Social Innovation Fund
There is an interesting report out today on the effectiveness of the Social Innovation Fund (SIF). Authored by the Social Innovation Research Center (SIRC), a nonpartisan nonprofit research organization, the new report details what has worked and what hasn’t in the six year history of the SIF.
Launched by the Obama administration in 2009, the SIF — a program within the Corporation for National and Community Service — provides significant funding to foundations that follow a venture philanthropy model by regranting that growth capital, along with technical assistance, to evidence-based nonprofits in “youth development, economic opportunity, and healthy futures” areas. In 2014, SIF expanded its efforts to include a portfolio of Pay for Success (social impact bond) grantees.
Now, 6 years on it is interesting to take a look back to understand what, if any, effect SIF has had on the nonprofit sector. The effect of the SIF is also critical given that, as of right now, the House and Senate have both defunded SIF in their respective funding bills.
To date, the SIF portfolio is made up of $241 million of federal investments and $516 million in private matching funds, which was invested in 35 intermediary grantees and 189 subgrantee nonprofits working in 37 states and D.C.
The SIRC report focuses on the current progress of SIF grants made during the first three years of the program (2010-2012). The report finds two clear positive results for the SIF so far. The SIF has:
- Added to the nonprofit sector’s evidence base about which programs work, and
- Built the capacity of nonprofit subgrantees, especially in the areas of “performance management systems, evaluations, financial management, regulatory compliance systems, and experience with replicating evidence-based models.”
On the negative side, however, the report finds that the SIF put real burdens on funders and nonprofits with its fundraising match requirements and the federal regulatory requirements. The report also finds that the SIF has had little effect on the sector as a whole because the SIF has not very broadly communicated their learnings so far.
To me, of course, most interesting are the report’s finding about capacity building at nonprofit subgrantees. There is such a need for nonprofit capacity building in the sector, and this was a clear goal of the SIF.
The SIF is one of few funders that do more than pay lip service to performance management by actually investing in building the capacity of nonprofits to do it. However, the SIF has been criticized for mostly selecting nonprofits that already had strong capacity. And indeed, the SIRC report finds that the SIF was most successful among those nonprofits that already had high capacity (in performance management, fundraising function, etc.) prior to SIF funding. Indeed, the report found that “poorly-resourced intermediaries working with less well-resourced community based organizations have been at a disadvantage.”
One SIF grantee in particular, The Foundation for a Healthy Kentucky, really struggled to build the capacity of their subgrantees whose starting capacity was so low. As they put it:
During the course of participation, it became clear that…[SIF] was really better suited for replicating existing programs or, at a minimum, investing in well-established programs that had some level of sophistication around organization systems and evaluation.
This mirrors earlier criticism of the SIF that it was set up to grow only those nonprofits that were already doing well, while those nonprofits that struggled with basic capacity issues were left out. The SIF has struggled to determine whether it is funding innovation (new solutions with limited capacity), or proven solutions (with a long track record and the corresponding capacity). It seems the two are mutually exclusive.
What the SIF is trying to do is such tricky business. To identify, fund and and scale solutions that work is really the holy grail in the social change sector. Certainly there are hurdles and missteps, but I think it’s exciting when government gets in the social change game in a big way. Six years is really too soon to tell. So I hope that this brief SIF experiment is allowed to continue, and we can see what a social change public/private partnership of this scale can really do.
To read the full SIRC report go here.
Photo Credit: Obama signs the Serve America Act in 2009, Corporation for National and Community Service
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
In this month’s Social Velocity blog interview, we’re talking with Jeff Raderstrong, founder and editor of UnSectored, an online platform for people interested in developing collaborative efforts to create social change. In addition to the online platform, the UnSectored community uses offline events and activities to identify intersections, facilitate discussions, encourage cross-sector collaboration, and promote cross-sector change efforts. Jeff is also a community engagement consultant and has worked for Venture Philanthropy Partners, among other organizations on the front lines of social innovation.
You can read past interviews in our Social Innovation Interview Series here.
Nell: You and some friends started the UnSectored blog a year ago to encourage the nonprofit, public and private sectors to break down their walls and work together on social change. How has it worked so far? What are you seeing?
Jeff: The blog was a first step in changing the conversation around social change to focus not on individual components—social enterprise, nonprofit, corporation social responsibility, government innovation, etc—but to consider the entire ecosystem. Social change is a complex task and, to us, it seemed silly to have all these conversations separately, with people not really paying attention to what those with similar (or identical) goals were doing.
In that way, the blog has been successful in providing that space. The response we received was way more positive than we were expecting, because our core message is a pretty simple one—that social change is the responsibility of all individuals, organizations, and sectors, and that everyone should work together. But there had not been a place for discussion around that idea, so it resonated with people.
There’s still a lot more work to do, obviously, and UnSectored can’t do all of it. We are providing the platform for the community that believes in this idea—what’s next is up to the people who join that community.
