Category Archives: Information Sharing

Philanthropedia: Capturing Expert Recommendations of Nonprofits

March 9, 2010 – 9:15 am

This is my newest column for the Chronicle of Philanthropy. You can find the archive of my past columns here.

A Philanthropic Network Passes On Recommendations of Worthy Charities
March 7, 2010 | Chronicle of Philanthropy

In all the talk about measuring results in philanthropy and how best to determine which nonprofit groups are effective, a simple fact is often overlooked. All across the country, foundation program officers, senior nonprofit staff members, and academic researchers know which nonprofit groups are doing great work.

Now a new group called Philanthropedia is working to capture this knowledge about top nonprofit groups and make it available to everyone.

This sort of information, personal recommendations from people in a good position to pass judgment, is a fundamental process that people use to make decisions.

Getting recommendations from experts can mean asking your friend who loves to eat out what she thinks about the new restaurant in town or consulting a book review in The New York Times before choosing your next novel. Recommendations from trusted experts are so valuable that we often pay large amounts of money to gain access to them before making critical investment, legal, or medical decisions.

Philanthropy itself is largely built on recommendations. Studies show that one of the main reasons donors give to certain groups is that a friend asked them to do so.

When those friends are fellow supporters of organizations and not professional fund raisers, they are in effect recommending a group that deserves support. But while those sorts of recommendations motivate action, they are not unbiased or delivered by an expert.

Philanthropedia is working to make expert recommendations of nonprofit groups as accessible as the expert recommendations that help shape our decision making about which movies to see, restaurants to patronize, or retirement strategies to deploy.

Working with a quickly expanding network of experts that includes grant makers, nonprofit staff members, scholars, and other experts, Philanthropedia is making available expert recommendations on topics that include organizations working to curb climate change, improve education, extend small loans to struggling entrepreneurs abroad, and reduce homelessness in the San Francisco Bay area.

Co-founded by Howard Bornstein, a former employee of the Bill & Melinda Gates Foundation, and Deyan Vitanov, an entrepreneur who had previously built an online community for computer programmers, Philanthropedia began operations last year with extensive support from the William and Flora Hewlett Foundation.

The Philanthropedia team uses a survey methodology similar to one developed by the RAND Corporation to use expert recommendations in situations involving a large degree of uncertainty.

Given the nonprofit world’s current inability to systematically measure the effectiveness of nonprofit programs or even agree on what attributes make for a well-run organization, Philanthropedia’s approach makes a lot of sense.

The big weakness in Philanthropedia’s model is that the recommendations it offers are only as valid as the expertise of the organization’s network.

Because so much of philanthropy is not based on evidence, it is quite possible that the nonprofit groups recommended by the organization’s experts are not truly the most effective ones. It could be that the people in the network have biases that produced flawed ideas about what makes a nonprofit group successful.

However, in a recent background paper, Philanthropedia showed that the nonprofit groups it recommends have little in common based on how much money they raise, how well known they are, and their age, number of employees, and accountability ratings from Charity Navigator.

This means that the experts are picking up on something else. Given that the experts are foundation employees whose job it is to analyze nonprofit groups, researchers who have spent years studying conservation, education, poverty, and other topics, and nonprofit senior staff members who see firsthand the activities of their peers, it seems likely that many of the groups Philanthropedia recommends are among the best.

In the wake of the Haitian earthquake, the Gates foundation, the Ford Foundation, the charity research group GiveWell, the University of Pennsylvania’s Center for High Impact Philanthropy, and the nonprofit Acumen Fund all made grants or offered recommendations of which organizations were in the best position to help.

Each of them listed Partners in Health as one of their choices. While this fact does not guarantee that Partners in Health is the most effective nonprofit organization working in Haiti, it does offer a useful piece of information for donors trying to decide what groups to support.

Philanthropedia offers the potential to gather this sort of information for different causes and to offer recommendations that are international, national, or local in scope.

What is fascinating about Philanthropedia is that its process is not only effective but it is also inexpensive to run and easy to expand.

