On his Facebook page, Brad Rourke has asked why the Social Innovation Fund (explained here) is such a big deal:
[The Social Innovation Fund] makes the government basically a grantmaker, giving away $50 million per year (which is not much as funders go). Sean points out that the original idea was that the government would find these worthy nonprofits and give the money to other funders to then pass on, after a match.
That’s definitely better, but still, either way, here’s my question: How is this in any way different than how things happen already?
Every foundation in the United States is essentially already doing what the White House office will be doing: trying to find the most promising grant recipients.
I do not understand what the fanfare is here, when what really appears to be happening is that a new funder is entering the mix. Yes, that’s good — but not shout-it-from-the-rooftops good.
Brad’s not the only person asking this question. If it is done wrong, the Fund will likely be a bureaucratic nightmare as Jeff Trexler recently suggested. So here’s my argument for why the Social Innovation Fund is a big deal if it is done right.
- The Social Innovation Fund is the first meaningful incentive for large foundations to provide growth capital to nonprofits.
- It provides serious “carrots” to participating foundations, but also empowers itself to “rate” those foundations. This should create the first meaningful incentive for foundations to compete to be viewed as the “best” funders.
- The Fund refocuses philanthropy from supporting programs to supporting nonprofit organizations.
- The Fund explicitly makes clear the role of the government as an “exit strategy” for philanthropy.
- The Fund offers meaningful incentives for the field of philanthropy to embrace a culture of knowledge sharing.
If you read this blog regularly, you can see that the points above are pretty much my wish list for our sector. Here’s why I think each point is true as long as the Fund is run in accordance to the policy recommendations of America Forward and follows the letter and spirit of the bill authorizing the Fund.
The Social Innovation Fund is the first meaningful incentive for large foundations to provide growth capital to nonprofits.
The Fund is providing cash grants to grantmakers. Most grantmakers are stuck with the endowment they have and do not have access to additional funding. But the Fund requires that grantmakers use this money (plus matching funds from the foundation’s endowment) to provide growth capital and capacity building grants to nonprofits. In addition, the Fund sets the government up as a long term exit strategy so that the grantmakers do not need to support the grantee forever (see below on “exit strategy”.)
It provides serious “carrots” to participating foundations, but also empowers itself to “rate” those foundations. This should create the first meaningful incentive for foundations to compete to be viewed as the “best” funders.
While offering the “carrots” above, the Fund also requires that grantmakers make a compelling case that they have an evidence based decision making strategy and provide specific measureable outcomes related to the areas they seek to support. Since the Fund cannot make grants of less than $1 million and it only has $50 million, it cannot select more than 50 grantmakers to work with. Since it is allow to make grants as large as $10 million, the final list will be between 5 and 50 grantmakers. That’s a list that foundations are going to want to be on. Even those that historically have not focused on providing growth capital.
The Fund refocuses philanthropy from supporting programs to supporting nonprofit organizations.
The language of the bill authorizing the Fund presumes that the role of funders helping to support social innovation is to provide growth capital. This isn’t terribly surprising when you realize that America Forward was convened by New Profit, which is one of the leading growth capital funders. This shift from foundations as designers of programs who contract execution out to nonprofits to foundations as providers of growth capital to the performance driven nonprofits represents a fundamental shift in philanthropy and one that I am a big advocate for.
The Fund explicitly makes clear the role of the government as an “exit strategy” for philanthropy.
The Fund become the “venture philanthropy” arm of the US government. But in promoting the Fund, everyone from President Obama on down has referenced the successful scaling of Nurse-Family Partnerships. The government did not care so much about NFP when it was a small, local program. But now that it has gained scale via the intentional providing of philanthropic growth capital from foundations, the 2010 federal budget is calling for $8.5 billion over the next ten years to finance nurse-family visitation programs.
So the Fund begins to make explicit the interest the government has in effective social innovations reaching a scale where the Federal government can step in to provide funding. This model wins with social liberals who love to see the government provide effective social benefits and it wins with social conservatives who love to see the government contract with privately developed and managed programs to execute social benefits. It also wins with foundations who can see that if they expend resources to scale effective programs, the government will step in to provide funding and the foundation can exit the relationship with the grantee. Is there an unlimited capacity for the government to provide funds? No. But government resources swamp private philanthropic resources and effective programs like NFP save the government money.