Nell: Your fellow bloggers at UnSectored are all part of the Millennial generation. Do you think the notion of “unsectoredness” (is that a word?) is a particularly Millennial one?
Jeff: Answer to first question: Yes! You just put it on the internet, so it’s now a word!
Second question: I do not think there is anything inherent about the ideas behind UnSectored that make it explicitly a millennial endeavor. The work on UnSectored has been done primarily by millennials, but I think that’s just a function of the people I reached out to (my peers) rather than who the idea resonates with most. We have gotten response on this from people of all ages and backgrounds—I think it’s a universal idea.
That being said, I do think it’s a relatively new idea, born out of the more collaborative and connected nature of the brave new world we live in. The new tools available to people make it much more easier now than ever before to work together. For millennials, this isn’t “new,” this is the way we were raised. Because of that, we get it a little quicker than others, but I don’t think that makes it “ours” at all.
Nell: In addition to the blog you are also doing UnSectored Talks and Working Group Actions. What are these and what are you hoping they will accomplish?
Jeff: We have four components to UnSectored: Blog, Talks, Actions, Campaigns. The blog is relatively straightforward, as are the Talks: Both are ways to engage with open and intentional conversations around social change. The Talks are offline, the blog is online.
The other two components are trying to leverage the power of the UnSectored community to move from discussion to action. The Actions are the offline, coordinated version of this, and the Campaigns leverage the online platform of UnSectored. By giving people the option to engage in discussion and action, both online and offline, we hope to meet people where they are and get them to engage the best they can.
Nell: How geographic is your movement? Is it growing beyond the D.C. Metro area?
Jeff: It’s centered on DC, but we’ve been talking to people around the country. Because we aren’t funded and rely on volunteer time, it’s hard for us to have events in other places. But, we are looking for creative ways to partner with other organizations around the country. If you have some ideas, let us know!
Nell: Many of your fellow bloggers work for high-profile organizations within the social sector space (Venture Philanthropy Partners, Calvert Foundation, Council on Foundations, etc.). Do you find that your employers buy into the UnSectored idea and if so what are they doing to make it a reality?
Jeff: They definitely do. I think we all get inspiration for UnSectored from our other work. More and more, people at all types of organizations—high profile or not—are beginning to see how working together can produce better outcomes and create more transformative change. Personally, I’ve worked on the Social Innovation Fund initiative from the Obama administration, a great example of “unsectoredness” at work: The federal government partnering with funders and service providers to better leverage resources and encourage innovation. This initiative, which many of your readers are probably familiar with, is a great example of UnSectored’s core principle: That by working together, we can do much more than working alone.
In this month’s Social Velocity blog interview, we’re talking with David Henderson. David is the founder of Idealistics Inc., a social sector consulting firm that helps organizations increase outcomes, demonstrate results, and organize information. He has worked in the social sector for the last decade providing direct services to low-income and unhoused adults and families, operating a non-profit organization, and consulting with various social sector organizations. David’s professional focus is on improving the way social sector organizations use information to address poverty.
You can read past interviews in our Social Innovation Interview Series here.
Nell: On your blog, Full Contact Philanthropy, you write a lot about making program evaluation accessible to all nonprofits, even small and under-resourced ones, which is something that a lot of those pushing for evaluation neglect to address. Evaluation can be expensive, time-consuming and poorly executed. What is the essence of good evaluation, and, at a minimum, what should all nonprofits be doing to evaluate their work?
David: Whatever the price tag, a good evaluation helps you make better decisions, a bad evaluation does not. If an organization is not open to changing its course of action regardless of what the data suggest, then evaluation has no meaning. Therefore, the most important step in any evaluation is knowing what you want to evaluate and why.
While some evaluations are expensive, they don’t all have to be. Evaluation does not mean just one thing. There is no one right way to do evaluation. Instead, there are a number of ways organizations can use outcomes metrics to inform their work, ranging from randomized control trials (most accurate and most expensive) to simply monitoring whether a few key indicators are getting better or worse.
More important than the certitude of any one evaluation is the regularity with which an organization uses metrics in decision making. It’s not terribly costly to start every staff meeting with an update on how the people you are helping are doing. But this discipline helps create cultural commitment to using outcomes data in decision making, which is really at the core of any good evaluation strategy.
Nell: Is everything in the social change arena measurable? Are their some public good efforts that are so complex or have so many variables that we cannot measure them, yet they still need to happen?
David: When we think about measurement, we tend to imagine a numeric, linear scale with start and end points. Not everything is quantifiable, but that doesn’t mean it’s not measurable.
Organizations collect information all the time. Some of that data is quantifiable and gets stored in spreadsheets and databases. But we also get a lot of important information through visual observations and conversations.
All of this information, quantitative and qualitative, objective and subjective, helps inform decision making. Taking the information we have and establishing evaluative frameworks that help us make systematic program decisions is the real challenge.
Nell: How does government fit into the effort for social change? Can and is government changing quickly enough to keep up and to have a relevant place?