Other organizations working to identify outstanding nonprofit groups by conducting original research may offer some advantages compared with Philanthropedia.

But Philanthropedia’s system allows it to analyze far more nonprofit groups by simply bringing to light what experts already know.

Philanthropedia could quickly become a great way for donors to learn from the people in the best position to know which organizations are the most effective.

Sean Stannard-Stockton is chief executive of Tactical Philanthropy Advisors in Burlingame, Calif., and author of the Tactical Philanthropy blog. He is a regular columnist for The Chronicle of Philanthropy.

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By Sean Stannard-Stockton | Also posted in Chronicle of Philanthropy Column, Cross-Disciplinary Conversations, Effective Giving, Evaluation, New Philanthropy, Philanthropy | Comments (0)

The Cost of Information Sharing in Philanthropy

March 2, 2010 – 9:54 am

My last post on the way that information has different characteristics in the social sphere compared to the for-profit sphere, generated a string of reader comments. The comments covered a lot of ground and I encourage you to check them out here. But one recurring theme pointed to the costs of sharing information being something that was difficult for nonprofit entities to cover.

Gabi Fitz of IssueLab:

When we forget the original intention behind knowledge production in the social sector (namely that it will contribute to social good and social change) we also forget to dedicate the necessary resources to sharing this knowledge more broadly…

Just like any other social need that is not satisfied by the market (or is maybe even the result of a market failure), the work of making meaning from information, providing effective filters, and brokering knowledge in the social sector is a social service that needs charitable support.

Dan Elitzer of Full Contact Philanthropy:

I agree that unlike in the for-profit sector, information sharing in the nonprofit sector does not have a negative impact on the information-creator’s ability to achieve their goals. However, there is still an opportunity cost for organizations to package their knowledge and transmit it in a form that will reach and be actionable for other actors. Foundations may have the resources to engage in information sharing if they think it will advance their mission, but for most nonprofits, investing the time and financial resources to share their data or knowledge requires making cutbacks in other areas.

If a nonprofit staff member is directed to evaluate a program and capture information on how it can be effectively replicated, the time spent on that task is time not spent on providing direct client services or fund-raising or training new staff, etc. If that staff member then has to find a way to distribute that information so that others in a position to act on it will find it, that’s more time not spent on other mission critical work. Yes, the time spent on capturing and disseminating information may ultimately do more to advance the organization’s mission than whatever other activity was superseded, but unless the organization is confident it can make that case to its supporters, that’s a hard call to make.

These are important points. I think the way to address these concerns is though the Googlization of Philanthropy and the way that technology is unbundling the process of creating information from its distribution. In a Chronicle of Philanthropy column last April I wrote:

The Googlization of philanthropy is about organizing knowledge to allow for smarter giving by more people. Most important, the Googlization of philanthropy means that organizing the information will not be done by the information creators, but by third parties and — excitingly — the people who want to consume that information.

The point here is that we are witnessing the rise of information processing organizations like Google, Yelp and Twitter (when it is used to create information filters) which do not themselves create information, but which pay for the infrastructure of information distribution. Something similar could clearly occur in the nonprofit sector (with current examples like IdeaEncore, PubHub and IssueLab).

The rise of these intermediaries both bring light to the information that is already available and creates incentives for more information sharing. The Foundation Center’s Glass Pockets project is a good example. The site, which shows how transparent and accountable large grantmakers are, both allow users direct click through access to an enormous amount of information about foundations and importantly it helps set expectations around information sharing. Certainly foundations which are currently not sharing information which Glass Pockets deems necessary will at least need to give some thought to changing their policy.

The takeaway from all of this is that it is critical that the social sector, both nonprofits and grantmakers, embrace a cultural ethic of information sharing. That as a sector, we realize that we don’t need to “own” our social impact. If we have valuable information that can help inform the activities of others, it is our duty and our biggest impact opportunity to share this information widely. Even the Bill & Melinda Gates Foundation, the largest grantmaker in the world, makes up only 1% of the amount given to charity each year. So to the extent that they are able to share what they know to help inform the other 99% of giving, they have an opportunity for the impact from what they know to dwarf the impact from the money they give.

