The Significance of the Social Innovation Fund

While many were starting their 4th of July vacations last week (me included) President Obama had a remarkable event at the White House.  He invited a very impressive list of nonprofit leaders, philanthropists, social entrepreneurs, and thought leaders to launch his “Community Solutions Agenda.”  Key to this agenda are the White House Office of Social Innovation and the Social Innovation Fund.

Sean Stannard-Stockton of the Tactical Philanthropy blog gives an excellent description of exactly what the Social Innovation Fund will do.  Essentially the Social Innovation Fund is a $50 million federal government fund (assuming Congress actually appropriates the money) that will be granted, via the Corporation for National Service, to “grantmaking institutions” to then regrant (and match the regrant 1 to 1) to nonprofit organizations.

The nonprofits that receive the regranted funds are required to:

• Match the grants 1 to 1  through state, local, or private sources (thus resulting in an overall 2 to 1 match of federal dollars)
• Grow proven programs, or support new programs, in low-income communities
• Demonstrate that they can sustain the program at the end of the grant period
• Use performance metrics to evaluate and improve the program
• Contribute the resulting knowledge to their field

In addition, the grantmakers that receive the Social Innovation funds must provide technical assistance to their grantees.  And the Corporation will 1)provide technical assistance to both the grantmakers and the nonprofits receiving the regranted funds and 2) create a clearinghouse for best practices from the funded projects.

There has been much debate (here and  here for a start) about whether the Social Innovation Fund will have a positive, negative, or any effect on the nonprofit sector and its ability to find and grow solutions.  The most pessimistic of these is Jeff Trexler, professor of Social Entrepreneurship at Pace University, who writes:

At its core, the [Social Innovation Fund] follows a model that’s all too familiar from comparative administrative law–a government program that gives money to subgrantees who in turn give money to other subgrantees, managed through the relentless documentation of how stated program goals were met.  For example, Russia moved to precisely this model recently, channeling social funds through grantmaking intermediaries, and USAID has been doing it for years.

True, the mechanisms of the Fund are probably not that innovative.  And the relatively small size of it ($50 million compared to the hundreds of billions of dollars of federal funding that annually goes into the nonprofit sector) is not very impressive.  But what is interesting and exciting is that the largest nonprofit funder (the federal government) is turning a page.

As Bob Ottenhoff points out on the Guidestar blog, the federal government is by far the largest funder to the nonprofit sector, providing over 29% of its funding, compared to the 12% that comes from charitable giving, which we spend most of our time talking about.  If the federal government could take an interest in innovation in the nonprofit sector (when was the last time that that many nonprofits and philanthropists were assembled together at the White House?), try and succeed at some new funding vehicles, take a lead role (or, really, any role) in the creation of a social capital market to seed and scale social innovation, THAT would be tremendous.

The Social Innovation Fund, in and of itself, is maybe not that impressive. But what is impressive is that the federal government has recognized social innovation as a force for change, is willing to take a risk (albeit small) in this new realm and may be willing to use this test case as R&D for a future, much larger, more innovative stab at getting itself pointing in a new, more helpful direction.  If we are truly going to scale social solutions then the largest funder of those solutions has to be on board. So let’s see what happens when the federal government dips its toe into the waters of social innovation.

Tags: Corporation for National Service, federal government, Jeff Trexler, nonprofit, President Obama, Sean Stannard-Stockton, social entrepreneurs, Social Innovation Fund, White House Office of Social Innovation

Too Many Nonprofits…Or A Weak Ecosystem?

Greenlights for Nonprofit Success, Austin’s nonprofit management assistance organization, today released the findings of a research study on the number of nonprofits in Central Texas.  The results weren’t surprising: we have more nonprofits (over 6,300) per capita than any other large Texas city and any other city in the Southwest region. And our nonprofits tend to be small: 93% (compared to 89% nationally) have a budget under $1 million, and 89% have a budget under $500,000.  In light of this study, Greenlights offers some good advice about looking towards cooperation, collaboration, and even  mergers given the number of nonprofits that exist and the increasing competition for funding, especially given the current economy.

What is missing from the study, however, is an analysis of the overall social sector in Austin, including philanthropy and other funding mechanisms, other social impact organizations–like social enterprises (creating social impact through market-based activity)– and the role of the public sector in all of this.  We need to take a bigger picture view and understand all of the elements and entities at play in the sector and how these elements could be better supported, analyzed, strengthened and winnowed, if necessary.  We need to take a look, as I explained in an earlier post, at the overall ecosystem for social innovation (ideas that solve existing public challenges). And we need to look at similar cities (like Portland, Seattle, San Francisco, Denver, Pittsburgh) to understand how their social sector is innovating and thriving and what we could learn from them.  The ecosystem for a thriving social innovation sector includes:

