A New Social Innovation Project Comes to Texas

There is something underway in Texas that I’m pretty excited about.  The OneStar Foundation, the Texas state office of nonprofit capacity building and social innovation and administrator of the state’s AmeriCorps grant, has just launched a new project called the Texas Social Innovation Initiative (TSI). TSI is a partnership with Root Cause, a national organization supporting social innovation and headquartered in Boston.

The TSI creates an opportunity and a marketplace for socially innovative nonprofit organizations to present a compelling case for support to scale their programs.  OneStar will pick six nonprofit organizations in the Dallas/Fort Worth area to receive consulting, networking and other assistance to create an investor pitch for growth capital to scale their results-driven program. The award for each nonprofit totals about $25,000 in money and services.  The project is modeled on Root Causes’ Social Innovation Forum, where nonprofits are given strategy consulting, executive coaching, and introductions to social investors.  Their goal is to “build a philanthropic investment community that will invest and re-invest resources based on performance, in order to increase progress in solving pressing social problems.”

OneStar’s TSI will similarly offer this introduction to social investors when the project culminates in June with a Fast Pitch event where these six nonprofits will present their growth pitches to Dallas Social Venture Partners and other individuals with money to invest in nonprofits.

Aside from the fact that it is so exciting to see this kind of social innovation activity in Texas, I’m particularly excited about this project because Social Velocity is involved.  We helped to review applications (which were amazing by the way–I was so impressed with what these nonprofits are accomplishing) from the 60+ nonprofits who applied.  And Social Velocity will be one of the consultant teams working with the six nonprofits to craft their growth plans and pitches.  I love helping a nonprofit organization take the results they are achieving  and translate those into a compelling ask of people who have money to invest.  Bridging that gap between work that creates social change and those who have money to invest in social change is a thrilling experience.

The six social innovators that will participate in this year’s TSI will be notified by OneStar today, and announced publicly at the Governor’s Nonprofit Leadership Conference on December 9th.  The work crafting their pitches will begin in January.  If the project is a success, there is potential to expand it to other parts of the state.  That would be amazing.  I’ll let you know how it goes.

Tags: Dallas Social Venture Partners, Fast Pitch, Governor's Nonprofit Leadership Conference, nonprofit, OneStar Foundation, philanthropic investment, root cause, scale, Social Innovation Forum, social investors, Social Velocity, Texas Social Innovation Initiative

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

Working Towards Scale in Austin

Something pretty interesting is happening in Austin around growth, social entrepreneurship and investment capital.  The KDK Harman Foundation, launched in 2004 by Janet Harman with a $26 million endowment, is spearheading an effort to get the social sector here talking about and thinking about how to grow and replicate successful nonprofit models.  The mission of the KDK Harman Foundation is two-fold:  “To break the cycle of poverty through education while promoting a culture of giving excellence.”  While the first part of the mission is admirable and necessary, it’s the second part that really excites me.  In 2008, when the foundation was only 4 years old, they decided to modify their mission to include the giving excellence piece because, per their website:

Janet [had a] desire to assist Central Texas in creating a culture of giving excellence. The Foundation is actively involved in the community through its role as a host and convener of community stakeholders interested in education and philanthropy. The Foundation also offers opportunities to share information about grantmaking with newly formed foundations as part of its Foundation 101 trainings. KDK-Harman Foundation is committed to funding and celebrating excellence; excellence in programming, excellence in nonprofit management, and excellence in grantmaking.

To that end, the KDK Harman Foundation launched what they call the “Growth Learning Collaborative” last year.  The Growth Learning Collaborative is a social innovation project that brings together various Austin-based nonprofit Executive Directors to discuss and analyze various growth models. The group wanted to talk with and learn from experts and peers about options for growing organizations.  These nonprofits are social entrepreneurs with great organizations that want to figure out how to scale.  I presented to the group in December about the process an organization that is thinking about growth should go through.

One member of the Collaborative is well on their way towards scale.  Heart House is a daily afterschool program for school-age children in neighborhoods known for high crime and high unemployment in Austin and Dallas.  The program has achieved some pretty impressive results for these kids, including:

• 90% of Heart House children improved their reading level by at least one level.
• Teachers report that 96% of Heart House children have improved their math skills.
• Teachers believe 85% of Heart House children have shown an improvement in behavior with adults and other children at school.
• 0% of Heart House children were victims of violent crime or engaged in juvenile delinquency.

