One of the posts quotes an email from Dave Chakrabarti, a major contributor to the debate on this blog, encouraging his network to weigh in on the debate:

Coming under fire for offering services for free, by nonprofit funders who do not seem to understand the difference between “mission-driven” and “profit-driven”, forces me to suggest that we, as a sector, need to develop stronger language regarding these issues. Most of all, we need to work towards a different model of sustainability, so that we can pose alternate definitions when a potential funder equates “sustainability” with a system based on marginal returns for services offered…

…Responses appreciated. Backup on Tactical Phil would be awesome (I think I’m outnumbered).

One of the interesting attributes of this debate has been the way it has spun off in a couple different directions at once. Currently there are actually three different arguments being waged, 1) Are nonprofits that use earned income strategies better than donation based nonprofits? Does “sustainable” mean not relying on donations? 2) Is it appropriate to tell a group of nonprofits that some of them “suck” or is doing so counter-productive? 3) Should funders avoid wasting time with underperforming nonprofits and allocate capital to top performers? Should nonprofits that provide subsidized services/products to other nonprofits only deliver those services/products to effective nonprofits or any that ask for them?

It is the third question that Mike Brown was discussing when he made his now infamous comment. But I think the splintering of the discussion showcases the lack of shared language between the for-profit and nonprofit mindsets. Rather than call for reinforcements and retreat to our respective corners to refine our side’s language to better “win” the debate, I think we need to cross the great divide and create a shared Vocabulary of Philanthropy.

The “shorelines” and “international borders” that I’ve referred to are places of great turmoil where various forces push against each other. It is in these zones that people feel a need to protect themselves and so quickly fall into line with their side’s “official party line”. People feel safer in groups. But if this cross-disciplinary conversation is going to produce something new and not just be a spectacle, we need more people to drop their defenses and wade out into the middle ground and see what we can find.

For the record, I believe that “earned income” strategies have nothing to do with nonprofit sustainability. Philanthropic donations are a perfectly acceptable way to attain sustainability. The question is do you have a way to finance the service that you plan to offer. Philanthropic donations are just a way for one group to bear the cost of another group’s needs. There is nothing about charging the recipient of a service that makes a nonprofit more sustainable that “charging” another group (i.e. soliciting donations).

Nonprofit employees on the other hand leave frequent comments. We already had the back and forth between fellow CompuMentor/TechSoup board members Daniel Ben-Horin and Mike Brown. Today we get the thoughts of one of the employees, Antony Chiang. Public disagreement? Heavens, what will people think? I don’t know about my readers, but my opinion of CompuMentor/TechSoup (which was already high) just shot through the roof. Let me know how you view this kind of public debate and how you would react to public comments from foundation employees and board members.

Antony:

No discourse like this should go on without the uniquely insightful perspective of someone like myself … my primary credential being the timekeeper at Mike’s panel at NetSquared.

However, I should perhaps warn that in addition to that impressive role, I have the distinct privilege to be part of the team expanding TechSoup’s impact internationally (and thus needing to be very nice to Daniel in this blog comment), as well as having worked in the cross roads of the non-profit / for-profit / technology intersection for quite some time.

My first reaction to the minor uproar I have to admit was “Really? Intentionally provocative but what was the big deal?”. Reading Daniel’s initial feedback about “content vs. context” was helpful (see I warned that I was going to be nice to Daniel). Got a good chuckle out of the NRA example, and I would say that essentially Mike was at a NRA/NPO panel where he said “some gun-owners/NPOs suck” and indeed got "didn’t get out of range/feedback regarding his insensitive language”.

To be fair however, here is some additional “context” that should be noted. First, this was a new model for NetSquared where the purpose was for 21 projects to persuade attendees to vote to fund them in a VC style pitch. Second, one of three key judging/voting criteria was “Economic Sustainability”, also phrased as “having a plausible financial model”. And the format was a panel set up to question each project representative on that factor (the other two being social impact and technical innovation). Third, Mike’s role was moderator (not just expert panelist). Here’s my point in more detail:

First, this was a competition. The nonprofits were there to compete for dollars, as well as drum up interest by resources like volunteer Yahoo developers and expertise in marketing / finance / strategy. The model and the whole conference reminded me very much of other “social enterprise” competitions, modeled on VC pitch competitions, where ‘business plans’ are presented for ‘startup venture funding’ to an audience of foundations/VCs. And I would add that the NetSquared community is a deliberate mix of VCs / Corporate / NPO / Foundations / Experts. So every organization there in my mind was buying into the social enterprise model, at least for two days.