David: Ideally, the non-profit sector would innovate and test social interventions, and governments would take the best innovations to scale. But successful social innovation requires cultural commitment to both evaluation and failure. And in the current funding environment, failure is not an option. That’s a big problem.
With so much pressure on organizations to show evidence of impact, instead of investing in innovating new social solutions, non-profits are hiring marketing consultants shrouded as evaluation experts to help them tell their stories.
If the government is to invest in and scale what works, as the federal Social Innovation Fund purports to do, organizations have to be free to report what does and what does not work. So long as our focus is on story telling instead of truth telling, it’ll be difficult for non-profits to have the latitude to experiment and evaluate freely, leaving the government precious little worth scaling.
Nell: Your particular interest is social change efforts to alleviate poverty. But since poverty is the result of some very serious failures in America’s infrastructure (inadequate education system, broken health care system, etc) is it possible to fix the results of those inadequacies without addressing those much larger structural deficiencies? Or can social entrepreneurs do both?
David: Poverty eradication has to be the goal, but alleviation is pretty darn important to the 43.6 million Americans and billions more worldwide living in poverty today. Social entrepreneurs as well as a myriad of government efforts address both structural causes and the many harms resulting from poverty.
Regardless of a particular intervention’s focus, every effort is more likely to succeed when informed by regular outcomes assessments. Since my firm’s focus is helping organizations use client metrics to make higher impact program decisions, we work with all types of organizations across the anti-poverty spectrum.
Nell: How does your company Idealistics fit into the solution to poverty?
David: Our practice is about helping organizations make smart, high impact decisions that increase social outcomes. Everything we do is underscored by a vision of a social sector that uses evidence in the crafting, implementation, and iterative evaluation of its interventions.
Probably the most important thing we do toward that end is helping organizations establish decision frameworks. A decision framework converts an agency’s theory of change into a tool, or a mathematical model as we think about it, that organizations can test, update, and use in the design and execution of their interventions.
With a solid decision framework in place, we provide analytically oriented consulting and technology systems that help organizations establish data collection pipelines to make sense of their information.
While a lot of our customers hire us so they can better prove to their funders that they’re making a difference, that isn’t our objective. But the fact is our customers do very well with their funders.
Our clients are able to uniquely demonstrate an analytical approach to their work, and have the evidence they need to back their claims of progress, which makes them very competitive in the evidence-deficient social sector landscape. However, for me and my team, the real gratification is not that our customers impress their funders, but that they are better positioned to change the lives of the people they serve.
In this month’s Social Velocity blog interview, we’re talking with Carol Thompson Cole. Carol is President & CEO of Venture Philanthropy Partners (VPP), a philanthropic investment organization (co-founded by Mario Morino) that helps great leaders build strong, high-performing nonprofit institutions. She has over thirty years of management experience in the public, private, and nonprofit sectors. She served as Special Advisor to President Clinton on the District of Columbia and was the Vice President for Government and Environmental Affairs at RJR Nabisco.
You can read past interviews in our Social Innovation Interview Series here.
Nell: This year marks Venture Philanthropy Partners’ 10 year anniversary. And in fact, venture philanthropy itself is only a little bit older. How has the concept of venture philanthropy changed since it first came on the scene?
Carol: People began talking about “venture philanthropy” about 11-12 years ago. Back then, it meant many different things, depending on who was speaking. Today, it still means many different things, but those organizations that work within this philanthropic mindset, like Venture Philanthropy Partners, have learned some important lessons along the way and share some common characteristics like a focus on performance, long-term financial commitments, investing in capacity and building infrastructure, and bringing resources in addition to capital to the table, to name a few.
At VPP, we actually moved away from using the term “venture philanthropy” a number of years ago as we realized that our approach was not a strictly “venture” approach. We are much more about blending some of the ways private equity firms approach their financial investments with many of the lessons learned and techniques developed by philanthropists through the years. We usually call ourselves a “philanthropic investment organization,” and we work to maximize all available resources, including capital, time, the skills and experience of our team, and the power of our network, to improve the lives of low-income children and youth in the National Capital Region.
Venture philanthropy arose out of the tech boom in the late 1990s, when many young entrepreneurs making their fortunes online decided to shift their resources into philanthropy. They saw a real opportunity to apply their business and management knowledge to nonprofits to create real, sustainable change for our society. These entrepreneurs decided to take the principles of venture capital that helped them become successful and shift that over into philanthropy.
Of course, the main strategies of venture philanthropy have been used, in some form or another, by grantmakers long before the late 90s. Venture philanthropists focus on high-engagement approaches to their grants, work to build capacity of organizations to scale their programs, and seek measured and proven outcomes as a result of their investment. Above all else, venture philanthropists use high-engagement techniques to bring more than just money to their partnership with nonprofits. Different grantmakers have refined their own ways of implementing these strategies, but they remain at the core of venture philanthropy, even a decade later.