The Fund offers meaningful incentives for the field of philanthropy to embrace a culture of knowledge sharing.
The language of the bill authorizing the fund requires that nonprofits that receive subgrants from the grantmaking partners be committed to the use of data collection and evaluation and be important contributors to knowledge in their fields. It requires that when making grantmaking decisions the grantmakers consult with a diverse cross section of community representatives in the decisions, including individuals from the public, nonprofit, private, and for-profit private sectors. And it mandates that the Corporation for National & Community Service that will operate the Fund shall maintain a clearinghouse for information on best practices resulting from initiatives supported by the grantmakers and their grantees.
This is important, heady stuff. If executed properly with vision and integrity, the Fund may mark a major turning point in the field of philanthropy. But it is easy to imagine that the fund will not live up to its potential. This is a big project and there are going to be many competing interests clamoring for attention. It could turn into a bureaucratic mess of grant dollars being handed out in a rote manner that relates more to political connections than anything else. This is the nightmare that Jeff Trexler worries we’ll see. I hope he’s wrong. I think the people running the Fund want to do the right thing and recognize the opportunity they have. Let’s all commit to support this important endeavor.
Sean, these are great answers to my questions and you’ve got me convinced!
Great points. I hadn’t caught the “knowledge sharing” aspect of the legislation, I think that is significant.
Thanks for spurring this post Brad.
David, it seems to me that the knowledge sharing is one of the ignored aspects of the bill that is really quite exciting. There’s never been much of an incentive for foundations/nonprofits to sharing knowledge and maybe the Fund can add some urgency.
Thanks for your insightful comments. You bring up some good points about why this Fund has the potential to become more than just a “bureaucratic nightmare.”
I have some additional thoughts which I’ve written out in a post on my blog, outlining three additional criteria that I think the Fund should be considering. Here’s a brief summary:
1. We have to be careful not to get too caught up in the dollars – because in reality, $50 million (or even $150 million after the 2-1 match) is not much. Rather, the money should be seen as a way to influence the actions of all sectors and thus achieve greater systemic change.
2. The Social Innovation Fund should be looking for organizations with proven models who are actively engaging with government in an attempt to incorporate the best parts of their model into the broader system where change can really be widespread.
3. Several states – including Texas, Louisiana, Virginia, and Minnesota – have started offices or passed legislation to find and grow what works. The Social Innovation Fund should encourage more of this – even giving funding priority to collaborations that include a state-based entity committed to ensuring the creation and growth of the most effective and sustainable models.
Read the full post at andrewwolk.com and thanks again for fostering this discussion!
The UK has some fantastic work being done through NESTA that SIF reflects somewhat. NESTA is a powerful driver of innovation and social design thinking (transformation design) and I think we’d do well to support something like it. Geoff Mulgan from The Young Foundation has a wonderful analogy of bees and trees that it uses to describe the potential benefits of innovation diffusion. Here’s a good quote:
“successful innovation requires ‘bees’ (small organisations, individuals and groups who have new ideas, and are mobile, quick and able to cross-pollinate) to find receptive ‘trees’ (big organisations such as governments, companies or non-governmental organisations, which are generally poor at creativity but good at implementation, and which have the resilience, roots and scale to make things happen). Much social change is a result of a combination of the two.”
(Copied from ‘Innovation in response to social challenges‘ by Nesta, March 2007-or read Social Silicon Valleys. A Manifesto for Social Change’, by the Young Foundation, 2006).
I hope that we can both spend effort on replication and spreading what works, but also moving the flywheel for new ideas and new thinking that will see us through the next wave of creative change.
Hi Fran, thanks for the comment. I love the bees and trees metaphor!
Some good points but nonprofit organizations as you well know are community based entities that are not proactively linked to a comprehensive coordinating effort. Nonprofit communication across county’s is mediocre at best. Perhaps the Office of SI will more methodically invest in the programs that work. As far as I know, there isn’t a national or even a regional organization whose mission is to coordinate these large scale comparisons.