The New Philanthropy: Long-term, Collaborative, and Transformative

Nancy Roob of the Edna McConnell Clark Foundation will do whatever it takes to improve outcomes for low-income kids. That includes developing a system for aggregating large amounts of capital to invest in organizations with evidence-based outcomes. She is not alone in her call for innovative, collaborative funding for nonprofit ventures.

The Pilot Program
capital aggregation, nonprofit funding, nonprofit investorsIn a conversation with Greg Dees of Duke University's Center for Advancement of Social Entrepreneurship at the SIE conference, Roob explained that her foundation realized it could not have the impact it wanted by working alone. Partners were needed. The foundation had to demonstrate that growth capital could pave the way for ongoing funding.

The McConnell Clark Foundation started making larger grants and partnering with other funders to raise the entire amount of money nonprofits needed, akin to the way venture capitalists fund a startup. They provided the capital needed to do the job, just as is done in the for-profit business model.

To set up this radical change in philanthropy, McConnell Clark:

  • selected evidence-based organizations;
  • found partnering organizations willing to experiment
  • didn't ask for overhead expenses;
  • raised the bar in terms of amount of money sought: very large sums of money were solicited.

After raising the money, the foundation worked closely with 19 co-investors and the grantees. The process was very relationship-driven, with co-investor meetings to insure accountability and transparency. The investors took the long view; their work was data-driven and collaborative.

The Take-aways
Panelists James Shelton (US Depart of Education), Jed Emerson (Blended Value), and Nadya Shmavonian (Public/Private Ventures) added their observations to the discussion.

From Jim: A pipeline to fund innovation doesn't exist. We need to leverage private resources and bring private expertise into the mix. The notion of pooled funding has been anathema in the nonprofit sector but that will have to change. Organizations with terrific ideas are not getting the funding they need despite unprecedented levels of evidence and unprecedented transparency.

Regional efforts could fill some of the gap but they aren't stepping up either.

From Jed: The nonprofit sector is moving from transactional funding to investment orientation. Funders are no longer just writing the check; they are asking questions, such as "Where are you developmentally?" and "What help do you need to attract additional money?" Philanthropy needs to go "retail," attracting wealthy individuals through online platforms.

Nonprofits, he noted, represent 7 to 10 percent of GNP and the sector needs to get its fair share of attention and respect. It also needs to stop doing things the way they've been done in the past. Foundations need to become involved in and supportive of impact investing.

From Nayda: Build on the commitment of the current administration. Its a rich opportunity, if the right platform existed. She cautioned, however, that when encouraging people to think like investors, one also needs to manage the expectations of new donors. Like investors in the private sector, they need to understand there will be failure as well as success

From Nancy: Nonprofits and foundations have to seize the moment and move from a disorganized, haphazard movement to a community of practitioners and funders. Philanthropists must step in earlier to build capacity and facilitate gathering evidence of impact. Focus on success, partner with government and move forward.

The over all take-away?

We must take a long view, focus on the new philanthropists, and buckle our seat belts: We're in an era of transformation.

 

For complete coverage of the 2010 inaugural Social Impact Exchange Conference: Taking Successful Innovation to Scale, go to Ventureneer SIEX10.

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