Nell: When venture philanthropy started in the late 1990s it was thought to be a true innovation that could transform the nonprofit and philanthropic sectors. Has it lived up to those original ideas?
Carol: Venture philanthropy is a true innovation, but the nonprofit and philanthropic sectors are large and complicated systems. Venture philanthropy is an effective tool that has helped us deliver strong results for the children and youth in the National Capital Region. VPP is focused on identifying outstanding nonprofit leaders with strong programs and bold ambitions to grow. We give them growth capital to build their infrastructure and scale their organizations through serving more children and youth, by increasing their outcomes and impact, or through influence – making systemic change that ultimately allows for many more lives to be changed. Our first fund has grown to serve an additional 16,000 youth.
Clearly, venture philanthropy has worked for us, but it is not the only answer for the nonprofit sector. It can be a useful tool to deliver results, but creating those results is more important than the way those results are created.
Nell: Venture philanthropy was in many ways the precursor to what has now become the social innovation movement. How do you think venture philanthropy fits into these new worlds of social investing, for-profit social entrepreneurship, and other areas where the public, private and nonprofit sectors are converging?
Carol: Again, venture philanthropy is a tool to be deployed in grantmaking. At VPP, we are focused on bringing a high-engagement model to our nonprofit partners and delivering results for the children and youth of the region. Social investing, social entrepreneurship, and other innovations coming out of the convergence of sectors are examples of similar tools to drive results. At the Harvard Social Enterprise Conference in March, where I spoke along side Paul Carttar of the Social Innovation Fund, there was a lot of discussion about what type of organizational structure is best to create social change and what type of funding an organization should seek out to achieve its mission. What became clear is that people need to focus on goals and strategy, not methods. Venture philanthropy complements programmatic sources of funding because it can help some organizations scale very effectively to help those who need it.
Nell: The federal government took a step into the world of social innovation last year with the Social Innovation Fund, which was based largely on the venture philanthropy model. What do you think of the SIF and how do you see government’s role (at both the local and federal levels) evolving from this?
Carol: VPP is a member of the inaugural portfolio of the Social Innovation Fund, and we are honored to be included among the other intermediary funders. We applied to SIF because the challenges in our community are too big and complex to be met by a single funder, a single nonprofit, or a single sector. What we need now is a “network” of nonprofits, funders, corporations, local governments, and the federal government working together to solve our most intractable problems.
SIF represents the first step towards that new form of collaboration. Speaking at the Harvard conference, Paul Carttar said that SIF was about much more than money, and it would be a success if the public-private partnership model was adopted by others across the country. In these lean times for funding, it is important that we work together to encourage social innovation where it is needed. SIF, as well as the other public-private innovations launched by the Obama administration, like Investing in Innovation and Race to the Top, are developments that should be encouraged. If we can continue to push local and federal government to take on this role as collaborator, we will be able to achieve much higher levels of impact in our communities.
Even the largest philanthropic investments are dwarfed by public funding and are often deeply effected by availability of public funding as well as how and when it is allocated. Not every partnership needs to be as formal as SIF, but I would urge all philanthropic and nonprofit organizations to look for ways to seek alignment with local, state, and federal government efforts.
Nell: What’s next for venture philanthropy? Where does it go from here? How do you continue to reinvigorate or adapt the model?
Carol: I strongly believe that SIF represents the next step for VPP, and for all of venture philanthropy. We feel our model of philanthropy works and our first investments were successful, but we also feel like there is potential to dramatically improve the lives of the most vulnerable children and youth in our regions through intense and intentional collaboration. Because of this, we applied to SIF.
Our SIF initiative, youthCONNECT, represents the next phase of our work. Instead of single investments, we are investing in a network of high-performing nonprofits that provide a number of different services to young people from low-income families to help them thrive in adulthood. All the nonprofits in the network share the goal of bringing education, job training, and social services to at least 20,000 low-income youth, ages 14-24, in our region over 5 years. As we demonstrate success, this approach can be replicated or adapted by others around the region and the country. We will still make high-impact, long-term investments in single organizations, but we are exploring the transformative power of a network approach.
It is too early to tell the effectiveness of youthCONNECT and SIF, but I think these developments are pushing us into the next generation of high-engagement philanthropy. At VPP, we are committed to evaluation, sharing, and transparency so we can learn from each other as we work in these unexplored areas.
Nell: One of the criticisms of venture philanthropy is that it is only accessible to the largest and most successful of nonprofits. Do you see smaller nonprofits being able to access the ideas of growth capital? And if so, how will this evolve?
Carol: VPP focuses on organizations with strong leaders that deliver results. We have historically focused on organizations with budgets of $3-$50 million, but in our youthCONNECT initiative we have invested in organizations that fall below that monetary requirement but still have a proven track record in the area. Investing in smaller organizations is a different approach than some venture philanthropists have used, but these smaller nonprofits should have opportunities to access growth capital. What is most important to VPP is that an organization, regardless of size, can deliver lasting and meaningful results for children and youth in our region. Change in the lives of those who need it most will always remain our priority.