Heart House has plans to grow to 25 sites throughout Texas.   They have a great growth plan, and I’m helping them refine it and create an investor pitch for the growth capital they will need to make it a reality.  The founder of Heart House, Anna Land, helped KDK Harman launch the Growth Learning Collaborative because she wanted to learn with others how best to replicate, as she explains:

The idea of the Growth Learning Collaborative has been more than simply expanding our organizations. I wanted us to meet to discuss and plan implementation of best-practice techniques to help grow and — more fundamentally — replicate our organizations. In our case, children across Texas need a resource like Heart House. To that end, we focus on how we can naturally nurture and maintain our sense of organizational culture, our enactment of our missions and values, through cycles of leadership and volunteers across Heart House hubs.

These are relatively new ideas for Austin and Central Texas.  Austin doesn’t tend to grow homegrown nonprofit organizations state- or nation-wide.  By bringing local nonprofits with a vision for growth together and giving them the space and expertise to envision growth and make it a reality, KDK Harman is providing an invaluable service.  It will be exciting to watch how this momentum grows and whether other local foundations and philanthropists follow their lead.  I’d like to see more philanthropists both here and across the country take the lead in encouraging scale, best practices, innovative use of funds and so on.  They are a key player in the movement for social innovation, and they have the resources to make a real difference in the success of the movement.

Tags: Austin, Heart House, KDK Harman Foundation, scale, Social Entrepreneurship

5 Ways to Scale

Key to the entire social entrepreneurship movement is the idea of scale.  If we are truly going to solve a social problem, right a disequilibrium, or fix a crumbling institution the solution has to grow to scale.  It cannot stay small and secluded; it has to grow until it has changed the underlying system.  But scale can be a nebulous thing.  What does it mean, what does it look like, how does it happen?

Peter Frumkin, head of the RGK Center for Philanthropy and Community Service at the University of Texas at Austin and leading nonprofit management and philanthropy thinker and author, came up with a model for understanding the various forms scale can take.  His 5 Models for Scale provides a nice framework for understanding the broader implications of what scale is and what it can look like.  He defines scale as “creating a lasting and significant impact” and defines the five platforms  from which scale can emerge as:

1. Financial Strength: Scale comes from the financial strength and sustainability of a large and enduring institution (usually universities and museums).  Through endowments and deep donor relationships these institutions can weather most, if not all, economic situations and potentially exist indefinitely.  Scale here is not about outcomes or inputs, but rather about the institution itself and its ability to endure.
2. Program Expansion: Scale is a function of the increasing number of clients served.  By growing the number of program inputs (clients) by several multiples, a program can achieve scale.  This form of scale happens in one location, not to be confused with Multi-Site Replication (below).
3. Comprehensiveness: Scale here is achieved when a set of activities and interventions occur within one organization or a closely integrated collaboration of organizations.  For example, when the food, housing, education, childcare and healthcare needs of the homeless are all addressed through one integrated solution, in the case of Jane Addams’ Hull House.
4. Multi-site Replication: Scale in this case expands a program to other sites in the city, region, country or world.  This replication can be instigated either from within the organization (through franchises and chapters) or from outside of the organization through independent efforts of funders or other interested parties.  This form of scale often requires the vision and commitment of a single individual to make it a success, for example with Teach for America or KIPP (charter schools).
5. Accepted Doctrine: In its final form, scale does not involve growth or expansion of an organization or program, but rather an idea.  Scale occurs when a way of thinking or addressing a problem or field changes.  A particular organization or program does not control scale in this case, but rather a new model or way of addressing a problem reaches a “tipping point” where it suddenly becomes the norm.

Each model has its benefits and drawbacks.  For example, the Financial Strength model doesn’t necessarily mean that change is occurring, rather an institution merely persists.  The Program Expansion model, too, doesn’t guarantee impact, rather scale is about increasing the number of inputs.  The Accepted Doctrine model is difficult, if not impossible, to control and mold to a particular outcome.  And, as mentioned above, Multi-Site Replication relies heavily on a key individual, a very clear understanding and articulation of what makes the current model successful, and an ability to replicate that success.