Second, worthy projects were supposed to demonstrate economic sustainability. I was at all four of the economic sustainability panels. And I have to say that precious few of the projects demonstrated persuasively any economic sustainability. Panelists and audience members kept asking the same questions of all of the projects that it got to the point where moderators were asking projects to introduce themselves and then answer one key question right off the bat “What is your planned mix of earned income versus donation/grant income” usually followed by “how will the earned income be …. well … earned”. Sometimes the answer was “we’ll be 100% (or mostly) grant funded” and frankly that put the damper on any useful questions or suggestions other than to suggest funders who had an interest in their type of project. A perhaps meandering way of saying that the context was very much ‘market place’, and capital flowing to the most effective users of capita l. Daniel’s point is well taken that in the NPO ecosystem, the ‘market’ context is a new fad and not of general applicability, but at NetSquared at least I interpreted social enterprise as being the accepted model.

Third, Mike took his role as moderator with more gusto in my opinion than any of the other moderators. Maybe I’m just saying that because I had to catch his attention every four minutes to tell him the clock was ticking and he was always in the middle of fostering lively debate. At the outset, he encouraged everyone to ‘ask the hard questions, this isn’t softball”. He played fast and loose with the format of the session for the purpose of creating a more lively discussion, where all the other moderators followed it exactly. My impression is that he was trying to push participants in general (both project founders and audience) to ask hard questions, go deep and get really valuable feedback / resources than if just easy ones were asked.

With the disclaimer of fading memory, I seem to recall that this controversial statement (and subsequent explanation/observations) was made in the context of a project that wanted funding to give away free websites and free web tools. So absolutely no economic sustainability around what they wanted to get funded. And panelists and audience members alike were trying to get the project reps to at least consider charging some who could afford, or place advertising, or other ways to create earned income. And philosophically, should we be giving resources to just any nonprofit, when some are less effective (s**k) than others. Foundations and other funders certainly don’t just give grants to any org that asks. Mike wasn’t saying the project being questioned s**ked. My interpretation of this part of the panel was an observation that this organization should consider thinking like a funder and give free sites to ‘worthy’ NPOs and charge all the rest perhaps. Or at l east that’s what I was thinking at the time as yet another alternative way to try to get this org to consider earned income strategies. On the one hand I admired the org reps’ refusal to budge from their specific vision. And even a hyperbole didn’t work. On the other hand I didn’t think they were ‘competing’ very well to at least say “hmm those are some interesting suggestions we’ll consider and hopefully this demonstrates that we have some possible viable models of economic sustainability”. Or another way to say this – this project was in the wrong competition if they wanted to blatantly keep their specific vision/strategy and expect to win.

And one final observation regarding part of this thread, is that I remember Mike introducing himself as “Mike from TechSoup”. I wonder how many in the audience read his bio and knew his vocation, but my guess is most didn’t. My hunch tells me they would have been offended by the phrase no matter who said it.

Which leads me to my lesson learned. S**k is not in the warm fuzzy cup is half full nonprofit vocabulary. It’s not so much being PC as it is having one vocabulary with my buddies, another with my toddler, and another at the office, and yes, one at NetSquared. So while disagreeing with Daniel’s specific analysis, yet coming full circle to his observation that the context here was a nonprofit conference. When all is said and done, this wasn’t a rough and tumble VC pitch competition where you better have a tough skin, it was a NetSquared conference. Warm, yes. Fuzzy, yes. Dedicated to non-profits, yes. Culture and language of non-profits … a definite yes. Dare I say ‘sensitive’… also yes. Nonprofit staff are a self selecting bunch of folks (hugs all around please). It was perhaps the most collaborative competition I have ever seen. “No one left as a loser” was actually a truth at this one. Cliché but true. Everyone got a free trip to the conference , ended up with at least some extra dollars and a boatload of great connections and feedback. Competitors were not tech entrepreneurs, and instead talked like nonprofits talk and asked how they could work together on overlapping goals. So my final verdict … content = accurate. Vocabulary in this context = did not cross the line for some (myself included) but did for others.

Daniel (this is an excerpt of his comment, read the whole thing here):

Mike is my good friend and our Board member at CompuMentor/TechSoup, but I think this remark is unfortunate and I likewise disagree with your gloss on it, Sean.