In this month’s Social Velocity blog interview, we’re talking with Susan Comfort from KaBOOM!, a national non-profit dedicated to saving play and building community engagement. KaBOOM! helps communities across the country build playgrounds for their neighborhoods. As the VP for Philanthropy at KaBOOM!, Susan has a unique perspective on the next generation of sustainable philanthropic support for nonprofits. Before KaBOOM! Susan worked for environmental groups like EWG and 1% for the Planet. KaBOOM! is a darling of the social innovation world because they have figured out how to scale their idea (a playground within walking distance of every kid) in a financially sustainable way.
You can read past interviews in our Social Innovation Interview Series here.
Nell: How is it fundraising two years into a recession? Have you found that your approach has had to change because of the recession? If so, in what ways?
Susan: The recession brings good and bad news for fundraising. The good news is, if you are a nonprofit that delivers results, you will stand out to donors for getting great bang for their limited bucks. KaBOOM! has made its reputation this way, not only delivering a tangible, needed asset to an underserved community, but doing it efficiently, in a way that brings people together in the short- and long-term.
The bad news is, as we work to diversify our revenues beyond corporate-funded-playgrounds, breaking into the foundation community during a recession is challenging. Foundations, coping with reduced payouts, can’t fund all their previous grantees, much less new ones. Plus, “play” is regrettably not yet understood by foundations as something that fits their guidelines, even though lack of play is harming kids intellectually, physically, socially and emotionally, and is linked to so many other pressing issues.
KaBOOM! launched its “Going to Scale” plan just before the bottom dropped out of the market, so our approach continues to be developing our organization and program offerings beyond building playgrounds. We aim to achieve our vision of a great place to play for every child in America, but we can’t build every play space ourselves!
Nell: KaBOOM! has grown tremendously since it was founded in 1995. What do you think enables some nonprofits to grow their solution significantly while others can’t? What are the characteristics, if there are any, of a growth-oriented nonprofit?
Susan: One characteristic is strategy. If you engage in direct service, you can always find more people to serve…then organizational growth is about funding and efficiency. If you engage in lobbying Members of Congress, however, you will have a limited number of people to lobby, with a limited number of opportunities…so your organizational growth is about the message (did it resonate? And who was the messenger?), or effectiveness (did you win?) or scope (where does this get addressed next—in state houses or internationally?).
Another characteristic of growth is your Theory of Change. First you have to define the problem, so you can rally around a collective cause. The problem we aim to address is the declining health of both children AND communities. At KaBOOM! we structure programs that lead to Achievable Wins, which in turn lead to what we call “Cascading Steps of Leadership”. The KaBOOM! model of community-built playgrounds allows our project managers to match up funders and nonprofits, then facilitate a 10-week process starting with a kid-led Design Day and ending with Build Day. But it doesn’t end there…
Our project managers keep in touch after the big Build Day with 1-week, 1-month and 6-month follow-up calls, each designed to propel the planning committee to take on another defined problem in their community, and take steps to achieve more “wins” for themselves. In essence, this model allows us to work in any part of the country, so KaBOOM! can grow and serve any number of communities. If your Theory of Change is focused on one community, as a traditional community organizer’s would be, you might not grow beyond that community – nor should you – but your roots there will be much deeper than ours, by design, ever will be.
Nell: You have raised a good bit of growth capital to achieve this growth. Beyond the capital you’ve raised from venture philanthropy funds, that are all about growth capital, how have you convinced other funders, who were maybe not as versed in the ideas of growth capital, to fund growth as opposed to just direct programs?
Susan: The only venture philanthropy funding that KaBOOM! has received is from the Omidyar Network, and we are incredibly grateful for their $12 million investment over 7 years. It gave us a long runway to get our engine revved up for take-off, in this case open-sourcing over a decade’s worth of playground-building expertise so that Do-It-Yourself activists could freely download what we’ve figured out and apply it to their own communities (per our Going To Scale plan).
At the same time, we started educating our closest friends in the corporate community about our other organizational needs, and some were willing (even in a recession!) to fund us beyond playground builds. So we started a “National Partner” program where we asked companies to build multiple playgrounds annually, plus contribute six figures in general support. Today, our national partners are Dr Pepper Snapple, Foresters, Kraft and MetLife.
And of course — near and dear to my heart — we also started a Philanthropy program (which I direct). Our goal is to engage foundations and individuals to invest in KaBOOM!, both its online programs and its organizational growth. With regional foundations, for example, we show what playgrounds we’ve built in their area thus far, and request support for our Playful City USA program. If play can be institutionalized in mayor’s offices and with local activists, so much more will be accomplished than we could have done on our own.
With individuals, it’s human nature to want to fund something very specific and/or tangible, so the growth fundraising is certainly a challenge. But it’s also human nature to extrapolate meaning from a single story, so when a donor sees how one child’s family benefits from a fantastic play space, they understand how millions of children and families would benefit just the same. We’ve had individuals support playground builds…we even have a wedding build lined up in Connecticut in June 2012…but we are also asking people to support the broader cause of play.
