The other day I was talking to a nonprofit executive director who was delighted because he finally convinced a reluctant board member to become board chair. Over the past year, this board member had been delinquent in his meeting attendance and fundraising requirements. But since the executive director had no other viable candidates for the chairmanship, he was incredibly grateful that this board member finally relented and agreed to become chair.
What kind of crazy is this?
Gratitude is being thankful when someone performs a helpful act. But in the nonprofit sector there is such a pervasive power imbalance that misplaced gratitude, or gratitude for acts that are actually NOT helpful, often gets in the way of real work.
If a nonprofit leader acts grateful when she should actually voice frustration or disappointment, she is cutting off authentic conversations that could result in more effective partnerships.
Nonprofit leaders could stand to be a little less grateful for:
Board Members Who Aren’t Thrilled to Serve
If a board member doesn’t want to be there, and they are making that blatantly obvious (by not showing up to board meetings, not meeting their give/get requirement, or derailing board meetings with self-serving tangents) then take them at their word. Stop thanking them for serving and instead have a conversation about their poor performance. Ask them to change or resign. Don’t be grateful that you have 15 warm bodies listed on your letterhead. Each ineffective board member takes up space that could be filled by a committed and productive member. So take a hard look at the actual performance of each board member and build a board for which you can actually be grateful.
Donors Who Don’t Fund Real Costs
There is (I hope) a growing recognition in the sector that you cannot have high-quality, results-driven solutions without the appropriate staff, technology, systems and infrastructure behind them. Not every donor is there yet – by a long shot – but when a donor wants to fund the programs they love, you need to educate them about all of the costs involved in those programs. And if they want the “program” without the “overhead,” explain that the two are inextricably bound and an inferior investment will yield an inferior result.
Superfluous In-Kind Gifts
Nonprofits cannot be the dumping ground for the things companies want to get rid of while they enjoy a fat tax write-off. If a donor wants to give your literacy program boxes of age-inappropriate books, or your food bank out-of-date Halloween candy, or your management team old, slow computers, just say “No”. You shouldn’t be grateful for something that makes your job harder. Take the opportunity to educate the potential donor about the work you do, how important it is, and the most effective ways to support that work. And if they just want the tax write off, suggest which more appropriate gifts (including money) would earn it.
An Inexperienced Fundraiser
I see this all the time. A nonprofit won’t pay a market rate salary for a high-calibre fundraising director so they recruit an inexperienced person who eventually fails. Instead of being grateful that your board will let you hire an underpaid fundraiser, or grateful that someone is willing to take the position, talk to the board about what is really going on. If you don’t make fundraising part of everyone’s job and hire someone to truly lead those efforts, you are simply setting the organization up for failure. Make your financial model a key part of your overall strategy and then hire (and pay appropriately) the right person necessary to lead that financial strategy.
Rise from bended knee with confidence in yourself, your staff, and your social change work to articulate what you really need. To be truly successful, a nonprofit leader needs a board that will move mountains, donors who fully fund and believe in the organization, and a staff that can knock it out of the park. And you get there by being honest about, not grateful for, the roadblocks in your way.
Photo Credit: Victor Bezrukov
We spend a lot of time in this country talking about innovation, particularly on the East and West coasts. But I was reminded recently that innovation can happen anywhere, even in the “fly over states” (which is such an obnoxious term, by the way).
I was in South Boston, Virginia last week to deliver a Financial Model Assessment to the Halifax Educational Foundation. They fund the Southern Virginia Higher Education Center (SVHEC), which is a fascinating model of higher education innovation.
Almost 30 years ago community leaders in this tiny, rural town 75 miles from Raleigh, North Carolina realized that their primary industries of tobacco, textiles and furniture were fading fast. In order to revamp their local economy, they decided to create a hybrid higher education institution (part community college, part incubator, part workforce development site, part educational broker) that would prepare the next generation workforce.
The SVHEC renovated two 150-year old abandoned tobacco warehouses (one to LEED certification) into 100,000 square feet of high-tech classrooms and labs featuring advanced machining and simulation technology focused on nursing, advanced manufacturing, 3-D modeling, and the business of art and design. Their goal is “to re-tool southern Virginia’s rural workforce for jobs in the New Economy.”