• An Engaged Public Sector: A city and/or state-level office for social innovation, similar to the White House Office of Social Innovation that puts public sector focus and resources toward strengthening an innovative social sector.  One-Star Foundation is moving in this direction.
• Larger, Innovative Philanthropy: An increased number of area philanthropists, giving more grants for capacity-building, providing growth capital to scale great ideas, giving seed funding for ideas that have potential, using mission-related investing and program-related investments, working as a group to discuss innovations in philanthropy and share and leverage projects.
• Social Investment: Adding a social element to the entrepreneurial investing that is already rich in our area, investors could create innovative funds that provide nonprofits and social enterprises financial tools such as loan guarantees, quasi-equity deals, and networks, advice, and entrepreneurial knowledge.
• Colleges and Universities Encouraging Research: Our local colleges and universities could launch centers for research on social entrepreneurship and social innovation. The RGK Center is a good start, but I’d love to see more.
• Discussions and Experiments: More events, gatherings, workshops, think tanks and other activities that help social entrepreneurship and innovation take hold in our region.

I think to truly understand where the Austin social sector is and how the number and capacity of nonprofits fit into that, we need to understand the entire ecosystem.  If we want to boast a thriving, innovative social sector we need to take a step back, analyze what we have and what we can do to encourage even more innovation.  The end result is a stronger, healthier city that ties its spirit of entrepreneurship and innovation to its desire to give back and strengthen the communities in which we live.  That is the Austin I envision.

Tags: Austin, Greenlights, nonprofit, One-Star Foundation, Philanthropy, RGK Center, Social Enterprise, Social Entrepreneurship, social innovation, Social Investing, White House Office of Social Innovation

Innovation is the Answer

There’s a really great recent post on the Stanford Social Innovation Review blog by Mario Marino, founder of Venture Philanthropy Partners, a venture philanthropy fund in Washington, DC. Mario’s post is the best attempt I’ve seen yet to frame the current state of America (deepening recession, crumbling institutions, etc.) as a tremendous opportunity to reinvent ourselves.  And although Mario set out to write a post about the new White House Office of Social Innovation, he realized that what is happening in America is a much larger need for innovation:

Instead of focusing on social innovation, I feel compelled to lift up a level and talk about innovation more broadly. I am convinced that, amid the many challenges facing our President, nothing is more important for the long-term strength of our nation than driving greater levels of innovation across all sectors of our economy, including the nonprofit sector.

Indeed, Mario points out that although we are a country of innovators, we have lost our urgency to innovate.  The current crisis we are in will force us as a country to find innovative solutions to all that ails us:

Through radical innovation in our commercial, nonprofit, and public sectors, we must break the status quo that is too often miring us in mediocrity—from how we manufacture our products to how we educate our children, from how we consume energy to how we provide health care. We have no choice but to discover and deliver new, different, and better ways of dealing with our most vexing challenges.

He suggests that three trends will enable us to seize the moment and innovate our way out of this mess:

1. Influx of Talent: The increased entrepreneurial spirit and drive of 20-40 somethings, the energy of the Baby Boom generation, and immigrant talent and expertise will create a large group of people with energy, interest and initiative to develop new solutions
2. New Mindset: The new generation of entrepreneurs is more interested in innovation for social good than innovation for individual gain (I wrote about this trend as well).
3. New Networking Technologies: Web 2.0 and social media have made coordinating and scaling innovation much easier and faster.

These three trends create a huge opportunity for America to take our crushing problems and innovate our way to solutions:

If necessity is the mother of invention, then this crisis, which has laid bare the depth of our needs, provides us the dramatic necessity to drive innovation and spur entrepreneurs of all types and sizes to find ways to deal with our challenges. The real change makers will be those throughout the land in small and big enterprises, the new and the old, the scientific innovator to the obsessively compelled entrepreneur, across all sectors, who take up this challenge.

And Mario tasks the Obama administration with leading this movement towards innovation :

So while I could not be more supportive of the Office of Social Innovation, I believe this is a chance for the President to systematically foster a mindset in America that is nothing short of a cultural and economic ground-shift. He must broaden the focus across and among the private, public, and nonprofit sectors—to seek and spark the most promising innovations whether they come from commercial or social entrepreneurs, executives or line workers, community leaders, public servants, researchers, or citizens who don’t fit into any of these categories. The real opportunity before the President is to supercharge innovators from all walks of life and make commercial and social innovation our national imperative.

However, I don’t think it is all up to the Obama administration.  Rather, this national need for innovation is up to all three sectors, not just the public sector, to lead.  Venture capitalists and angel investors can seek out and seed great solutions (for profit or not), nonprofits that have found solutions can create growth plans,  corporations can take a larger view of how they measure success to include social profit instead of just financial profit, foundations can harness their corpus towards innovation through mission-related investing, and the list goes on.   A White House Office of Social Innovation is a start and Obama encouraging a new spirit of innovation would be great.  But to truly become an innovative nation again we’ve all got to take the lead and explore how we can use our respective resources in new ways to encourage solutions.

Tags: innovation, Mario Marino, Obama, venture capital, Venture Philanthropy Parnters, White House Office of Social Innovation