Curtis, I agree that the ageism issue is a complicated one. It is as you say; VCs often insist that more experienced management step in once the concept has been established. And to be honest, I wouldn’t mind if that were the case in the nonprofit sector, where funders and entrepreneurs planned out the eventual exit strategy where the founder eventually steps down to be replaced by leaders who have expert knowledge in scaling up organizations or managing large organizations. But there is one significant problem with this model, which applies to all nonprofit entrepreneurs and not just young nonprofit entrepreneurs – replacing startup leaders with more experienced management distorts the incentives of starting a nonprofit in the first place. While in the for-profit world, founders are rewarded for their risk with their generous equity stakes in the companies they started, the corresponding return for the nonprofit entrepreneur is being able to work on issues that you’re passionate about and lead that organization. If funders started to consistently replace nonprofit entrepreneurs, the nonprofit entrepreneur’s individual exit strategies are reduced to 1) working on the funder’s side (which seems to be common these days) or 2) becoming unemployed.

It might be the case that ageism isn’t at all an issue here and the reason why FORGE hasn’t received the funding it needs is completely independent of her and the rest of FORGE’s age and that what we have here is just another case of a good nonprofit not getting the funding it needs. But I would hypothesize that age does play a factor when foundations evaluate grant applications – that ceteris paribus, everything else being equal, FORGE would have received more money if the people there were older.

Paul, I did raise the merger/acquisition issue briefly with Kjerstin but I just didn’t have time to go into it with any rigor. Pulling mergers off is incredibly complicated and requires long, long study. Still, I should have at least flagged it as an option in the report. Great question!

Tony, I think the “ageism” issue is a complicated one. It’s true that VCs in the for profit world may be willing to invest in a young entrepreneur. It’s also true that they insist at some point that more experienced management step in once the concept has been established. So, I think it is a matter of recognizing what stage an organization is in and what is needed at that stage.

Paul, obviously I agree that transparency is a key element for a functioning social capital market.

Tony, good point on the ageism in philanthropy. I’ve always found it kind of stunning to watch philanthropy name a whole group of people “NextGen” which, while well intended, also implies “Not Important Now”.

From the report:

“Donors, especially high net worth ones, tend to be executive types. They are reassured when they see that “one of their own” is involved in FORGE’s governance. This is especially true given how young the FORGE staff is (all under 25). When such a donor looks at the current roster of board and staff members, they see individuals that would be several levels down their own corporate hierarchy, a reality that does not inspire donor confidence.”

Although I understand the fear of inexperience, why should it matter that FORGE’s staff is all under 25? I’ve found that in the nonprofit sector more than the for-profit sector, ageism against young individuals is much more of a significant problem. Angel investors and venture capitalists have no problems funding young twenty-somethings from Stanford who they believe have a great idea and great potential, but when it comes to a young twenty-something who has an amazing track record of passion, intelligence, and on-the-ground experience like Kjersten, few from the foundation and grantmaking world are willing to take a chance. And many of the fears that potential donors may have can be easily solved through mentorship and good communication – in fact, one advantage of young people is their greater willingness to listen to reason and expertise. But if the foundations don’t fund organizations like FORGE and people like Kjersten, then their beliefs become a tautological self-fulfilling prophecy BECAUSE the eventual failure will undoubtedly happen because they refuse to support the organization.

It’s so frustrating to see that the “pathfinders” are often times far too ahead of the curve for the funders. Unlike the for-profit world, where being ahead of the curve is more likely to get you funding, in the nonprofit world, being ahead of the curve is less likely to get you funding (grantmakers may not “get” it; the method of producing impact doesn’t “fit” the somewhat arbitrary grantmaking guidelines, etc). Thus, one of the perverse incentives of the nonprofit finance market is that it encourages social entrepreneurs to instead of first come up with a great idea, look at the available funding streams and come up with a mediocre idea. Even though it seems that FORGE is correctly focusing on development rather than relief, since the SROI is probably much higher there, the difficulty of finding funding is much higher than it should be.

However, I’m not too enthralled by the idea of “playing to FORGE’s strengths” through its alumni and student base. Both, while passionate, are often an undependable source of labor – many are already extremely busy with their own lives and initiatives and many will be worried about their future careers; becoming a FORGE evangelist, even with the certainty of success, may not be enough incentive. Add to the fact that there might be a high likelihood of failure (one big question I have is: how are you, as a student or an alum, going to raise several tens or hundreds of thousands of dollars through friends and family in a down economy when many are already questioning your career choice?), I have to wonder whether this path is simply a moment of wishful thinking because the other funding sources haven’t looked so great in the past.

