innovative? No. But what is innovative is that the government is  recognizing the concepts of social innovation and scale and is experimenting with becoming a builder instead of just a buyer of nonprofit services.

But this experiment is in danger of failing before it even gets out of the gate. A major controversy developed this week with the announcement of SIF grantees. The controversy centers around whether New Profit, arguably the inventor of the venture philanthropy concept, was given preferential treatment in being awarded a grant.  Paul Light, the Nonprofit Quarterly and others voiced their concerns about the granting process. You can read all the details of the saga here.

Let’s be honest, everyone knew New Profit was going to get a SIF grant. New Profit pioneered the idea of venture philanthropy. And their spin-off organization, America Forward, which works to connect the vast governmental resources to social innovation, was behind getting the Serve America Act,  containing the SIF, formulated and made into law.  Would the SIF make any sense without New Profit? They have been scaling nonprofits for years, and they have unlocked the door between government and social innovation. How could they not be at this table?

And the growing amount of documents being released by the Social Innovation Fund demonstrates the fairness and process behind the grant awards and more than makes up for any of SIF’s initial ignorance of the importance of transparency.

I understand that discussion, transparency, and refining of process are all critical elements to getting change to happen, but too much of that before the actual experiment happens can actually prevent change. Let’s not conduct business as usual by over-analyzing a new project to death. Let’s see where this experiment takes us instead of railroading it before it even begins. It’s not perfect innovation, it’s not a perfect process, but experiments never are. If we don’t give the government some space to actually innovate, they may never go down this road again. Instead of beating innovation to death, let’s get out of our own way and see where this goes.

Tags: America Forward, builder versus buyer, New Profit, Nonprofit Quarterly, Paul Light, Serve America Act, Social Innovation Fund, Venture Philanthropy

We Need an Ecosystem for The Bottom 80%

In response to my post last week on the Change.org blog about the Social Innovation Fund, Sean Stannard-Stockton, of the Tactical Philanthropy blog, wrote a comment that really got me thinking.

My post argued that the $50 million federal Social Innovation Fund is only one small piece of the capital the nonprofit sector needs. The fund will help the top nonprofit organizations, but will not remedy the lack of capital available to the smaller, less sophisticated nonprofits that make up the majority (80%) of the sector. Sean rightly pointed out that like the business sector, the vast majority of nonprofits are small, and as we have done with businesses, we need to create different expectations for different kinds of nonprofits.  I would take Sean’s comments even further and argue that we actually need to create a similar ecosystem of funding and expertise for the nonprofit sector, as we have done for businesses.

Sean writes:

One thing I think that people need to keep in mind when they point to how many nonprofits are small is that the same is true in business. While good revenue numbers are hard to find, did you know that 73% of for-profits have less than 10 employees and 54% have less than 4 employees? It seems to me that as a field we need to do a better job of segmenting the nonprofit market and having very different expectations for nonprofits which are “small businesses” vs those that are “public companies.”

Sean makes a critical point. The vast nonprofit sector is often lumped together as one. When in reality, the sector is incredibly diverse. And although over the past 10 years there have been some innovative strides made in providing capital, expertise, and other resources to the top 20% of the nonprofit sector (such as venture philanthropy funds like New Profit and Venture Philanthropy Partners and management expertise from consulting companies like Monitor and Bridgespan) the fact remains that the “bottom” 80% of the nonprofit sector is still very much alone.

This is one of the reasons I started Social Velocity. I saw a real hole in the marketplace in terms of capital and management expertise to the bottom 80% of the nonprofit market. A $500,000 nonprofit organization can’t engage a Monitor or Bridgespan group, and a venture philanthropy fund wouldn’t be interested in scaling them since no one will fund evaluation to prove their results.  These organizations are stuck within the vicious starvation cycle and cannot get out.