They have created an example of what innovative higher education can look like. The video below describes the center, which although located in the middle of rural America, rivals most large city higher education institutions:
The SVHEC recognized early the threat that changing times posed to their community and created a solution that not only recycled beautiful old buildings, but more importantly breathed new life into a rural economy on the brink of extinction. Theirs is truly a model for innovative rural economic development.
And it is testament to the fact that social innovation can happen anywhere.
Because social change doesn’t require big names, huge ideas, or deep pocketbooks. It simply demands a confident vision and the leadership and tenacity necessary to execute on it.
Photo Credit: SVHEC, Steve Helber
Between my own time away from social media in August, the general end of summer quiet, and of course, the glut of posts about the Ice Bucket challenge (of which I have already said my piece), my list of great reads in August is admittedly slim.
But there was some interesting debate, most notably about “strategic philanthropy” and about ratings agency Philanthropedia. Also, calls for more nonprofit leadership development and for nonprofit leaders to get out of their own way by taking the Overhead Pledge. Throw in a little Mark Twain, some sharing economy, and a dash of Millennial analysis and you have a pretty good month in the world of social change.
So below is my pick of the 10 best reads in the world of social innovation in August. For an expanded list you can follow me on Twitter, Facebook, LinkedIn or Google+. And you can see past months’ 10 Great Reads lists here.
- Leadership development is a woefully underfunded need in the nonprofit sector. Indeed from 1992-2011 only $3.5 billion of the nearly $287 billion dollars granted by foundations went to support leadership. In order to get more foundations investing in leadership development, Rusty Stahl offers case studies of 9 foundations who already do.
- In the summer issue of Stanford Social Innovation Review, the lead article “Strategic Philanthropy for a Complex World” caused quite a stir in the philanthropy world with many arguing that there is not much new there. In August, Alliance Magazine ran a series of editorials by philanthropy leaders as counterpoints. Most interesting among them was Avila Kilmurray’s, former director of the Community Foundation of Northern Ireland, response, in which she said “Can we not just recognize that when any funder sets her/himself the task of addressing complex issues…there needs to be provision for continuous consultation, practice, reflection and change?”
- An interesting article in the New York Times paints the Millennial generation as a very communal-minded one, where “the highest value isn’t self-promotion, but its opposite, empathy — an open-minded and -hearted connection to others.” From working, to eating, to shopping it seems Millennials bake social into everything they do. How will the world be different if that holds true as they age?
- Writing in Forbes, Tom Watson asks whether nonprofits should participate in GivingTuesday. As he puts it, “Is #GivingTuesday a well-meaning marketing promotion – or is it a real, organic movement for change?…[Does it] seek to increase U.S. giving from 2% of GDP (where it’s been stuck for two generations) to some higher point?” Amen to that!
- Rating nonprofit effectiveness is such a tricky challenge. Philanthropedia, one rating system that is driven by crowdsourced feedback from experts, comes under fire from the clean water space for being just “a popularity contest.” But others claim it’s an improvement over previous evaluations.
- Writing in the Chronicle of Philanthropy Nicole Wallace shows the value of sharing data by profiling Crisis Text Line, which gives other nonprofits, researchers and government agencies access to their data of 60,000 counseling sessions with teens in crisis to use in their own programs. It begs the question whether other social change data could be shared and how we make that easier to do.
- Sue Dorsey from Water for People was among a group of nonprofit leaders at the InsideNGO conference who took the Overhead Pledge in August, vowing to fully disclose the true costs of their nonprofits. And she encourages other nonprofit leaders to follow suit. This is exciting because it is not enough for funders to get over the overhead myth, nonprofit leaders must as well.
- I am always a sucker for connecting literature and/or history to social change, and even better both, so David Bonbright’s post about how Mark Twain would have viewed recent trends in business is fascinating. Bonbright argues that Twain wanted American business to fully integrate profit and community. And we are beginning to witness this trend again where companies are “embracing the full implications of what they are – what they mean for the environment, for communities, for the most marginalized people affected by their supply chains…[because] this is best way to remain competitive and successful over time.” Let’s hope!
- The new “sharing” economy is not all good, but not all bad either, as Daniel Ben-Horin argues that “there are enormous opportunities for the social sector to engage with the values-driven segment of the sharing economy.”
- Finally, some guidance on making your nonprofit email marketing more mobile friendly and your website better able to connect people to your cause. It’s all about responsive, engaging design.
