Social Capital Markets
It seems that October had two primary themes: moving nonprofits to measure outcomes and the evolution of philanthropy. The drum beat that nonprofits must find a way to measure what change they are creating has been growing louder, and every nonprofit leader would be wise to listen and understand this new trend. But in order to get to a place where most or all nonprofits are measuring outcomes, philanthropists must start paying for measurement. It is interesting to watch this all evolve.
Below are my top 10 picks for what was worth reading in October in the world of social innovation. And as always, please add what I missed to the comments. And if you want to see an expanded list, follow me on Twitter, Facebook, LinkedIn, Pinterest or my newest social media network, ScoopIt.
You can see the 10 Great Reads lists from past months here.
- There were several great articles about the need for nonprofits to prove the change they are creating. Steve Boland at Nonprofits Assistance Fund kicked if off by encouraging nonprofits to compare their resources to the outcomes they achieve. The New Philanthropy Capital blog encouraged nonprofits to approach measurement with theory, courage and creativity. And on the Center for Effective Philanthropy’s blog, Lauren Gilbert provided a case study of BELL and how they measured outcomes.
- And then to the ultimate question, “Will funders pay for measurement?”. Beth Kanter asks the question What is the Funder’s Role in Supporting Good Measurement? and Mario Morino (author of Leap of Reason) weighs in. And Phil Buchanan, CEO of the Center for Effective Philanthropy, argues “Foundations must step up and support robust nonprofit performance management systems.” Oh yes, please.
- Writing in the New York Times Paul Sullivan explores how the advent of impact investing is pushing philanthropists to measure the impact of their dollars.
- Even though the premier social entrepreneurship conference, Social Capital Markets, was in September, there were two great round-up blog posts about how SoCap moved the conversation about investing in social entrepreneurship forward. First was Jeff Raderstrong’s argument that we need to beware of the hype around impact investing and focus on solutions to social problems. And Christine Egger wrote a fabulous post on the Idealist blog about new ways to think about, fund & inform social change.
- There were a couple of great posts about (the really sexy topic of) nonprofit budgeting. It may sound dry, but a nonprofit’s budget is an incredibly powerful tool for creating social change, so the more organizations that can harness that tool, the better. On the Nonprofit Finance Fund blog, Peter Kramer demonstrates how to connect your budget to your overall organization strategy. And Kate Barr argues that breakeven budgeting is the “biggest barrier to nonprofit financial health.” Amen to that!
- Two great pieces this month from Lucy Bernholz who always makes us think, especially about the future. First is her piece on libraries and the future and then her laundry list of things we can no longer assume about the world around us.
- I always love a well done infographic and PhilanTopic offers one with their Nonprofits’ Impact on the Economy.
- Writing on the Social Earth blog Ashok Kamal reminds us that the work of social change is an exhausting roller coaster and we all need some “inspiration capital” to keep us going.
- Nancy Lublin, CEO of DoSomething.org, describes that for the millennial generation, innovation is the status quo and they are “poised to bring the social and business worlds closer together – tying profit to social change, and strong local communities to a new global society.” Let’s hope!
- It looks like the old is becoming new again as cities revive the idea of public, inner city markets.
Photo Credit: x1klima
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
I’m back from Spring break, which came right as the flurry of discussion about my blog post The Critical Alignment of Mission, Money and Competence was winding down. I really appreciate the great comments and discussion from Sean Stannard-Stockton (of the Tactical Philanthropy blog), Nathaniel Whittemore (of Change.org’s Social Entrepreneurship blog), Kjerstin Erickson (founder of FORGE) and Sasha Dichter (Director of Business Development for Acumen Fund), among others.
The great discussion happened and was then picked up by others (such as the Social Capital Markets blog, and the Nonprofit Assistance Fund blog) and taken further by others (Sasha kept going) because of our good friend, Twitter. For all the jokes and rolled eyes, Twitter has a tremendous amount of value. The discussion itself didn’t happen on Twitter, 140 characters can only do so much. But rather, it created a space for a thoughtful discussion about a topic that seems to be of interest to many in the social innovation space, among people who otherwise would not have connected, let alone been able to have a conversation of such depth.
I’m a fairly recent convert to Twitter (aren’t we all?) and at times it can feel like an albatross (one more thing on my very long list of things to keep up with), but if you can keep up with it, even just marginally, it can hold tremendous value. (You can follow me on Twitter @nedgington).
But what came out of this great discussion? What were the takeaways? I’m sure the battle rages on, but for me, the key points were:
- Although mission, money and core competencies must be in equal alignment in a nonprofit organization, funding must mold to mission, not vice versa.
- A sustainable revenue stream is one that is sustainable not because it is based on sale of goods or services (“earned income” is often used interchangeably with “sustainable revenue stream”, which I, like Sasha, really disagree with) but because it is based on a funding mix (whatever that may be) that can be counted on for years down the road.
- Finding a sustainable revenue engine is often about creating a context or a “market” for your work.
- Nonprofits have to be more analytical about their funding sources and how sustainable, and aligned with their mission and core competencies, they are and will continue to be.
- The funding community is best positioned to help with revenue misalignments.
I’m sure nothing was changed by this discussion. But the more that these kinds of discussions happen and the more that some of the assumptions of nonprofit operation and finance are challenged the more apt we are to restructure how nonprofits work so that great missions with great delivery can become sustainable.
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