I think it’s essentially a matter of distinguishing between content and context. The content here is self-evidently true, in the sense that more or less ipso facto a subsection of every group is the least qualified in that overall group…

The context is another matter. If you’re standing in front of the NRA and want to say "Gunowners suck," than I say, "more power to you and excuse me while I get out of range." Truthiness to power; good for you. But if you stand up, from a position of authority, and tell a group of people who have in many cases worked for nothing or very little to try to accomplish something beneficial that some of them "suck", I am not very impressed. It feels like piling on. Is it possibly true that anyone in the nonprofit world doesn’t already know that some nonprofits do a poor job in some (or many) areas? I don’t think so.

I think Mike’s real point is that some nonprofits really have no claim to be taken seriously as business models. And I think that’s actually a pretty interesting point and more nuanced than it might appear… The trend toward a more business oriented approach to social maintenance and improvement is a relatively recent development. I won’t take the space here to describe it, but will just note that one of the unintended consequences of this trend is that nonprofits that can’t spell bizness modl now feel obliged to claim that they have one. That doesn’t mean they suck! It means they are confused about where they fit into the present funding climate and are climbing on the latest buzzword…

Knowing Mike and what a warm, fuzzy and empathic individual he is (most of the time), I believe he misread the room. Obviously he struck a chord with you, Sean, and I’m sure some others, but for many of the people there (based on the feedback I’ve heard; I wasn’t present myself) it felt like a person in a position of power, a VC, an "Expert Reviewer", a board member of the host organization, taking the opportunity to state the obvious in an unnecessarily belittling way.

Mike Brown responds (again, this is an excerpt, you can read his whole comment here):

…One of the major challenges in the non-profit sector is that the efficient markets principle we hold dear in the private sector doesn’t hold as well in the NPO world. In the for-profit world we value the fact that resources tend to accrue to the organizations that generate superior returns…

…Unlike in other realms where competition channels resources to the most efficient or effective consumer of resources, in the non-profit sector resource allocation and efficiency/effectiveness are not always or easily correlated. Efficient /effective NPO’s don’t always thrive and inefficient or mismanaged NPO’s sometimes consume resources better allocated elsewhere…

Yesterday, I made the point that any organization (foundation, NPO, or for-profit) must set some criteria or filter for its resource allocation to ensure that the resources are deployed as effectively as possible. I provided the example that if my goal is to provide housing for people and my resource is hammers, I should offer the hammers to the builders that can build more housing than the builders who are slower or lazier (all else equal)… Most people understood that I was making this point clearly yesterday when I said, "Some non-profits suck; just like some for-profit businesses suck" as I then spent the next five minutes explaining exactly what I meant. The people who understood this point told me so directly after the NetSquared panel I moderated. Apparently, some took offense to my "inflammatory" remark. Those who took offense felt that I was undermining the hard work of good people in all NPO’s who have dedicated their careers to helping others. To them I say, learn the meaning of the term "hyperbole" and stop being so sensitive. Obviously I care deeply about the sector and appreciate the great work effective NPO’s are doing. Why else would I spend the time that I do supporting NPO’s with my time and resources?

My take on Mike’s comment at the conference was:

In a world with limited resources, we need to get comfortable with the idea that nonprofits that are trying hard and have lots of passion — but aren’t cutting it — don’t need a pat on the back. They need to be ignored and we need to let them go out of business.

Personally, I do not buy into the hype that nonprofits should behave more like for-profit businesses. At least not in the sense that they must create business models based on earned income strategies or that being dependent on philanthropic funding is somehow a deficiency. But I do feel strongly that there is only a limited sense in our culture that nonprofits can and should be expected to be highly effective organizations. Certainly many people in philanthropy establishment get this, but it is not a widely held concept.

In the investment management industry that I work in and the venture capital industry that Mike works in, success is defined by the results of how we allocate capital. No one cares about how slick of a concept a company has, or how big they are. The metric is “what was your return?”. Measuring the “return” on money invested in a nonprofit is a very difficult concept. But at the least, we need to have a framework where pointing out that some nonprofits aren’t any good at what they do and resources allocated to them is a waste, doesn’t inspired a debate or hurt people’s feelings.

Here’s the thing about Mike’s comment, it wasn’t directed at nonprofits. Nonprofits know that some of them are effective and some aren’t. His comment, or at least my take on it, was directed towards allocators. We measure what we care about and in philanthropy we tend to measure how much capital is given, not how effectively it is allocated. This is why “Some nonprofits just suck” was such a powerful line. Mike wasn’t speaking from a position of power down to the nonprofits in the room. He was talking about how the sector, all of the players (and the room was a diverse cross section), allocate capital.