Nell: KaBOOM! recently took a fascinating spin on growing to scale by realizing the only way they were going to get to every area that needed a playground was to make playground plans downloadable on your website. That has the potential to undermine your financial model since you won’t receive any money for those playgrounds built. How do you balance the desire to reach everyone with the need to sustain a large organization?
Susan: Well, it’s a challenge, and honestly, we haven’t figured out the answer yet. But we have a few irons in the fire in addition to some of the foundation efforts I described.
We are hoping individuals will “Play it forward” to KaBOOM! after they’ve served as playground build volunteers, or Do-It-Yourselfers, or recess advocates. We are also figuring out the best way to help others raise money for their playground projects using a platform similar to Donors Choose or GlobalGiving, where donors give a small percentage “tip” to help with operating costs. Of course, we are also reaching out to high-net-worth individuals who have the potential to underwrite our mission.
In addition to our individual and foundation outreach, we are developing less-traditional revenue streams. Imagination Playground is a unique LLC, formed between KaBOOM! and the non-profit arm of David Rockwell’s architecture firm. Once that enterprise begins making money (we’re not there yet) KaBOOM! will get half of the proceeds. Another new revenue streams is KaBOOM! founder Darell Hammond, who is contributing all author proceeds from his new book, (an Amazon best-seller) How One Man Built a Movement to Save Play, to the organization. Back in the day, we also used to scoop ice cream down at the Ben & Jerry’s on Free Cone Day, which eventually got us a limited-run ice cream flavor featuring white-chocolate-coated pop rocks…called KaBerry KaBOOM! Too bad that’s in the Flavor Graveyard now.
Nell: What is your sense of how philanthropy is evolving in terms of the distinction between buying services and building organizations? Do you think more philanthropists are understanding this distinction and stepping up to fund building organizations? And what will encourage more to do so?
Susan: Some of the forward-thinking philanthropists are certainly making this distinction. Venture Philanthropy Partners. The Social Innovation Fund. Omidyar Network. Skoll Foundation. These tend to fund “social entrepreneurs” which are not just business-like non-profits. Jim Collins says “We must reject the idea.. well-intentioned, but dead wrong.. that the primary path to greatness in the social sectors is to become ‘more like a business.’ Most businesses…like most of anything else in life…fall somewhere between mediocre and good.”
Jim Collins has many fans at KaBOOM! – in fact, every staff member receives on their first day his Good to Great in the Social Sector so that we can embrace the universal principles of being GREAT.
But the reality is, the traditional KaBOOM! funding model sits squarely in the fee-for-service column, and corporate-funded playgrounds still dominate our budget. To fund everything else, we are making the transition away from venture philanthropy (Omidyar) toward a diversified organizational funding model (foundations + individuals).
Both entities are still tempted to fund a particular geographic area, or program area. And that’s okay—it’s good work.
But so many organizations are running around chasing 1-year grants for a program, for which quarterly reports are due, that you need a permanent development staff to keep track of all those proposals and reports and such. Which keeps people like me employed, but it’s not great for all of our social change movements who are spending time chasing money when they could be growing their organizations and serving the public more efficiently.
To download the 27-page Financing Not Fundraising e-book, click here.
In this month’s Social Velocity interview we are talking with Laura Tomasko. While she shares her millennial generation’s passion for social innovation, she sees a real opportunity, that many dismiss, for government to play a role. Laura serves as manager of Public-Philanthropic Partnerships at the Council on Foundations. She is a proud StartingBloc Social Innovation Fellow who holds a Master of Public Administration from the Maxwell School of Citizenship and Public Affairs at Syracuse University, where she served as the Vernon Snow Fellow in Nonprofit Management. You can follow her on Twitter at @lauratomasko.
You can read all of the interviews in our Social Velocity interview series here.
Nell: Many of your contemporaries are as passionate about social innovation as you are, but they tend to dismiss government. Why don’t you? Why do you think there is hope for government to be reinvented?
Laura: I don’t dismiss government because I believe that cross-sector partnerships benefit social innovation. People, organizations, and sectors all have strengths and limitations. Partnering affords an opportunity to merge skills and areas of expertise for the purpose of achieving a common goal. Like any institution, there are ways that government could improve. But I don’t believe that government needs to be reinvented to be a helpful partner in social innovation. In classrooms and professional settings, my generation recognizes the value of partnerships and discusses how to blend social innovation and government. Increasingly, master’s degree programs in public service emphasize social entrepreneurship. Fellowship programs like StartingBloc train emerging leaders to drive social innovation across sectors. Last fall, I facilitated a conversation among StartingBloc fellows on the role the public sector plays in social innovation, and I saw that these next generation leaders recognize the valuable role that government can play in social innovation.
Nell: Where do you think government fits into the social innovation movement? What should government’s role be?