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By Sean Stannard-Stockton | Also posted in Philanthropy, Transparency | Comments (4)

Does Information Want to be Free in Philanthropy?

February 26, 2010 – 9:50 am

One of the issues I write about frequently is “information sharing in philanthropy.” My basic argument is that because the social sector is trying to create value that accrues to the public, individuals actors in the sector can enhance their total impact by sharing what they know with other actors.

However, my argument also has echoes of the popular concept among Internet devotees that “Information Wants to be Free.” This concept advances a value judgment that information (especially stuff online) should be free.

I think this concept is nonsense.

The phrase “information wants to be free” comes from a speech given by Stewart Brand (editor of the Whole Earth Catalog, and founder of The Well, Global Business Network and the Long Now Foundation) in 1984. But Brand didn’t simply say that information should be free. What he actually said was:

On the one hand information wants to be expensive, because it’s so valuable. The right information in the right place just changes your life. On the other hand, information wants to be free, because the cost of getting it out is getting lower and lower all the time. So you have these two fighting against each other.

Brand commented on his speech in a 1987 paper that this tension…

…leads to endless wrenching debate about price, copyright, ‘intellectual property’, the moral rightness of casual distribution, because each round of new devices makes the tension worse, not better.

Brands comments reveal a deep complexity that the simplistic insistence that “information wants to be free” ignores. I bring all this up, because I want to be sure that when I advance the idea that philanthropy should embrace rampant information sharing, it is clear that my argument is not based on what I believe is the simplistic moral arguments that information in general wants to be free.

Instead, I’m so excited about advancing information sharing in philanthropy because the tension that Brand points to is mostly a function of for-profit markets and largely absent from social good markets. The reason we have “endless wrenching debate about price, copyright, ‘intellectual property’, the moral rightness of casual distribution” is because most information generally becomes less valuable to its creator as it spreads.

Coca-Cola is highly secretive of the formula for Coke. If they decided to share the formula, two things would happen 1) Other people would copy Coke, flooding the market with product as good as Coca-Cola’s, drive the price down and make Coke much more widely available and 2) Coca-Cola would find that their business was suddenly far less profitable since they no longer controlled the valuable information that underpins their business.

But the social sector doesn’t face this dilemma. Let’s imagine that a nonprofit existed that ran a program which successfully raised life outcomes of inner city youth. If they decided to share their “formula” two things would happen 1) Other people would copy them, flooding the nation with programs as good as theirs, drive the cost down and make the program much more widely available and 2) Social value creation would skyrocket, the developers of the program would be national heroes and probably win the Nobel Peace Prize (as Muhammad Yunus did in 2006 for advancing the field of microfinance).

Social media and the rise of almost costless information transmission is tearing apart for-profit fields like journalism and the music industry. But philanthropy doesn’t face the tension that Brand describes.

Yet philanthropy is failing to capitalize on the biggest transformational dynamic to hit our field. Brand writes that “each round of new devices makes the tension worse, not better.” But in philanthropy each round of new devices makes the opportunity better and our failure to capitalize on the shift more dramatic.

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By Sean Stannard-Stockton | Also posted in Philanthropy, Social Media | Comments (20)

Surfacing Great Social Entrepreneurs

February 25, 2010 – 9:10 am

Last year I wrote about the Social Entrepreneurship API and how it could make it easier for donors to “follow the smart money”:

In financial markets there is “smart money” and “dumb money”. These rather crude phrases refer to the fact that certain types of investors tend to make good decisions and others tend to make bad decisions. The “smart money” usually goes against the crowd and makes investments in things that the “crowd” currently dislikes. “Dumb money” investors tend to be trend followers and pile into the hottest fade of the moment. When someone says “follow the smart money”, they are urging you to invest in the things that the “smart money” investors are currently buying.