In the for-profit sector, market forces drive poor companies out of business. Therefore, we don’t need anyone running around reminding people that some for-profit companies suck. But this hasn’t always been the case. In the late 1990’s, the technology bubble, an event of mass psychological hysteria, broke the efficient market system for awhile. During that time, capital allocation was terrible. Companies that destroyed value were given massive amounts of capital. Anyone who questioned these allocation decisions were told that they didn’t understand the New Economy. During that time a website called F**ked Company came about. The site pointed out companies that Mike Brown might say “sucked”. At that time, the for-profit sector desperately needed this pointed out to them. With the lack of market forces and the lack of reliable outcome metrics in the nonprofit sector, we still need to be reminded that just because a company has 501c3 status doesn’t mean that giving them money does any good at all.

1. MAPLight.org
2. Miro
3. Freecycle.org

Some nonprofits just suck!

He got some hesitant applause and a few nervous laughs. But why is that such a shocking statement? Doesn’t everyone agree that some for-profit companies “just suck”? Why should nonprofits be any different? In a world with limited resources, we need to get comfortable with the idea that nonprofits that are trying hard and have lots of passion — but aren’t cutting it — don’t need a pat on the back. They need to be ignored and we need to let them go out of business.

“I have always felt that the action most worth watching is not at the center of things but where edges meet. I like shorelines, weather fronts, international borders. There are interesting frictions and incongruities in those places.”

Anne Fadiman
The Spirit Catches You and You Fall Down

Why am I at NetSquared? I provide wealth management services for philanthropic families.

Why is Chris DeCardy here? He is director of communications for The David and Lucile Packard Foundation President.

Why is Anurag Nigam here? He is a member of Sand Hill Angels.

Why is Amy Lesnick here? She is executive director of Full Circle Fund.

Why is Cisco Systems sponsoring this conference?

Because interesting things are happening “where the edges meet”. Something’s happening here. I don’t think that anyone knows for sure what it is. Usually when you go to a conference, everyone is in the same line of work. At NetSquared, everyone I meet comes from a totally different background. There are “interesting frictions and incongruities” between us. But that’s why all of this is so exciting.

Well so far, you find that some of the entrepreneurs on stage are full of passion… and not much else. If you don’t understand a question that asks what percentage of your budget is going to come from fundraising… you aren’t going to raise any funds at NetSquared. You also find some brilliant minds working on brilliant solutions. It’s not often that startups consisting of two people and a plan get to field questions and comments from people representing such caliber organizations as:

• Bill & Melinda Gates Foundation
• C.S. Mott Foundation
• Full Circle Fund
• Geneva Global Inc
• The William and Flora Hewlett Foundation
• John S. and James L. Knight Foundation
• Omidyar Network
• Packard Foundation
• Schwab Charitable
• Silicon Valley Community Foundation
• Sunlight Foundation
• The Surdna Foundation
• The Case Foundation
• The John D. and Catherine T. MacArthur Foundation

…not to mention WackyPuppy Design.

What I’ve found interesting so far is the humbleness with which most of the nonprofits present themselves. If you’ve ever seen for-profit companies pitch for funding, humble isn’t the word that comes to mind. But I’m not so sure that if I’m a funder who is thinking about making large grants to a startup, that I want “humble” to be how I describe the entrepreneurs. If you think that you have a transformational idea that will help with a significant social problem, it’s OK to have some self-confidence or even a little arrogance.

Not everyone agrees with me. Allen Gunn of Aspiration (a loyal friend to the NetSquared community) wrote the following on the NetSquared blog about his concerns with the contest format:

The Net2 tagline is “Remixing the Web for Social Change”, but an agenda model that pits 21 promising projects against one another in public doesn’t seem to me the most likely strategy to engender more innovative mashups, interoperability or content sharing between those 21 projects or the sector as a whole. I’d be much more excited to see efforts that reward collaboration among projects instead of competition between them. The N2Y2 agenda format puts me in a veritable Prisoner’s Dilemma: do I stand in solidarity with like-minded projects in my field as I have tried to do for years, striving to interoperate, collaborate and blur organizational and informational boundaries for collective sector benefit, or do I make calculated decisions to maximize return to my organization at the effective expense of others? I tag that conundrum with “yikes” and “no-win”.