Laura: Government provides an incredible platform for convening people and connecting ideas. Right now, we are seeing federal innovation initiatives that elevate results-oriented programs and incentivize public-private partnerships. The White House Office of Social Innovation and Civic Participation used its platform to draw attention to federal initiatives such as the Social Innovation Fund and the Investing in Innovation Fund. The Corporation for National and Community Service and the Department of Education, the federal agencies that respectively house those initiatives, attracted interest from public and philanthropic entities that want to work together to support innovative community-based models for change. These examples demonstrate the ability of government to draw attention to social innovation and encourage the development of partnerships to sustain the movement.
Nell: What are you working on right now at the Council on Foundations’ Public-Philanthropic Initiative? What gets you really excited there?
Laura: I serve as the Council’s manager of the Public-Philanthropic Partnerships Initiative, a program that marries my passion for social innovation and government. The goal of the initiative is to increase substantially the quality and quantity of government-philanthropic collaborations. We serve as a conduit between foundations and the federal government by cataloging opportunities, developing partnership tools, and generating analysis and commentary about current partnerships. As foundations work with the public sector, we are here to offer support and coordination assistance. During the Council’s Family Philanthropy Conference last month, I met with our members and had conversations about collaborating with government to scale up promising programs. Philanthropy plays an important leadership role in society, and I get excited by the opportunity to bring together people and ideas and facilitate connections.
Nell: How confident are you that public and private money can come together to create significant social change? There wasn’t a large government presence at past Social Capital Markets (SOCAP) conferences, for example, but that might be changing. What will it take to get private and public money to collaborate more?
Laura: I believe that public and private money can come together to create social change. To encourage more collaboration, both the public and private sides need to understand and trust one another. The barrier of unfamiliarity creates misunderstandings and missed opportunities for partnerships. Greater understanding of the risks and opportunities can build trust and lead to significant social change. The SOCAP conferences are excellent platforms for breaking down barriers, increasing understanding, and fostering relationships among for-profit investors, social entrepreneurs, government officials, and philanthropic leaders. In your interview with Kevin Doyle Jones, one of the SOCAP founders, he described SOCAP10 as a time for translation as people learn to work together. A few months ago, I was excited to hear Secretary of State Hillary Clinton announce her intention to bring SOCAP to the State Department in fall 2011. With the talented SOCAP team leading the way, I am optimistic that participants can move past translation and into action, developing public-private collaborations in the social capital markets.
Nell: What sorts of changes would you like to see in government, at the local, state and federal levels in order for it to be more effective and instrumental in the social innovation movement?
Laura: The social innovation movement focuses on the root causes of social conditions. It looks to new and creative means for improvement, rather than continuing to treat the manifestations of problems. Innovators, optimistic about the potential for change, focus on the assets of clients and aim to use resources in new ways. With an end goal in mind, they emphasize measurement, evaluation, and collaboration when appropriate. Government can help these efforts by aligning incentives in a way that encourages innovators to address the root causes of social conditions and by supporting programs that emphasize results. Through federal innovation funds, we are seeing government invest in ventures at a level commensurate with past and potential impact. In addition to emphasizing the importance of measurement, I think that government should seek opportunities to work with philanthropy as a knowledge partner. For example, community foundations can offer local governments innovative solutions for addressing critical needs in the community.
Nell: There has already been a bit of controversy around the Social Innovation Fund, the federal government’s first official foray into the social innovation realm. What do you think about this first attempt by the federal government to play a role? Is it working or is too soon to tell?
Laura: I like the Social Innovation Fund (SIF) because it raises the visibility of philanthropy’s leadership in social innovation. The SIF offers a model for how government can leverage funds and expertise to identify promising and innovative mid-sized nonprofits. Once selected as intermediaries of SIF funds, grantmaking organizations identify and grow high-performing nonprofits. This is an important aspect of the SIF design because government defers to philanthropy’s knowledge when finding effective ways to meet community needs. In addition to encouraging public-philanthropic partnerships, I like that the SIF focuses on evidence, a desire to scale success, and the need for growth capital. George Overholser has provided incredible thought-leadership about the field of nonprofit financing. Sean Stannard-Stockton, president and CEO of Tactical Philanthropy Advisors, wrote a great post that applies Overholser’s distinction between builders and buyers to the SIF. Steve Goldberg also has offered detailed commentary about why the SIF is so important.
Even among those who like the SIF concept, some have criticized its implementation. As with any initiative in its early stages, it is helpful to have conversations about what is working and what could be improved. From my perspective, I see two good measures of success for the SIF. The first measure is whether the community-based organizations that receive public-private funds and resources can achieve their desired impact. Community-based organizations have just begun receiving funds, so we still have to wait and see. The second measure is whether state and local governments elect to implement similar models moving forward. Even before the SIF, state and local governments showed interest in social innovation and entrepreneurship. I am hopeful that these initiatives will continue to exist and new ones will develop. The more of these models that exist, the more opportunities will be available for philanthropy and government to collaborate in supporting social innovation.
