Your financial support will come not from typical nonprofit funding, but from investors, who lend you their support with the expectation of a return on their investment, whether in a tangible financial sense (such as with a loan or a program-related investment) or through the strong social impact generated by your program. Venture philanthropists often operate under the notion that nonprofit finance is “broken” and that the most effective way to spur social change is by identifying innovative ideas early and providing them with ongoing nurturing and support through the investment of smart, informed givers.
Community education programs can be an ideal fit for social investors, as a primary tenet of social impact investing is the notion of “giving where you live,” and educational endeavors tend to be held close to the hearts of investors who see funding for education as crucial for producing the next generation of donors. On May 19th, the Foundation Center hosted a panel as part of our Funding for Education Month, titled Meet the Grantmakers: Harnessing the Power of Social Impact Investing for Community Education. The panel featured three speakers representing a broad range of venture philanthropy groups: Chris Cardona spoke on behalf of the New York City Venture Philanthropy Fund, a giving circle in which member-investors pool their resources to offer funding, technical support, and access to a skilled professional network to one innovative project each year. Lara Galinsky discussed her work with Echoing Green, which acts as an angel investor, identifying as-yet-unproven visionaries and providing seed money to develop their organizations through a two-year fellowship program. Finally, Blaise Rastello explained the mission of the Contact Fund, which provides short-term loans to community development organizations with the expectation of a financial return as the organization comes to fruition. Wondering if the support of social impact investment is right for your community education program? Here are some things to consider:
Can you prove that your idea works? Social investors, while bold about taking risks, are fastidious about ensuring that they are taking the right risk, one that they feel confident will pay off, whether that means they will get their money back in the end, or will be able to see a social return on their investment, i.e., your project instigating just as much social change as you told them it would. When approaching a funder, try to show as much solid data for your idea as you possibly can, and some well-organized financial information on your program. Use a logic model* when demonstrating how your program will achieve its results, showing funders precisely where their money will go and how it will help accomplish your goals. The more convincing your model, the better a match you are for an investment.
* As Blaise Rastello mentioned, the Kellogg Foundation's web site is a good place to get information online about this concept.
Do you possess the right characteristics for success in social enterprise? Producing change through social enterprise requires an especially high level of commitment to your cause. Many who engage in this work report experiencing a “moment of obligation” – a moment when they recognize that in spite of the immense challenges involved in pursuing their project, they are fundamentally compelled to push forward and do it. Often the moment of obligation is born out of personal experience, or sometimes out of educational experiments that bloom into new, larger projects that continue beyond the classroom. Also, social entrepreneurs tend to be very adept at syncing their hearts and their heads – knowing on an empathetic level what they want to do while simultaneously knowing what personal gifts they possess that can be employed to get it done. Social entrepreneurs also have a tendency to be “resource magnets.” They have a natural ability to attract resources and to often find strange bedfellows (such as unlikely corporations or high-profile donors) to champion their cause. Overall, if you possess an intense commitment to your cause, as well as the energy and resourcefulness to make a success of your project, then social entrepreneurship could be right for you.
If you receive a loan, are you confident that you can pay it back? In a way, this question harkens back to the question of whether you can prove that your program works. If you are certain that your idea is effective and innovative enough to succeed and be sustainable over time, then that’s a good sign that you will be able to give your funders any return on investment that they will require. Also, if your funder is offering a full-on loan rather than a grant, it helps if your organization has an earned income stream that can eventually contribute to your repayment of that loan. Otherwise, if you are confident that you will have additional funders to help you once your loan has fueled your program to run smoothly, then that is helpful as well. Generally, make sure that your program is destined to be a great one before delving into something as risky as a loan.
There is a lot more information out there about the growing fields of social impact investing and social entrepreneurship. To learn more, take a look at our FAQs, What is social enterprise? and What is a program-related investment? Also, you can search our Catalog of Nonprofit Literature using the subject/descriptor “social entrepreneurship” or “socially responsible investments.”
-- Tracy Kaufman, Library Assistant, Foundation Center-New York
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