I think this framework is a useful way to understand the various forms that scale can take.  It all goes back to the notion that in order for social entrepreneurship to be a successful movement, we have to understand what it is that we are doing and how we are doing it.  If broad and sweeping change in various areas of need is the ultimate goal, we have to be smart and strategic about how that change is happening and what form of change makes the most sense.  Impact, change, scale can take many forms depending on the problem being faced and the best solution(s) for it.  I imagine that as the field of social entrepreneurship continues to evolve other forms and understanding of scale will emerge.

Tags: Hull House, KIPP, Peter Frumkin, scale, Social Entrepreneurship, Teach for America

Radical Transparency for Nonprofits

This is a (perhaps) final update to my earlier posts here and here about FORGE, a nonprofit working in African refugee camps to promote peace and stability but that is struggling to stay afloat. Curtis Chang the consultant from Consulting Within Reach who Sean Stannard-Stockton, of Tactical Philanthropy, asked to provide an analysis of what it would take to turn FORGE around has submitted his final report. And because of this final report, and Sean’s own discussions with FORGE’s Executive Director Kjerstin Erickson, Sean has been convinced that FORGE is a worthy endeavor and has made his own $1,000 contribution.  His decision to invest, however, was not purely based on FORGE’s work or their potential to turn things around.  Rather, Sean based much of his decision on his appreciation of FORGE’s “radical transparency:”

It is incredibly important that we build more trust within philanthropy. It is incredibly important that we move away from soliciting donations via a “sales pitch” and shift it towards a process of making a well reasoned argument centered on impact potential. FORGE hasn’t sugared coated things for us. They haven’t pushed pictures of the refugees they help at us. They’ve explained their situation, made a well reasoned argument for why they think they deserve funding and they’ve openly accepted any and all criticism with grace and humility. FORGE gets my money.

In fact, FORGE has raised half of their $100K deficit for this year. So, perhaps they are on their way.

I have my doubts, however.  In Curtis’ report he details a needed major overhaul of FORGE’s board, their infrastructure and their overall fundraising function.  FORGE’s board lacks refugee expertise and the network and capacity to raise funds from individual donors.  Curtis also points out that FORGE has little hope of raising money from foundations, corporations or governments.  That leaves individual contributions.  However, he points out that FORGE currently lacks a board that can help with that, a donor database and cultivation system, fundraising expertise and a network.  Those seem like some pretty huge hurdles to me.  So what is the plan to overcome them?

It seems to me the biggest roadblocks facing great social entrepreneurs like Kjerstin (and I do think she is a great social entrepreneur because she pairs vision with action) are the capital and strategic management expertise necessary to scale and become sustainable.  Lack of transparency in the social sector is not a major hurdle.  It would be great if we had more transparency in the social sector, and the financial sector as well, for that matter.  But transparency is not what is holding organizations like FORGE back, and it is not what will turn them around.  There needs to be major changes in the way resources flow to organizations and models that are really making a difference and creating positive outcomes.  And these resources are not limited to just financial ones, they also include strategic expertise about how to create a viable business model, how to plan for and achieve sustainable growth, how to create a sustainable revenue engine and so on.  We can’t expect our social entrepreneurs to be able to do it all on their own.  And we can’t simply reward them for sharing their lack of expertise or the hurdles that they encounter.  We need to provide the resources they need to bring their ideas to fruition in a sustainable way.

Tags: FORGE, Fundraising, nonprofit, scale, social entrepreneurs, transparency

How to Scale

Continuing my series on defining and exploring key terms in social innovation, I’d like to take a look at scale.  In an earlier post defining social entrepreneurship, I discussed the key part that scale plays:

Absolutely essential to the idea of social entrepreneurship is the idea of scale. A pattern changing idea, by definition, creates a new model. And to do so, it can’t just exist in one school, in one district, in one city. To truly be social entrepreneurship, the new idea must grow to scale, to reach all of those who can benefit from the solution.