I think Allen is correct to recognize the value of collaboration. On the other hand “doing good” isn’t enough, funders want to know who is doing the “most good”. In a world with scarce philanthropic dollars, creating competitive environments is one way to allocate those dollars effectively. NetSquared is a good step in that direction and nonprofits need to prepare themselves to compete. So my advice to the projects for day two is don’t apologize for what you don’t know yet, tell us what makes you great. If you don’t think you and your project is an outstanding use of philanthropic dollars, better than all the other projects, you might want to consider a different conference to attend.

The panel judges seem to have no hesitancy to ask tough questions. For example, “Hasn’t company X been doing what you want to do for the last decade?” or “It doesn’t seem like you have any expertise in the area you are telling us is most critical to your success”. Make no mistake, today is a day for competition.

Being good at collaboration is a great competitive advantage. I’ve already seen a number of projects reach out to other projects publicly. That raises those projects’ status in my view (because they know how to play well with others, which is critical when they try to enact their mission). Collaboration is a good way to become more competitive. But you need to know when you are trying to make friends and when you are trying to win. Unfortunately, even if we’re all trying to do good, we can’t all win. There is a limited amount of philanthropic dollars and no matter how much you want to do good, if someone else can “do good better”, they should win and you should lose. The naïve belief that all nonprofits are “winners” steals food from the hungry, resources from the impoverished and valuable wisdom from those who need it.

During the conference, I will serve as a judge on the “economic sustainability” panel for the following projects. If you have any feedback to share, send me a note before 1:50 pacific time:

• Farmer2Farmer
• Yankana
• MAPLight
• Youth Assets

My guest today is Daniel Ben-Horin. Daniel is founder and president of CompuMentor and TechSoup, who are behind the NetSquared Conference. Daniel discusses the history of CompuMentor, how technology is transforming nonprofits, explains the vision behind NetSquared, and reflects on the use of “wisdom of crowd” techniques in philanthropy.

• Launch Podcast

Expand this post using the link below to read the transcript.

[intro music]

Sean Stannard-Stockton: Hello, and welcome to the Tactical Philanthropy podcast. I’m Sean Stannard-Stockton, author of the Tactical Philanthropy blog, and a principal and director of Tactical Philanthropy at Ensemble Capital. My guest today is Daniel Ben-Horin. Daniel is founder and president of CompuMentor and TechSoup, who are behind the NetSquared Conference. Daniel, thanks so much for joining us today.

Daniel Ben-Horin: My pleasure.

Sean: Daniel, why don’t you start off and tell us what CompuMentor does, and what led you to founding the nonprofit in 1987?

Daniel: CompuMentor came out of an experience I had in one of the early online communities, the WELL, which was spawned by the “Whole Earth Review,” and actually stood for Whole Earth ‘Lectronic Link. I’d been the director of an organization called Media Alliance, which we founded in the computer lab which I never used because it was 30 feet down the hall and I was trying to figure out how to use my own first computer, a Kaypro 2X. But somehow, getting away from my computer and trying to learn in a lab just didn’t feel right.

And after I left Media Alliance, I was still pounding away at the Kaypro and holding, like many people, an idea of the nerds out there–these sort of new breed of folks who presumably had pocket protectors full of pens, asocial, and no interest in anything other than the new technology. That was the image that I held, until my next-door neighbor insisted that I log on to the WELL. And in fact, I refused, just didn’t pay any attention for a while, until he, like a good nerd, insisted, and came over and sat next to me and logged me on with my 300-baud modem.

What I found was a community of people who were incredible. I saw how shallow the stereotype was. These people were highly engaged with social issues, were very articulate–very passionate, in fact, about social issues–and very busy, very occupied with being on the edge of new technologies. But it seemed to me, very interested in reaching out, if they were given a way that would really use their skills.

And so that, in combination with experiencing the power of having my neighbor sitting next to me at my own computer showing me what to do, led to CompuMentor. The simple idea was that we would ask the people on the WELL to be mentors at the sites of nonprofits, and we would see what would come out of it. And what’s come out of that 20 years later is NetSquared, although, there’s been quite a bit in-between.

Sean: Sure. What are the basic services, or what does CompuMentor do for nonprofits today?

Daniel: I often say that CompuMentor is the dog and TechSoup is the tail, and that over time the tail has sort of eaten the dog. Today, the single main thing, the anchor of our program, is that we administer a website called TechSoup and a product philanthropy platform that is closely integrated into TechSoup, which is called TechSoup Stock.