We need to do a better job, as Sean says, of segmenting the nonprofit sector and creating appropriate expectations for those different segments, but we need to go much further. We have to create an ecosystem of expertise and funding for the smaller, less sophisticated segments of the sector, which includes:

• Educating smaller, less sophisticated philanthropists that creating solutions requires funding for less sexy things like capacity, organization building, evaluation
• Providing significant capacity capital to build out revenue functions, attract and retain top talent, articulate a value add, message effectively
• Supplying growth capital to nonprofits who have a great solution and the desire to scale
• Creating realistic and cost-effective evaluation tools so that smaller organizations can prove their impact along with the big guys
• Securing management expertise to help smaller nonprofits create strategic and growth plans, articulate their impact and value add to potential investors, develop comprehensive financial strategies, etc.

I think it’s fabulous that there is a growing understanding that nonprofits can’t do it alone anymore. And I’m so pleased to see new funding vehicles like the Social Innovation Fund that are helping to take social innovation to the next level. But let’s not forget that there are many other innovative nonprofit organizations that will never catch the eye of the Social Innovation Fund, or their funding and consulting counterparts.

Over the past 200+ years America has established a fairly advanced ecosystem that supports (albeit not perfectly) the growth and success of entrepreneurs at every stage of the game.  We are starting to recognize the need for a similar ecosystem in the nonprofit sector.  But there is still much work to be done. Let’s not forget the smaller, less sophisticated nonprofits that may have tremendous solutions to contribute, but who just can’t get past the many hurdles in their way.

Tags: Bridgespan, growth capital, Monitor, New Profit, nonprofit, nonprofit starvation cycle, philanthropists, Sean Stannard-Stockton, Social Innovation Fund, Social Velocity, Tactical Philanthropy, Venture Philanthropy Partners

Will the Social Innovation Fund Really Change the Nonprofit Market?

Last week a new head of the federal Social Innovation Fund, the $50 million public/private fund to scale innovative nonprofits that came out of the Serve America Act, was named. Paul Carttar brings a wealth of experience and knowledge having worked at New Profit, the first venture philanthropy fund, and Bridgespan and Monitor consulting groups, the largest and most sophisticated consulting firms to large nonprofits. He knows how to scale proven nonprofit models.

But we need to be cautious about how much the Social Innovation Fund can do to transform the nonprofit capital market. While it will provide mezzanine funding to the best nonprofits, there are still some glaring holes in the capital available to the rest of the nonprofit sector. You can read my post “Will the Social Innovation Fund Really Change the Nonprofit Market?” at the Change.org blog.

Tags: Bridgespan, Monitor, New Profit, Paul Carttar, Serve America Act, Social Innovation Fund

Social Impact Finance

It’s a new year and a new decade, and both hold tremendous promise for creating real social change.  And key to significant social change is a fundamental restructuring of how we finance that change.  I think (hope) that in the next decade we will see the emergence of a new Social Impact Finance.  And I imagine it will look something like this:

• Social Impact Funds Become Commonplace. Experiments like the Federal Social Innovation Fund (which combines government and private money to fund the growth of proven nonprofit models), Village Capital Fund (seed funding for social entrepreneurs, determined by social entrepreneurs), social investment funds like Good Capital, and venture philanthropy funds like New Profit and SeaChange Capital Partners are expanded and become commonplace.  Seed and growth funding for nonprofit, for-profit, and hybrid social impact organizations becomes more readily available and accepted.




• Foundations Get Risky. Foundations deny their risk-aversion heritage and provide risk capital for social innovation, whether through their customary 5% cap for nonprofit donations, or social investments from their corpus, or by foregoing dreams of perpetuity and giving all their money away on a big bet or two.  See Nathaniel Whittemore’s great post on this.