However, just as there are various ways a successful business can grow to scale, there are different ways a nonprofit can grow to scale.  There is the franchise model that we see with organizations like Teach for America, Citizen Schools, or College Summit.  These organizations have a successful model with dramatic results that they want to replicate in other areas of the country.  They raise growth capital that will allow them to import the model to other cities and regions; they bring in or recruit a staff and build the new chapter.  This can be a very successful model.

In a session at this month’s annual Net Impact (an organization for socially-minded business school students and alums) conference, panelists had some provocative ideas for how nonprofits scale.  Aaron Hurst, founder of Taproot Foundation, an organization that provides pro-bono marketing, IT, and HR consulting to nonprofits, took the franchise idea even further arguing that there must be great consolidation within the nonprofit sector:

We need to talk about how we get foundations to stop giving inefficiently…the multitude of nonprofits with similar missions…[are like] the hundreds of Chinese restaurants across New York City. All the restaurants serve dumplings, lomein…[to be efficient] they should all be one Panda Express.

I’m not sure that is the answer.  Nathaniel Whittemore, founding Director of the Center for Global Engagement at Northwestern University argued in his blog on Change.org that scale for nonprofits needs to be thought of a bit differently.  Because of the social, consensus and local nature of nonprofit organizations, you cannot simply franchise a good idea from one city to the next.  He makes a very necessary distinction between scaling an organization and scaling a solution.  The former forces a model onto the next community, without taking into account local processes, norms, behaviors, beliefs, etc.  The latter approach molds the basic solution to the new area.  He believes the successful model is Jane Addams’ Hull House, one of the first settlement houses offering social services to the poor.

For [Jane]…[scale] meant helping other socially concerned citizens found their own organizations with similar but locally appropriate models. She was far less concerned with franchising and branding the Hull House name, but cared that poor people in every city had access to the same quality of services with dignity that her organization offered.

That’s not to say that organizations like Teach for America, Citizen Schools and others don’t meld their model to be locally appropriate,  but it is still very much a franchise model.  And as you grow that model overhead becomes more expensive, quality assurance standards become harder to enforce, and ultimately, the solution may creep farther away.

The franchise model also necessitates significant growth capital.  For example, College Summit has had to raise tens of millions of dollars in growth capital to expand to 8 states with their current program and 6 additional states with a pilot program.  And growth capital can be very difficult to find.

With a model more like Jane Addams’, scale is less about the organization that brings about the solution and more about the actual solution.  You are not building a nationwide organization with a very specific solution, but rather you are building local organizations that mold the solution to be most successful in their communities.  However, because the latter is less rigid and more decentralized it would be more difficult to ensure the quality and effectiveness of the solution, and perhaps much more difficult to track outcomes.

There is much more to be learned as social entrepreneurs continue to grapple with how best to grow to scale – what that means, and what it looks like.  But it is a very necessary discussion, because the true impact of social entrepreneurship does not lie in the ideas that social entrepreneurs create.  I don’t think we have ever lacked good ideas.  But rather, true solutions come when a great idea can grow to scale and fundamentally alter an old, broken model.  How that scale happens most effectively, however, is yet to be determined.

Tags: Citizen Schools, College Summit, growth capital, scale, Social Entrepreneurship, Teach for America

Social Entrepreneurship Defined

Because social innovation is such a new field, terms are still being defined. At times terms are used interchangeably when in reality they have very different meanings. Academics and thought leaders are still hammering out final definitions, but in the interim a common language is beginning to emerge. In an on-going series, I’d like to explain and expand on different terms within the social innovation space. Today I will start with Social Entrepreneurship.

In their ground-breaking 2007 article, “Social Entrepreneurship: The Case for Definition,” two leaders in the field, Roger L. Martin & Sally Osberg, define social entrepreneurs as having three necessary components:

(1) identifying a stable but inherently unjust equilibrium that causes the exclusion, marginalization, or suffering of a segment of humanity that lacks the financial means or political clout to achieve any transformative benefit on its own; (2) identifying an opportunity in this unjust equilibrium, developing a social value proposition, and bringing to bear inspiration, creativity, direct action, courage, and fortitude, thereby challenging the stable state’s hegemony; and (3) forging a new, stable equilibrium that releases trapped potential or alleviates the suffering of the targeted group, and through imitation and the creation of a stable ecosystem around the new equilibrium ensuring a better future for the targeted group and even society at large.

