This post is part of a series of posts generated through a collaboration with Geri Stengel of Ventureneer to provide a one-stop resource for insights and news from the Social Impact Exchange Conference on Scaling Social Impact, held June 17 – 18, 2010.
As I take a brief moment to reflect on this morning’s discussion about the need for growth capital at the Social Impact Exchange Conference on Scaling Social Impact, I’m struck by five issues that I hope will be further discussed at the conference and after it concludes:
1. Philanthropy commonly spreads its funding across many organizations and limits its funding to a short time period of 1 to 3 years. The scaling social impact model would flip that on its head by providing more significant funding and for much longer periods of time. However, should we be concerned about the possibility that providing the funds needed to grow nonprofits to scale might generate the unintended consequence of shifting capital away from other nonprofits? Or will we expect funders to allocate new funds for the scaling efforts?
2. The conference brought together seven organizations to present their models for scaling growth at a two-part Investment Fair. The organizations included:
- Communities in Schools, a 33 year-old organization with an annual budget of $15.1M that requires $36M to grow to scale;
- Experience Corps, a 15 year-old organization that requires $12M to grow to scale;
- Jumpstart, a 17 year-old organization with an annual budget of $15.4M that requires $6M to grow to scale;
- Root Capital, a 11 year-old organization that currently covers 70% of fully loaded costs of its loan program through earned income and requires $40M in debt and $20M in grants to grow to scale;
- Uncommon Schools, a 5 year-old organization that requires $30M to grow to scale (it has secured $6M to date);
- Ways to Work, a 12 year-old organization with an annual budget of $3.4M that requires $36.6M to grow to scale (it has secured $17.7M to date); and
- YouthBuild, a 30 year-old organization with an annual budget of $26M that requires $85M in private funding to grow to scale (it has secured $17M to date).
(Note: not all of the organizations profiled provided information on their annual budgets.)
The organizations’ budgets and growing to scale requirements differ vastly. What is consistent – with the exception of Uncommon Schools – is that these organizations have had a long track record and in many cases have moved across the organizational development cycle of nonprofits into the Review and Renew stage (see PDF example of the stages). My surprise in seeing YouthBuild on the list (i.e., not an organization I expected needed support to grow to scale) led to this question: do we have any evidence of existing nonprofits that would serve as examples of having successfully raised capital to grow to scale on the level proposed at the Investment Fair?
3. Vanessa Kirsch, CEO of New Profit and the founder of Public Allies and the Women’s Information Network, raised an important question that was echoed by others throughout the day: how will we link the importance of growing to scale with policy work and advocacy? As exemplified by several of the organizations at the Investment Fair, public policy and advocacy are important aspects of their work. However, a more substantive discussion on this subject is still lacking.
4. Bob Steel, former President & CEO Wachovia Corporation, and chair of the Aspen Institute, first raised the issue of strong management in his morning plenary as a core element of successful nonprofits ready to grow to scale. This was stressed again by Vanessa, who noted that while money is a real obstacle to scale, the real challenge is finding the right talent to work within the organizations. Does finding the right talent and bringing onboard strong managers imply that these employees should be compensated at higher rates comparable to the corporate sector? This is an ongoing debate, as evidenced by Pablo Eisenberg’s most recent column in the Chronicle of Philanthropy (premium article). I believe we still need more clarity on what funders would tolerate as appropriate compensation to attract strong managers and the right talent for nonprofit organizations that want to grow to scale.
5. Not an issue that expect will be discussed at the conference, but to echo a comment made to me later in the day: are the seven organizations profiles for the Investment Fair truly representative of organizations that will have the most significant impact if they scale up? Where are the organizations that could truly disrupt their fields through innovative approaches and how do we get them the funding they require?
I look forward to finding answers to these questions tomorrow and after the conference ends. Links to additional blog posts from the conference are posted on Ventureneer website and you can follow the Twitter discussion using the hashtag #SIEX10. Today’s agenda generated over 190 tweets from 41 people.
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