• Individual Donors Become a Powerhouse. Technology finds a way to harness the power of individual donors toward significant social change. Currently, individual donations make up the vast majority of funding entering the nonprofit sector, yet their gifts are fragmented. With the potential of a new nonprofit rating system on the horizon, and social media’s growing ability to gather and marshal individual participants, there could be a pivotal shift in how individual donations flow to the nonprofit sector, and how significant those individual donations become to nonprofits creating demonstrable social impact.




• Nonprofits Understand the Power of Finance. Nonprofit organizations understand and become successful at financing their overall operations, instead of fundraising for them.  And they begin to think bigger about their work, the overall outcomes they are trying to achieve and how finance fits into that (The GiveWell blog did a great series on the “Room for More Funding Question.”)

The end result of these and other changes will be, I hope, that “Social Impact” and “Finance” are no longer separate terms that have no bearing on each other, but instead inextricably linked concepts that create a better world.

Tags: GiveWell, Good Capital, Nathaniel Whittemore, New Profit, SeaChange Capital Partners, Social Innovation Fund, Village Capital Fund

Two Weeks to SoCap

Two weeks from today the 2nd annual Social Capital Markets Conference kicks off in San Francisco.  I’m pretty excited about it because I think one of the biggest things standing in the way of social innovation is a social capital market–the financial tools and vehicles necessary to adequately capitalize social innovation.  The speaker’s list for the conference reads like a Who’s Who of the social innovation world.  There are some incredible sessions, too many to choose from.  I wish the conference were longer than 3 days.  I’ll be tweeting (as much as my multi-tasking challenged brain can handle) and blogging from the conference.

Just a few of the topics to be discussed at this year’s conference include:

• The Social Capital Movement Across the Globe
• Social venture funds’ prominent role in the new economy
• The sophistication of social investing pioneers
• Raising money for impact investing in a downturn economy
• The Obama Administration’s focus on social innovation
• Creating effective collaboration between the private sector and development agencies
• Moving beyond Microfinance
• Market based solutions for the base of the pyramid
• New corporate structures, including hybrid businesses and L3C organizations
• Creating metrics and value around social change
• Mobile technology platforms worthy of investment

Are you excited yet?

One of the things I’m particularly excited about at this year’s conference is a movement toward including nonprofits and philanthropy in more of the conference.  Last year’s conference tended to focus a bit more on blended value investing (investing in social impact organizations that provide a social AND a financial return). But we don’t want to neglect those social entrepreneurs that employ a nonprofit model to create their desired social impact.

To that end, SoCap this year has a host of sessions about nonprofit social entrepreneurs  and a social capital market for them.  I am moderating one of these sessions, Growth Capital for Nonprofit Social Entrepreneurs on Wednesday, September 2nd at 1:30pm.  Darell Hammond of KaBoom!, Greg Baldwin of VolunteerMatch and Kelly Ward from America Forward/New Profit will discuss the growth capital that was used to bring some impressive nonprofit organization’s to scale.

If you are going to attend only one conference in the social innovation space this year, I would highly recommend SoCap.  Hope to see you there!

Growth Capital for Nonprofit Social Entrepreneurs

Date: Wednesday, September 2nd
Time: 1:30pm

Moderator: Nell Edgington, Social Velocity
Greg Baldwin, VolunteerMatch
Darell Hammond, KaBOOM!
Kelly Ward, New Profit and America Forward

Nonprofit social entrepreneurs like Volunteer Match and KaBoom! have become, over the past decade, very successful, national, multi-million dollar nonprofit organizations working to solve critical social problems. They’ve achieved this impressive scale through growth capital from individuals, foundations and venture philanthropy funds. Greg Baldwin from Volunteer Match and Darell Hammond from Kaboom will be joined by Kelly Ward from America Forward and New Profit, a pioneer venture philanthropy fund in Boston, to discuss the various financial tools available and necessary to scale nonprofit social entrepreneurs.

Tags: America Forward, KaBoom!, microfinance, New Profit, nonprofit, scale, SoCap, social capital market, social entrepreneurs, Venture Philanthropy, Volunteer Match