Social Actions, in partnership with The Skoll Foundation, PopTech, ideablob, andCivic Ventures, announced a new resource that will let people interested in social entrepreneurs “follow the smart money.” The resource is called the Social Entrepreneur API:

From the Social Actions press release:

The Social Entrepreneur API (Application Programming Interface) will be the first open database of information about social entrepreneurs who have won fellowships and awards from social enterprise funders.

The tool will allow philanthropists, investors, press, and fellow entrepreneurs to find social entrepreneurs based on keyword, location, cause area, population served, and a variety of other factors.

Facing more than a million nonprofits and a vast field of social entrepreneurs, we need smart ways to create filters so that the great opportunities do not get lost in the fire hose of information.

Now, the Skoll Foundation is launching a Social Entrepreneur Search Widget:

The widget can be customized to include all or a selection of funders participating in the API. You can put the widget on your own website if you like by grabbing it here.

The main thing I like about the API and widget is that it surfaces a set of vetted social entrepreneurs. By creating a searchable set of social entrepreneurs that have gone through the due diligence process of well resourced funders, the API makes it easier for individual donors to piggyback on the research of others.

Let’s say that last year a donor read about the nonprofit OneWorld Health’s successful work with pharmaceutical giant Roche to develop a drug for a prevalent, but not profitable, disease. The story is compelling, but the donor wonders if the article is telling the whole story. A quick search of the Social Entrepreneurship API Widget would have revealed that the founder of OneWorld Health passed the due diligence of the Schwab Foundation for Social Entrepreneurs. The info from the Schwab Foundation even includes detailed information about The Innovation, The Strategy and The Entrepreneur (not all funders have added this info to the API). While this doesn’t guarantee a thing, it still puts the donor way ahead of the game in terms of evaluating whether OneWorld Health is worth supporting.

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By Sean Stannard-Stockton | Also posted in Philanthropy, Social Entrepreneurship | Comments (3)

Crowdsourcing the SoCap Conference

February 17, 2010 – 9:34 am

Within minutes of announcing that there would be a Tactical Philanthropy track at this year’s SoCap Conference we started getting emails from people who had suggestions for panels and speakers. So I’m glad to say that our plans for designing the track include soliciting your ideas and comments.

Below you’ll find a number of session concepts for the Tactical Philanthropy track. We would love to hear your feedback on these concepts, ideas you have for other sessions and your opinion of whether these sorts of concepts will draw the savvy donors, foundations and nonprofits who have in past years not been strongly represented at SoCap.

Nonprofit Analysis: Beyond Metrics

Nonprofit analysis, the evaluation of nonprofits to gauge their social investment potential, is a holistic process that does not lend itself well to simplistic financial measures. This panel will explore how donors should go about deciding which nonprofits to support and how much bang a donor can expect for their philanthropic buck.

Philanthropy Fail

The best laid plans don’t always work out so well. Since philanthropist can generate social impact through sharing what they’ve learned with others, sharing failure is a critical impact strategy. Join this brave group of donors and nonprofits as they share ways in which they’ve failed and what they’ve learned.

Information Sharing in Social Capital Markets

Profit is often derived from a firm’s access to proprietary information. However, social impact is often maximized by sharing important information with other market participants. This panel will explore how socially relevant information is valued differently in social capital markets and will offer strategies social capital market participants can use to maximize the social value of intellectual capital.

Replication vs. Diffusion: Does scaling social impact require scaling organizations or not?

A successful for-profit organization must maintain ownership of its concept while it scales in order to capture profit. But social impact accrues to the public, not the firm that owns the process that generates the impact. How should social enterprise weigh the tradeoffs between scaling their organization or scaling impact through sharing their process with others?

The Role of Philanthropy in the Social Enterprise Capital Structure

Most social enterprises receive either philanthropic capital or profit seeking capital. But there can be a role for each in both for-profit and nonprofit capital structure. What role can philanthropic capital play in helping social enterprises gain access to traditional market rate capital? What role does philanthropic capital have in kick starting new market driven industries?

Mission Related Investing: Why Foundations have NOT taken up MRI.