Photo Credit: Seth Anderson
Note: Fifth and last in my list of guest bloggers this summer is Laura Tomasko. Laura is a network developer at the Council on Foundations, where she follows trends related to private capital for social good. Here is her guest post:
Perhaps like some of you, I dedicate a good portion of my internet reading to blogs like Social Velocity, Re: Philanthropy, and Philanthropy 2173. When I am browsing a blog unrelated to nonprofits, philanthropy, and impact investing, I do a double take when I come across a topic from my professional sphere.
One of those non-work related blogs that I read is Popville, which chronicles activities in Washington, DC neighborhoods. This July and last, two local businesses sought financing through crowdfunding platforms, and reached out to Popville readers for support. Both cited the community focus of their enterprises as reasons to financially support their efforts. What ensued in the comment thread of both posts provides a snapshot into how those outside of the philanthropy and impact investing field understand and discuss crowdfunding, charitable giving, and investing with the intention to generate social and financial returns.
Last year, a local business named Pulp posted to Popville to request “donations” to improve the store and website, including repairs to fixtures, new paint, windows, and other related costs. Even though they said they wanted donations, Pulp actually sought no-interest loans, a distinction clear on their Clovest crowdfunding page but not on Popville. Confusion and opinions swarmed the comments section as people tried to figure out whether Pulp wanted a donation or a loan, and shared their musings on the whole situation.
This July, another local business, Three Little Pigs (TLP), used Popville to promote their Kickstarter campaign, accurately requesting donations for infrastructure improvements to enhance the business that will allow them to build a community space on their third floor. In exchange for donations, TLP offers gifts, like a pound of maple-cured bacon, to donors.
The comments to both posts provide insight into how local residents react to financial requests from community-focused small businesses. Such requests may increase given the passage of the JOBS Act and the Securities and Exchange Commission proposed rules that allow non-accredited investors to get an equity stake in a local business through crowdfunding platforms.
Here are common themes about local businesses raising money on crowdfunding platforms raised by commenters:
- Is This Charity?
While both businesses used words associated with philanthropy to appeal to the charitable sense of local residents, neither provides a charitable tax benefit to the readers. This created confusion and commenters wrote in to ask whether the business would provide a tax benefit or repay the money. One Pulp commenter asked, “Does anyone know what the tax implications are to this approach? I doubt they realize the tax-exemption you typically see with donations to non-profits. Or do they? Could this be an interest free loan as well as a tax-free donation?”Questions such as this one suggest that those using crowdfunding platforms to raise money need to clearly state what they ask of their potential supporters and what they will get in return. For example, they should distinguish between how the funding will benefit the community and whether it is a charitable donation, a donation without a tax benefit, or loan.
- Should You Donate to a For-Profit?
Many commenters bemoan the idea of a for-profit business asking for donations instead of raising the necessary capital through the sale of goods and services. There seems to be an expectation that the business should either flourish or fail based on the value of the good or service, and donations should not supplement either course. While some were happy with the idea of donating to a for-profit, most did not support the concept.
- What About Traditional Financing?
Several wondered why the businesses did not get loans through banks or pay for these expenses using a credit card. Others supported crowdfunding as a way to get around the hurdles of traditional financing. While one TLP commenter in support of traditional financing noted, “There are plenty small business loans and lines of credit they can apply for at the mentioned banks,” one in favor of crowdfunding stated, “If you can’t meet every requirement, the major banks will usually turn you down due to high risk.”
The confusion and concern that arose from these two crowdfunding experiences suggest that language matters and concepts like crowdfunding and impact investing are still new to people accustomed to distinguishing charity, which generates social benefit, from business and investing, which seek to generate financial revenue.
In addition to local businesses on crowdfunding platforms, mainstream media use language associated with charity to describe impact investing activities. An interesting example is coverage of the bridge loan that Laura and John Arnold made to the National Head Start Association during the 2013 government shutdown. Covering the story, the New York Times uses the headline, “$10 Million Gift to Help Head Start Through Shutdown” and Politico writes, “Philanthropists pledge $10 million to restore 7,000 Head Start seats.”
Tucked within both articles, after terms like “donation” and “gift,” are brief mentions that the money might be paid back as a no-interest loan if government restores funding after the shutdown. However, to those scanning headlines and not reading the entire article, it is not clear that the Arnolds have made an impact investment in the form of a bridge loan to the Association.