Sean is a visionary leading the charge to transform philanthropy. He is CEO of Tactical Philanthropy Advisors, a philanthropy advisory firm. He is also the author of the very popular Tactical Philanthropy blog and writes a monthly column for the Chronicle of Philanthropy. He is a member of the World Economic Forum’s Council on Philanthropy & Social Investing and his insights on philanthropy have been referenced in The New York Times, Wall Street Journal, Washington Post, and Financial Times.
Nell: At the first Social Capital Markets Conference (SoCap) in 2008 one of the keynoters said “we’re not here to talk about nonprofits.” We’ve come a long way from there to this year’s devoted track around philanthropic capital and the nonprofit space at SoCap. Where do you think the initial hesitance to connect philanthropic and impact investing came from? And how do we continue to integrate the two worlds?
Sean: I think that one of the segments of people who are attracted to impact investing are people who think philanthropy doesn’t work. While I view philanthropic and for-profit social capital to be part of a single continuum of capital, many people seem to feel that they are fundamentally different. Like most new ideas, early adopters often think it is a silver bullet that will “change everything”. Some early adopters of impact investing or other forms of for-profit social capital wrongly believe that impact investing will replace philanthropy. I think this is a fundamental misunderstanding. Continuing to integrate the two worlds will require helping the various points on the capital spectrum better understand each other. At the end of the day, capital shouldn’t be viewed through an ideological lens, but should simply be deployed based on what sort of capital fits the situation.
Nell: The SoCap session on nonprofit rating systems like Charity Navigator and GiveWell demonstrated that there is still quite a divide between GIIRS (the impact investing rating system) and nonprofit rating systems. What is your sense of this? Do you think there is potential to somehow combine GIIRS (or something else) and nonprofit rating systems so that there is one comparable impact measurement system?
Sean: I would guess that any truly effective impact measurement system should be functional across both for-profit and nonprofit activity. A good impact assessment system wouldn’t care about the tax status of the entity producing results, it would just care about the results and the cost of obtaining them. That being said, I think evaluating a nonprofit organization is really quite different from evaluating a for-profit organization. So even if we have a unified impact assessment framework some day, I would guess that organizational assessment will utilize different systems and approaches for nonprofit and for-profit organizations.
Nell: How would you like to see the conversation about connecting philanthropy and impact investing evolve at SoCap11? What are your hopes for next year’s conference?
Sean: I’d like to work to profile more examples of ways that for-profit and philanthropic capital worked together to produce social impact. Our session on Evergreen Lodge at this year’s conference looked precisely at this question, but I’d like to see more examples. I’d also like to see examples of ways philanthropic entities have used for-profit investments or subsidiaries well or for-profits have effectively used philanthropic activities to drive profit and social results. However, one of the most important goals is simply getting the different players into the same room and getting them to come to understand each other better. While Kevin Jones and I had a good time talking about the Social Capital Markets as a meeting ground for the Barbarians and Byzantine, in reality none of us are barbarians.
Nell: Beyond SoCap where do you think the important conversations about unlocking philanthropic and government capital for social impact are happening?
Sean: This is an interesting question. SoCap is special because it is one of the only (the only?) conference that is specifically about capital for social impact without regard for sector. But versions of this conversation are happening around Grantmakers for Effective Organizations, The Social Innovation Fund, online and in a different sort of way at the PopTech conference.
Nell: At the last general session of SoCap Woody Tasch of the Slow Money movement said he doesn’t think mission-related investing will ever be adopted by the majority of foundations. What are your thoughts on that?
Sean: Social Responsible Investing, the practice of screening out stocks of tobacco companies, defense contractors and the like from investment portfolios, is not practiced by a majority of investors. Yet, SRI is very mainstream and has significantly altered the behavior of publicly traded companies. Today, SRI mutual funds are one of the fastest growing areas in money management. So I don’t think that the majority of funders have to adopt mission related investing for the concept to be deemed a success. It should be noted that SRI took a good 20 years or so to go mainstream. So it could be some time before mission related investing is considering mainstream.
Nell: And more broadly, what do you think it will take to change how philanthropists (both foundations and individual donors) use money to support social impact? How do we make more donors builders instead of just buyers?
Sean: Today, I think that very few people in the social sector really understand what “philanthropic equity” is and how capital differs from revenue. Nonprofit accounting does not acknowledge that capital even exists in the sector. Nonprofits can only book cash coming into their business as revenue or a loan. There’s no official way to account for equity-like capital. So I think that there needs to be a pretty major education effort to get the whole sector very clear on how fundamentally different it is for a funder/donor to “invest” philanthropic equity in a nonprofit vs paying a nonprofit revenue to execute programs. Personally, I don’t think much progress will be made until nonprofit accounting changes. Until that happens, it doesn’t matter much what we call “growth capital”, it is all just revenue to the nonprofit.