Mission related investing is seen as a way for philanthropic entities to align the 95% of their assets that they do not give away each year with their social impact goals. Yet for the most part MRI has not gained traction with the vast majority of funders. This panel will explore what is holding funders back and whether mission related investing will ever become mainstream.

The Changing Media Landscape for Philanthropy and Social Enterprises

Philanthropy has historical be covered by the mainstream media as a human interest story that either focused on “do gooders” or charitable fraud. But recent years has seen a growing interest within the mainstream media to examine philanthropy and the emergent social capital markets with a more analytical eye. Join our panelists as they explore the role of the media in the social capital markets.

Donations as a Sustainable Revenue Stream: Ending the Fixation on Earned Income

Charitable donations are less volatile then the overall economy, so why are they rarely seen as a sustainable revenue stream? Join our panelists as they discuss how nonprofits should view the role of charitable donations within a sustainable business model. Are donations a more sustainable source of revenue than the sought after “earned income”? Are donations not “earned”?

Individual Donors: Navigating the Social Capital Markets

Many of the most sophisticated, active participants in the social capital markets are institutions. But individual donors have fewer institutional constraints and can bear more social risk. Join three individual donors who are doing cutting edge work in the social capital markets without the help of a large staff.

When to Invest & When to Give

For all the talk of producing a blend of social and financial value through giving and investing, little is known about when a social investor can maximize their blend returns through a donation and when an investment is a better option. Given the choice to lend money to a nonprofit or make a donation, how should a social investor choose?

Please leave your thoughts as a comment to this post. Thanks for your input!

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By Sean Stannard-Stockton | Also posted in Capital Market Philanthropy, Cross-Disciplinary Conversations, Effective Giving, Evaluation, Impact Measurement, Individual Giving, New Philanthropy, Philanthropy, SoCap10, Social Capital Markets, Social Investing | Comments (20)

The Role of Social Stock Exchanges

December 8, 2009 – 8:10 am

This is a guest post from Alex Rossides, the founder of Growth Philanthropy Network, the organization behind the Social Impact Exchange. Alex’s post is a follow up to my post last week profiling the Exchange and my post yesterday envisioning the future of social stock exchanges in the year 2033.

By Alex Rossides

Thanks to Sean for envisioning the future of social stock exchanges and for his recent write-up regarding the Social Impact Exchange as an early form of such exchanges, developed in partnership with Duke University and Robert Wood Johnson Foundation.

Sean helped clarify a key difference between for-profit stock exchanges and social exchanges – in the social sector there is no price per share and stock is not exchanging hands. But, the broader analogy holds of an exchange that matches buyers and sellers i.e. investor and nonprofit organizations with an explicit promise of standards and transparency.

Exchanges in the for profit sector are the focal points for capital marketplaces. One primary function of stock exchanges is to enable the efficient flow of capital to growing companies so they can finance their economic activity. The social sector does not currently have exchanges to enable a more efficient transfer of capital to scaling nonprofits to finance their social initiatives.

As Sean pointed out, the member-driven Social Impact Exchange is designed in part to help play this role in the area of growth capital. It has a number of collaborative funding venues to connect high-impact, growing nonprofits to funders, based on transparent investor information, such as its online investment platform, National Investment Fair and Business Plan Competition to be held at its June 2010 Conference.

The Exchange is designed however to facilitate the exchange of more than just dollars. Its two other equally important goals are to (1) serve as a learning community and forum to develop and share knowledge on scaling, and (2) serve as a common ground where members can help build the field of scaling together. The focus on more than capital is an example of how the unique qualities of the social sector may help create social stock exchanges in the future that differ from their brethren in the for-profit sector in ways that could be better suited to the goals of social progress.

In the social sector, exchanges can be built with a focus on collaboration and networks that compound our learning, magnify our financing and accelerate the development of marketplaces that drive social progress. Exchanges can become true community resources, that provide opportunities to jointly build necessary field infrastructure and enable organizations across the sector to work together to solve our toughest social problems. They can combine the action oriented transactional nature of exchanges, with joint knowledge and infrastructure building to create social sector marketplaces.