I think Curtis’ recommendations of changing the composition of the board is spot on, but I would encourage step 2 to be another push towards foundation funding. I would be interested in knowing what kind of feedback FORGE has received from foundations in their grant application process (if any – something the sector really should work on) and whether or not there is anything FORGE can do to meet any additional requirements in the next cycle of funding. If FORGE can land a grant from a big foundation in this space, I think that would be the best way to achieve the legitimacy it needs and solve its many other problems. To start, I think Hewlett might be a good prospect for a variety of reasons – there’s a strong Stanford connection, they have a global development program, and they understand SROI and impact analysis. Who knows, maybe Paul Brest of Hewlett or Bill Somerville of PVF might want to chime in with some of their thoughts on the whole matter.

[Further Disclosure: I worked at Hewlett as a research assistant to Paul. My recommendation of pursuing Hewlett funding is my unbiased, honest recommendation and any views expressed here do not reflect the views of the Foundation or Paul.]

The 376 organizations who have completed reviews with public results on smartgivers.org give me great hope that transparency is very highly valued and easier than ever. There are even organizations who completed reviews knowing that they would not meet all of standards. The conversation started by FORGE and carried on here is also inspiring.

However, I am still worried about what I call selective transparency. It is quite easy to be transparent when an organization is doing well. When an organization is having problems or recovering from or discovering mismanagement (financial, governance, or otherwise) there is a fear that exposing the problem will weaken the organization further, losing donors immediately and the resources needed to meet your mission.

But I believe we must encourage each other to default to transparency. If you are telling your donors that everything is fine, they might be giving to you because they think everything is fine. Likewise the people you serve are counting on your services and deserve to know if the organization is stable. However if your position is actually precarious and you know that, is it right to not tell people, at least in an annual report of some kind? I do not think it is right. I think there is an ethically slippery slope to be avoided there.

Also the difficulties that an organization might be having maybe out of its control and being upfront about them may be the only way you find the right donors. This leads me to my next point, everyone should reward transparency. Let’s imagine you are a grant maker using our site. You find that an organization does not meet the financial health standard due to persistent deficits. Assuming the rest of your careful due diligence goes well, our great hope is that you contact the organization and let them explain their difficulties and maybe follow-up with some capacity building support rather than a project grant that exactly fits your guidelines.

Many nonprofits have expressed to me that the general public does not understand nonprofit finances and governance well enough to benefit from transparency. I actually think that the general public may not understand nonprofits very well because of a lack of transparency. Nonprofits are complicated businesses and not educating the public will not help.

Let’s be clear, I could talk about transparency forever.

But before I end this comment I wanted to talk about the cultural basis of transparency. I think everything I said above really applies to the US scene and it’s growing culture of transparency. I think we are on the verge of becoming a curious hybrid between the way publicly traded companies operate and the old community chest/public benefit type organization. Transparency is grounded here in a kind of no-choice culture that grows out the regulatory system and things like states’ use of the Model Nonprofit Corporation Act. Nonprofits who are led by people who come from cultures not used to this system can have difficulty adapting to it. The concept of “saving face” is a good example. Another thing I have seen is that for people who come from places with an oppressive government something like the new (or the old) 990 could be met with suspicion. I think the issue of transparency being culturally influenced is quite clear. But I do not believe that some cultures are prone to varying levels of transparency. I suspect it is more a question of how that transparency is delivered or expressed that is different.

I am interested to know if the question of some kind of merger or even contracting relationship with existing NGOs in the camps where FORGE works was ruled out.

I could see this being ruled out because FORGE decided they must be independent to serve refugees properly.

On the other hand, exisiting NGO’s might be able to support the work through their own resources and using their established fundraising networks. Even without a merger or absorbing the program, they could pilot FORGE with a contract, still leaving the organization largely independent. This may even reduce immediate fundraising burden and allow them to build for the future instead of scrambling for now.

It would seem to me that the organizations running the camps infratructure and daily services have an interest in FORGE succeeding.

I could also imagine that those organizations running the camps are too strained themselves.

But the leadership of those organizations could certainly go to bat for FORGE. They might be a good board prospect for FORGE too.