My friend George Overholser responded in a comment to my post yesterday about Investing in Nonprofits. George is head of Nonprofit Finance Fund Capital Partners (one of the organizations I listed) and my co-author of the op-ed Philanthropic Equity.
Well said, Sean. Your argument is a bit like Copernicus putting the Sun at the center of the Solar System instead of the Earth.
I am struck by three things.
(1) One of my clients described his organization as reluctantly being in the “chameleon business,” constantly contorting the various components of his program design and strategy to fit into the many programatic funding streams among the funders. They are so busy chasing chameleon dollars that their own very compelling core strategy for social impact hasn’t gotten the focus it would need to bring funders into alignment.
(2) If it is to bring funders into alignment, an enterprise needs to become VERY compelling . And this takes a large amount of growth capital – more than any single funder is likely to provide. Growth capital can be defined as “money that pays the bills while an organization learns how to be compelling”. Compelling enough, that is, to attract simply-pay-us-for-what-we-do money that covers all the costs of the enterprise.
What does being compelling entail?: Not just a program that works. But also: a proven way to replicate the program faithfully, and… enough scientific proof of impact to change minds, and… a business model that can reliably generate money in return for program execution (not program change), and… a management team and board that instills great confidence.
Tally it up, and we are typically talking $10 to $30 million of growth capital before an organization can be compelling enough to bring funders into alignment. That is more than any single fund is likely to provide. Hence the need to run syndicated growth capital campaigns.
(3) I don’t want to give the impression that I believe funders shouldn’t develop strong strategies for social impact. I think the field has plenty of room for different approaches. It’ll be interesting to see if those who are pursuing a more enterprise-centric approach will be able to demonstrate superior levels of social impact. Time will tell!