And we, over the years, have gained the confidence and business of most of the major software companies, and also Cisco, a very prominent hardware company, as the administrator of their product philanthropy programs. So for these companies, it’s a goal, to be good corporate citizens and provide support to the nonprofit sector, and the way they prefer to do that is by donating the products they make.

Our proposition to them is that we will qualify recipients, that we will handle the administration, and that we will support the use of those products once they reach the recipient. So that support is provided through the knowledge platform that TechSoup is, and through a host of relationships we maintain with technology providers around the country, whom we try to support in various ways.

We also undertake projects ourselves. We do a lot of work with the Gates Foundation, with libraries, in domestic libraries, and try to bring those learnings back to TechSoup and the broader community.

So at this point in our evolution as an organization, we provide products, we provide knowledge, we go out into some areas that are difficult to fund work in at the outset, and try to explore the terrain and come up with ways of accessing resources in different ways and supporting nonprofits. So we have a program for refurbished computers, and as I mentioned, the library work, and then this NetSquared, our effort to support web services, the social web in a social entrepreneurial and nonprofit context.

Sean: One more question before we move on to NetSquared. Most people, I think, can look around them and see how technology has transformed corporations and transformed consumer products. And people feel like the various services and products that they buy are different than they were, due to technology.

But I have the sense that most people don’t know how technology has really changed the nonprofit world, or even wonder if it has. Has technology really transformed the products and services that nonprofits can offer?

Daniel: Well, it has. I think, in many ways, the nonprofit world lags behind the private sector. In some ways, nonprofits are simply small and medium-sized businesses, but in other ways, they are very distinct entities that operate in a different way than the private sector. So to the extent that they are the same–that they’re just small and medium-sized, and in a few cases large, enterprises–they have to use all the software that any such enterprise would use.

And they have been acquiring that software over the years and the hardware to run it on, not quite as quickly as the private sector and with more financial constraints, so there’s more kludged systems and less elegant setups.

One of the jokes, so to speak, of the nonprofit sector is that when people from the private side come in and try to help, and they look at a messed up computer system, they’ll say, “Well, let’s get a new one.” And that kind of alternative is not as available to nonprofits as anyone would like. And the efforts to sort of dance around the lack of financial resources and still come up with effective results is an ongoing one that causes some apparent backwardness, just because, often, the resources aren’t there.

On the level that nonprofits aren’t like businesses, I think things will get pretty interesting, because nonprofits are in the business, so to speak, of doing the things that society needs done but no one really wants to go out and try to make a living at doing and create enterprises to perform, in the private-side sense.

So nonprofits are often very engaged with serving low-income communities, in one form or another, and traditionally, nonprofits serve those communities in a very center-out model. The people at the nonprofit, working with their funders, perhaps, and their boards, will decide what the communities needed and will try to provide those services to the community.

What’s changed, and how technology has, I think, changed that equation, is that as technological tools and communication tools do penetrate the larger community–even the under-served communities–nonprofits are hearing from their constituents in a new way. And they’re realizing that they can’t simply have a one-way street of deciding what’s best and trying to provide it.

There has to be a dialogue, and if that dialogue is a fruitful one, then the non-profit has access to forms of support that it couldn’t buy. It can successfully advocate; it can get volunteers; it can raise funds. So, that sense of both opening up of decision-making and potentially creating a different dynamic and reaping the results of that, I think is a very current phenomenon within the non-profit world.

Sean: Obviously, one of the places where we can see technology transforming non-profits is at NetSquared. Tell us about the vision behind NetSquared. How did you get into this, and how is it evolving?

Daniel: I have two words to say about NetSquared, and those are “Marnie Webb.” Marnie is our Vice President for Knowledge Services, and really the intellectual author of NetSquared. I certainly would want to credit her as the main strategist of this project. It’s a two-year-old project.

Marnie and I were looking at this burgeoning 2.0 world–put yourself back in the fall of ’05. We were testing an idea, which was that the shift of technical intelligence from the desktop to the web, the array of web services, and the different kinds of ways that people could utilize technology that resulted from that platform shift represented a particular opportunity for non-profits. That was the idea we were chewing on.

We thought that there was a case to be made that one of the key ramifications of this shift–of the proliferation of web-based services–was that the onus was being taken off the stuff non-profits had the least of, which was money and resources of that kind that they needed, hard resources that they needed to buy stuff.