With increased interest in social entrepreneurship and impact investing, many use charitable language to describe financial transactions ranging from donations to impact investments. Until the concept of impact investing becomes as mainstream as charitable giving, taking the time to distinguish between the two could increase awareness, and eventually adoption, of both traditional and untraditional forms of financing for social good.
Language matters and those raising capital from local residents, as well as those in the media writing about these transactions, should differentiate between the desired financial transaction and its charitably-minded purpose. Crowdfunding may bring impact investing to new audiences, and let’s make sure that the message gets there clearly and accurately.
Photo Credit: zeh fernando
A couple of fascinating debates – one about the role of philanthropy in democracy, and one about the value of nonprofit evaluation – were fascinating reads. And I always love a good controversy, so July gladly provided at least two. The much heralded “sharing economy” came under fire and the hype around social impact bonds was called out.
Below are my 10 favorite reads from last month. If you want to see a longer list of great reads, follow me on Twitter, Facebook, LinkedIn or Google+. And you can see past months’ 10 Great Reads lists here.
- There was a really interesting debate on the Markets for Good blog (always a place for thoughtful conversation) between Andrew Means and Patrick Germain about the value of program evaluation and performance measurement in the nonprofit world. Andrew Means kicked it off here and here and Patrick responded here.
- I absolutely love it when someone makes you think about something that you took for granted in a whole new way. Conventional wisdom is that the sharing economy is a democratizing development. But Max Holleran, writing on the OpenDemocracy blog, argues that perhaps it is the complete opposite. As he says, “Our concept of what sharing means has gone from The Gift to the paid-for lift…How we assess public goods has also changed dramatically: urban commons have been ceded to private-public management initiatives.”
- The Hewlett foundation announced a new $50 million initiative to “strengthen representative democracy in the U.S.” And that announcement inspired a thought-provoking back and forth about the role of philanthropy in democracy among Daniel Stid and Larry Kramer (both from Hewlett) and Maribel Morey (assistant professor of history at Clemson University), via a Stanford Social Innovation Review blog post and the subsequent comments to the post. No matter your politics or your views on philanthropy, it is refreshing to see such an open discussion about a foundation’s efforts.
- On a somewhat related note, Amy Schiller argues that we cannot allow philanthropy to be a “workaround” to the “friction of democracy, ” which is necessary for truly solving social problems.
- To get more funders to invest in nonprofit organization building we need more data and case studies on the return on investment. Building the case for funder investment in nonprofit technology capacities, Berta Colón, Cynthia Gibson, Michele Lord, and Geraldine Mannion examine recent data on building nonprofits’ digital reach, and the Knight Foundation provides a case study on how National Public Radio (NPR) built their digital skills.
- I love New York Times food columnist Mark Bittman for his fabulous recipes and views on food, but recently he’s become somewhat of a food activist, and his article on the the true (social) costs of a burger is eye-opening.
- Is there hope for the famously dysfunctional nonprofit board? A new report from Urban Institute suggests we need to raise our expectations of nonprofit boards. Let’s hope!
- I know I’ve been including Steven Pressfield in my round ups lately, but this man really knows how to inspire people to fight the demons that face them in order to create whatever they were put on this earth to create. His recent blog series entitled “Why” does just that. I think social changemakers, more than anyone, need this kind of inspiration.
- Curt Klotz from the Nonprofits Assistance Fund argues that nonprofits must price their services according to value because “there is no virtue in self-imposed austerity that leads to mediocrity in our programs, and constant turmoil in our finances.” Amen to that!
- Writing on the PhilanTopic blog, Laura Callanan pulls back the curtain on some of the hype around social impact bonds and social innovation in general. Instead of falling victim to shiny object syndrom she asks that “we all bring our critical minds – as well as our open hearts – to the job of social change. Let’s celebrate the potential in the new approaches but also integrate them with prior experience and test them with our constituents…Let’s remember that a tool is just a tool.”
What thought-provoking or controversy-inspiring read caught your eye last month?
Photo Credit: Josue Goge
I get a little tired of the social media noise sometimes. Don’t get me wrong, I love social media for finding new information and making connections. But sometimes it replaces thoughtful conversation with increasingly shortened sound bites (more on that later). And when I hear people claim that 140 characters are better than long-form articles and blog posts, I get depressed.
