Or, another way to think about it is the amount of upfront philanthropy needed to build a nonprofit organization that is strong enough it won’t need to come back for more…

You’re correct that the term needs a good definition. I’ve always thought of it as the money an organization needs to grow – to scale to some meaningful fraction of the problem it’s addressing. In that respect, it seems to me, nothing is more important than building the revenue engine, because if an organization builds that, and revenues grow, it has all of the money it needs for all of the other things on your list, and it isn’t dependent on any other single entity for it.

Ironically, the very NGOs that are trying to “teach the poor to fish,” so to speak, have to be given the resources to be able to fish for themselves.

Its not just about building a sales engine. Its not just about getting the program perfect. Its not just about being efficient, or paying folks enough so they won’t burn out. And its not just about paying for evaluation to strengthen the proof story.

Its about working backwards from a sort of homeostasis, where all of these elements combine in a way that compels all involved (beneficiaries, employees, funders) to want to repeat what they’ve done.

The SIF will be something very special if it can be managed in a way that sticks to this growth capital (I like to call it Philanthropic Equity) role.

Otherwise, its just another check-writer with a small staff, looking for programs to fund for a while.

“Project funding should be placed as a social-benefit fund under oversight of an independent board of directors, particularly including representatives from grassroots level Ukraine citizens action groups, networks, and human rights leaders.

“This program provides for near-term social relief for Ukraine’s neediest citizens, most particularly children who normally have least possible influence and no public voice. Over a few years time, the net cost financially is zero. Every component is designed to become financially solvent, through mechanisms of cost-savings and shared revenue with other components. One component, Internet, provides essential communications infrastructure as well as a cash surplus to be used to offset any lingering costs of other components such as childcare, and otherwise goes to a permanent social benefit fund under oversight of the aforementioned independent, citizens-based non-government board of directors.

“Any number of other social enterprises can be created. Furthermore, any number of existing for-profit enterprises are entirely free to contribute any percentage of profits they wish to increase the proposed initial $1.5 billion social investment fund. If for example the total fund comes to $3 billion, that amount would generate at least $300 million per year in a hryvnia deposit accounts at any one of several major Ukrainian banks, to provide ongoing funding to continue to create and expand social enterprises.

“This strategy places adequate funding for social benefit under control and management independent of government and the very obvious vicissitudes and conflicts inherent therein.

“This is a long-term permanently sustainable program, the basis for “people-centered” economic development. Core focus is always on people and their needs, with neediest people having first priority – as contrasted with the eternal chase for financial profit and numbers where people, social benefit, and human well-being are often and routinely overlooked or ignored altogether. This is in keeping with the fundamental objectives of Marshall Plan: policy aimed at hunger, poverty, desperation and chaos. This is a bottom-up approach, starting with Ukraine’s poorest and most desperate citizens, rather than a “top-down” approach that might not ever benefit them. They cannot wait, particularly children. Impedance by anyone or any group of people constitutes precisely what the original Marshall Plan was dedicated to opposing. Those who suffer most, and those in greatest need, must be helped first — not secondarily, along the way or by the way.”

Sean,

My fear is that “growth capital” will be used to fund program growth. That isn’t sustainable. Once the capital’s been spent to grow the program, there’s nothing to maintain it. This is a ubiquitous and chronic problem with foundation grants, for example. If, alternatively, the “growth capital” is used to fund the growth of revenues, then we can sustain the program growth. “Sales engine” might not capture the breadth of opportunities to fund growth, but you know what I mean; development/fundraising/new community wealth ventures, etc.

The president says the fund will “invest in [high-performance nonprofits] to help them grow.” Does he/the fund know how? It’s encouraging to see the use of the word “scale” and “grow” in his remarks, but I don’t think many people, including the president, are thinking about how we address scale. It will not be by investing in promising program approaches. The growth potential of that investment money will get annihilated with the program spend. Investment in fundraising, development, marketing and advertising – all still pretty much criminal ideas in the sector – is the only way we will dramatically increase scale. But no one ever mentions that. We have to stop obsessing over investment in programs and start focusing on investment in the sales engines of nonprofits. It’s the only path to generating massive new, self-sustaining revenue streams to fund the innovative new programs.

The sector has to take market share from the for-profit sector to fund social progress. The only way it can do that is by building consumer demand. That’s where new capital should be invested. Ironically, investing precious new “growth” dollars in new program ideas only delays our ability to grow anything.