The shift was going toward–actually, non-profits had more of than anyone else, and that was access to communities, if they did it right. It suggested to us that there was something over the horizon that was very exciting: non-profits that could tap into their communities to such an extent that they could actually get social impact work done on a much higher level.

A metaphor that we always like here is that if you think of everything that has gone into Wikipedia, with so few staff and so much contribution from the community that is excited by the concept of an encyclopedia built on collaboration and which accepts a set of protocols that enable it to function in an efficient way. If you take that idea and think could that be applied to AIDS, could that be applied to hunger, could people be so motivated to solve a social problem that they operate at the same degree of contribution and efficiency as characterized by Wikipedia, and quite a few of the other noteworthy social web projects.

So, from that intellectual starting point, we thought about what could we do as an organization. What do we have to bring to the table? Now, what we think we have to bring to the table is a set of relationships.

We’re an unusual organization in that because of the product program, we have strong corporate relationships. Because we serve non-profits, we have a huge database of opted-in non-profits. We’ve been working closely with philanthropy for 20 years; we have, we hope, a significant degree of trust and competence there. We have a lot of people who are right out there in the blogosphere and highly woven into the web, and bring us back that form of intelligence and contacts. We consider ourselves a social change organization–an activist organization–from the outset, so, in that sense, we’re connected on more than a technical assistance level with the non-profit sector and the social change sector.

The idea was could we bring all these audiences into one place and create a discussion that was distinctly oriented toward impact–toward how can we help projects that have potential succeed. And that was the first NetSquared, a very lively, if talk-heavy, conference. Very disparate speakers: speakers from Microsoft, Amy Goodman of Democracy Now!, Hong Eun-taek from OhmyNews in Korea, Dan Gillmor, the list goes on, and Angela Glover Blackwell of PolicyLink; a very disparate set of speakers at a technology conference who got people very excited.

But, for the second NetSquared, which is coming up at Cisco on May 29th and 30th–the first one was also hosted by Cisco, for which we’re extremely grateful–we decided to really shift the dial toward helping specific projects succeed. That led to the nomination process. We ran the community vote; a process we’re in the middle of now, of preparing the projects–the 20 that were selected out of the nomination process–helping them to develop their pitches. Then, they’ll compete at NetSquared for a share of the $100, 000 innovation fund we set up, and for a lot of other resources–non-monetary–that will be in the room. We hope to continue to keep coming to the table for these kinds of projects on an on-going basis.

Sean: You’ve really gotten a lot of interesting people into the room, in the audience: a lot of representatives of the major most forward-thinking foundations. Why are they coming to this conference as opposed to other social enterprise conferences?

Daniel: I think a lot of these people stay very informed and get out there quite extensively. But you’re right; from my observation of conferences, it’s an unusual concentration of philanthropists who are really interested in not just technology as a generic field but where it’s going, what the edge is, and what that represents for their programs and their philanthropic interests. Frankly, they’re even more interested than I expected; I thought it would be a harder sell to get funders into the room. As such things go it was relatively easy.

I think that if you look at what a number of the foundations are doing, this is of interest broadly in the philanthropy world. How do you distribute decision-making, on some level? How do you get a wider degree of input from the field? How do you make yourself smart through the–I guess you could say–wisdom of the crowd–wisdom of the field might be a little less threatening way to say it. How do you eventually equip the projects you fund with the support they need to succeed down the road?

I think there’s, slowly, more humility in philanthropy, and a recognition that philanthropic dollars, as large as they may seem to earnest, would-be recipients, are very small, and ultimately, by themselves, are limited in what they can achieve. So, if you’re going to invest $10, 000, or a $100, 000, or a million dollars, or 10 million dollars in a particular project, it’s not enough in of itself. That project needs to be equipped to use new tools and to use new communities in an on-going way. If those communities are brought in on the front-end of the process in some fashion that increases the odds that they’ll stick around to support the projects down the road.

I think that’s interesting to certain people in philanthropy, and they see this conference as a way of exploring those ideas with their peers, and helping us make a creative mess of a sort, and find out what kind of projects rise to the top in this process and if and how they can be equipped to succeed in the next year.

Sean: So, tell us about the conference itself. What are the finalists going to go through, and what do you hope the process achieves?

Daniel: Firstly, I’d venture to say the process is the reward. Maybe some the projects that heard that would put a contract out on me. Some of them–I think they were half joking–are telling us that all the help they’re getting between now and the conference is just killing them. I think it’s a joke.