Call me old fashioned, but I love to spend the necessary time processing thought-provoking, controversy-encouraging written words. Social change is incredibly complex work, so we desperately need people and spaces where we can have difficult, thoughtful, and game-changing conversations. And I think great blogs are one of those spaces.
So I offer here my current list of favorite blogs. These are spaces where I think really valuable points of view are being expressed. That’s not to say that I don’t read or enjoy blogs beyond this list. These are just the top of the heap for me right now:
- White Courtesy Telephone
- Balancing the Mission Checkbook
- Nonprofit Finance Fund Social Currency
- Work in Progress: The Hewlett Foundation Blog
- The Center for Effective Philanthropy Blog
- Steven Pressfield Online
- Full Contact Philanthropy
- Markets for Good
- Stanford Social Innovation Review Blog
- Beth’s Blog
- Philanthropy 2173
But I LOVE to find new writers and spaces, so what are the places you have found for a good, thought-provoking read?
Photo Credit: Wikipedia
Note: Third in my list of guest bloggers this summer is David Henderson. David’s professional focus is on improving the way social sector organizations use information to address poverty. Here is his guest post:
I was recently turned down for a position at a startup-up big-data company focused on the philanthropic sector because I’m “too pessimistic”. This company initially sought me out since they don’t have any social sector expertise on staff, a likely requisite to make successful nonprofit software. Our courtship turned sour when I expressed my view that we have a lot more social sector initiatives than evidence that those interventions actually work.
My skepticism that social sector initiatives by and large work was wrongly misconstrued as pessimism that social progress is possible. Skepticism is a critical driver of intellectual curiosity. I spent a pretty penny on two degrees that essentially taught me how to critically assess the divide between rhetoric and results. Indeed, the null hypothesis in a statistical model assumes the intended effect is not present. I guess statisticians are just a bunch of pessimists.
Fundamentally, I believe the company I interviewed with was mirroring the widespread lack of intellectual curiosity that plagues the social sector and impedes real progress. Too many nonprofits are terrified of having their claims of social impact investigated, lest their effects are discovered to be more modest than claimed. And I don’t blame them. The funding community’s emphasis on investing in “what works” has resulted in a proliferation of noise as every nonprofit steadfastly argues their interventions cure everything. It’s no wonder evaluators are seen as Angels of Death.
I generally don’t favor taking cues from the for-profit world, but venture capital and angel investors’ practice of investing in people and teams over ideas is far more conducive to intellectual honesty in product (and social intervention) development. The basic premise of this investment strategy is that initial product ideas are generally wrong, but smart people will investigate, iterate, and innovate.
Compare that philosophy to the social sector, where the expectation is that nonprofits already have the answers, they just need money to scale them up. This assumption is largely incorrect, but by making funding contingent on the perception of effectiveness, the nonprofit sector is incentivized to not question the efficacy of its own work. In this model, continued funding depends on a lack of intellectual curiosity at best, and intellectual dishonesty at worst.
A better alternative is for nonprofits to embrace intellectual curiosity, and to be the first to question their own results. Under this model, nonprofits would invest in their capacity to intelligently probe the effectiveness of their own interventions, by staffing those with the capacity to sift through outcomes data and investing in the growing list of tools that are democratizing evaluation. Of course, this would require a shift in the funding community away from “investing in what works” to more humbly “investigating what works”.
A shift toward intellectual curiosity would create more space for the sector to solicit beneficiary feedback in the design of social interventions, as organizations would no longer be incentivized to defensively “prove” existing approaches work, and instead would be rewarded for proactively evolving practices to achieve better results. It is this very intellectual curiosity that led organizations like GiveDirectly and the Family Independence Initiative to invest in the poor directly, a departure from long-standing anti-poverty practices that the evidence suggests might actually work. It’s a shame that organizations imbued with a mission of experimentation deviate so far from the norm.
I don’t consider it pessimistic to question whether the sector is achieving its intended social impact. To the contrary, it’s rather cynical to set aside what should be the critical question for any nonprofit organization in the name of self-preservation. In order to achieve social progress, the sector needs to expel anti-intellectual policies and actors in favor of a healthy skepticism that questions everything, and is willing to try anything.
Photo Credit: NASA
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
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