Social entrepreneurship is also defined by what it is not.  Martin and Osberg see two types of organizations that are not social entrepreneurial.  The first is a “social service provision” organization where

a courageous and committed individual identifies an unfortunate stable equilibrium – AIDS orphans in Africa, for example – and sets up a program to address it – for example, a school for the children to ensure that they are cared for and educated. The new school would certainly help the children it serves and may very well enable some of them to break free from poverty and transform their lives. But unless it is designed to achieve large scale or is so compelling as to launch legions of imitators and replicators, it is not likely to lead to a new superior equilibrium. These types of social service ventures never break out of their limited frame: their impact remains constrained, their service area stays confined to a local population, and their scope is determined by whatever resources they are able to attract.

The second type of organization that is not social entrepreneurial is “social activist organizations.”  These are different from social entrepreneurial organizations because

instead of taking direct action, as the social entrepreneur would, the social activist attempts to create change through indirect action, by influencing others – governments, NGOs, consumers, workers…to take action. Social activists may or may not create ventures or organizations to advance the changes they seek. Successful activism can yield substantial improvements to existing systems and even result in a new equilibrium, but the strategic nature of the action is distinct in its emphasis on influence rather than on direct action.

Thus, a social entrepreneur is someone who creates and scales a new solution to a social problem. In his book How to Change the World: Social Entrepreneurs and the Power of New Ideas, David Bornstein defines a social entrepreneur as:

[an] obsessive individual who sees a problem and envisions a new solution, who takes the initiative to act on that vision, who gathers resources and builds organizations to protect and market that vision, who provides the energy and sustained focus to overcome the inevitable resistance, and who-decade after decade- keeps improving, strengthening, and broadening that vision until what was once a marginal idea has become a new norm.

Take Teach for America for example. Wendy Kopp recognized that the old model of teacher recruitment was not working in low-income schools. They had tremendous teacher shortages, many of the teachers who stayed were demoralized, and the end result was tremendous inequalities in education. She estimated that 13 million children growing up in America suffered from educational disparities.  Wendy came up with the idea to take recent college graduates who have the energy and mobility of youth and place them in these poor schools for two years. The results were dramatic. Kids became more engaged, stayed in school, and improved their test scores. Wendy then built on that model and raised growth capital to expand the program to other school districts.

At inception in 1990 they had 500 teachers in 6 communities.  18 years later they have 6,000 current teachers in 29 communities, count 14,000 teachers among their alumni, and have impacted 3 million students.  Teach for America is a pattern-changing idea that is being implemented and growing to scale throughout the country in order to dramatically improve educational outcomes.  They are currently reaching almost 25% of those in need (3 million of 13 million children) and have aggressive growth plans to eventually reach all students affected by educational disparity.  That is social entrepreneurship.

Absolutely essential to the idea of social entrepreneurship is the idea of scale. A pattern changing idea, by definition, creates a new model. And to do so, it can’t just exist in one school, in one district, in one city. To truly be social entrepreneurship, the new idea must grow to scale, to reach all of those who can benefit from the solution.

A social entrepreneur is part program visionary, part implementer, and part marketer, because to grow the solution to scale it takes buy in and investment from many, many people. The social entrepreneur works tirelessly to convince people to try the solution, to invest in the solution, to grow the solution, to tell others about the solution.

But social entrepreneurs cannot work alone. Yes, marketing and fundraising is critical to their success. But they can’t be expected to do it all. The capital available to social entrepreneurs must grow. And it must be a particular kind of capital–growth capital–large amounts over a limited period of time. Wendy Kopp was able to expand Teach for America with growth capital like the $2,000,000 over 5 years from New Profit, a venture philanthropy fund in Boston.  This capital allows a social entrepreneur to build the infrastructure necessary to create a sustainable, scaled organization.

The end goal of social entrepreneurship is to solve the root cause of a social problem. Not all problems can be solved, and not all problems require this direct action approach.  That is why social service provision and social activist organizations are a necessary part of the sector and critical to the strength of our country.  Social entrepreneurship is not and can never be the answer to all problems.  But it is a fairly exciting approach to some seemingly intractable ones.

Tags: growth capital, scale, Social Entrepreneurship