The idea was that these 152 projects nominated themselves. By nominating themselves the statement they were making was they had a strategy they could defend along three parameters: economic sustainability, smart use of new web-based technologies, and social impact. Of course, they varied widely. The first round of voting was open to anyone who cared to register at NetSquared and, presumably, take the time to sift among the projects and make an informed choice of at least five, and no more than ten, of the nominated projects, with only one vote going to each.

We, essentially, tried to run a campaign where it was in your interest to recruit voters, but those voters could not pack the ballot box for the project that recruited them. Still, it favored projects that had some kind of installed base to start with. Out of that process, 20 of the projects were elected to go to the second round.

The next round is to come to NetSquared, at our expense, and pitch, along those three parameters, on three separate tracks. Each track will have a review panel of expert reviewers. We have business people serving as reviewers on the economic sustainability track, technologists on the technology track, and activists and thinkers of different kinds on the social impact track.

The projects will be in a “fish bowl” situation; each of the expert reviewers will have reviewed the project beforehand, and will offer their critique and comments. We’re encouraging a kind of “tough love.” The people in the room will have a chance to chime in; the project will defend itself, and it’s on to the next project. At the end, the people in the conference will vote. The top project will get 25, 000; the second, 15; third 10, then we will divide the remainder of the 100, 000 among the others.

So, it’s not quite Simon Cowell kind of tough, but it’s definitely an attempt to get these projects to raise their game, to talk about themselves in terms of sustainability, and to, in some sense, compare themselves to others. While that’s happening, were hoping a lot of other things are happening, such as projects finding each other and deciding, if they share goals, to throw in together or to pool resources, and to realize economies in that way. A lot of what projects need isn’t dollars.

So, part of the proposition here is that we’re putting together something called an “innovators support network” in which, just to name one example, Tara Hunt and Chris Messina of Citizen Agency, which is a highly thought of Web 2.0 marketing firm, are making $15, 000 of their services available to one of the projects. There will be this matching and pairing–identification of resources and matching of resources to projects, and we’ll monitor all that over the course of the next year.

It’s very much an exploration Sean. We’re not kidding ourselves that this is a protocol that is ready to be baked, packaged, and shipped. But, we think there’s a sense of possibility and we can bring enough to make that real, that it’s worth looking at with some rigor over the next year. NetSquared Year Three in 2008 will be something else again.

Sean: OK Daniel, I have one last forward-looking question for you. I think what sets NetSquared apart from other social enterprise competitions is the purity of the wisdom of crowd’s concept that you used. Leveraging the wisdom of crowds in this kind of a process is still an emerging science, or maybe it would be better characterized as an art. Do you think this process can emerge as an important one for non-profits and the philanthropic field?

Daniel: You know, I have to push back at the concept of the purity of wisdom of crowd’s process that we use. In many ways, we just thought we had to start somewhere. When the projects that nominate themselves include a project like Freecycle, which is a recycling project that already has several million, as I understand it, users around the world, well, they had a profound advantage. They could get to the crowd more effectively than could a project that might have a huge amount to recommend it, but no installed user base.

I was talking to someone and I said, “Next year we want to do a better job of allowing people to compare apples to apples,” and he said, “Yeah, instead of apples to pianos,” which I thought was touché!  So, purity is not a word I would own as applying to this process.

On the other hand, as I said before, I think there is a tremendous upside if the crowd feels ownership and feels involvement. If one posits that there’s a spirit of collaboration abroad in the world, really, and that this is a powerful new impetus as people find out for the first time in human history that they can put their shoulder to the wheel of a project, or, for that matter, a transaction, with someone across the globe, and it can be effective and it can make a difference.

This is new, I think, in our history as a species, and people are exploring that. If we can create conditions where that exploration grids with–aligns with–creating social benefit, and raise up projects that make that very tangible, then, I think, the flame will be worth the candle. The contribution of the crowds, as you’re putting it, will be increasingly recognized as something you don’t want to do without. It will become seen as a building block for success in projects that really aspire to a broad reach and high impact.

Sean: Well Daniel, thanks for your time. I’m really looking forward to the NetSquared Conference.

Daniel: Thank you Sean.

Sean: This has been the Tactical Philanthropy Podcast. You can visit us at tacticalphilanthropy.com. For more information about CompuMentor and TechSoup visit techsoup.org, and learn more about NetSquared at netsquared.org.