The Social Impact Exchange is an early attempt to do just that. Its structure consists of working groups where members can work together on important field initiatives such as developing investment standards for scaling organizations, supporting the work of growth intermediaries, identifying models that work in different issues, sharing knowledge, and creating new products and distribution channels for scaling which the field can leverage. It is designed to be a cross-sector initiative so that we all have a hand in creating a more effective marketplace for financing positive social change. 

Social stock exchanges, whether they are local, national, international or issue based, hold the great promise of combining collaborative, mission driven activities with marketplace structures to enable philanthropic capital to flow towards its greatest good. By 2033 let us hope that philanthropic capital distribution will be more results driven, based upon quality due diligence and business planning, better financial reporting, greater transparency, shared standards and enhanced accountability.

But, by 2033 social stock exchanges could also be nexus points for marketplaces where large numbers of funders aggregate to find high-quality organizations that they collaboratively fund in amounts large enough for nonprofits to execute multi-year strategies. They could be environments where business models of capital and information intermediaries thrive because they can more effectively broker capital rounds and information services, and where nonprofits that qualify can finally attract capital efficiently in one place based on the impact of their work.

To get there will be hard work and slower than we’d all like, but by working together we have an opportunity to realize a vision that enables us to make progress on our most difficult social problems and hopefully improve the lives of millions of individuals.

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By Sean Stannard-Stockton | Also posted in Capital Market Philanthropy, Effective Giving, New Philanthropy, Philanthropic Capital Markets, Philanthropy | Comments (1)

Social Impact Exchange

December 4, 2009 – 7:39 am

The Social Impact Exchange is a new effort from Growth Philanthropy Network and Duke University with funding from the Robert Wood Johnson Foundation. The Exchange is designed as a focal point for studying, funding and implementing large expansions of proven social purpose organizations. To that end the Exchange offers an “investment clearinghouse” (free registration needed) of top-performing nonprofits that are actively implementing growth strategies (read the full press release here).

The Clearinghouse is interesting because of the way it offers some of the attributes of a stock exchange. There has been a lot of talk in philanthropy about social stock exchanges, but I’ve often found the implementation of this concept of little interest. This is because when most people think of a stock exchange, they think of the prices of stocks moving up and down as the primary characteristic. A social stock exchange which attempts to mimic the pricing elements of a stock exchange is interesting, but I’ve yet to see an implementation that is particularly exciting. Instead, stock exchanges are valuable not only because they publicly reveal prices, but because they have certain requirements for organizations to be listed and ongoing requirements to stay listed.

Once an organization is listed on a stock exchange, it must adhere to higher levels of public disclosure than a non-listed company. Being listed on a stock exchange is called “going public” and a listed company is a “public company” as opposed to a non-listed or “privately held” company.

This all matters to philanthropy because the organizations listed on the new Social Impact Exchange are offering public access to documents such as due diligence reports, business plans and the results of independent evaluations (it appears that currently there are not standard documents that all listed organizations must have, but see the documents listed for the nonprofit Ways to Work as examples).

My friend George Overholser, has often pushed back on my urging for nonprofits to share more information about themselves publicly. George’s point is that most nonprofits are the equivalent of privately held companies, who may be damaged if they share too much of their internal issues with the public. While I’ve generally thought that nonprofits should have a higher required level of transparency than privately held companies, George’s point has always resonated with me. With the advent of the Social Impact Exchange, we have the beginning of a mechanism whereby a nonprofit that is ready to “go public” can list their organization and in exchange gain access to a wider range of philanthropic investors.

In addition, the Exchange plans to only list organizations who have demonstrated extremely high levels of impact and scale readiness or have demonstrated a significant level of effectiveness, and are increasing their capacity for scale readiness (groups qualifying under each standard are identified separately). This means that if the Exchange can establish credibility for their vetting process, 1) organizations who get listed will gain a marketing advantage due to their “making the grade” and 2) donors can have an increased level of confidence in Exchange listed organizations.

The Social Impact Exchange is more than just a list of nonprofits. It also hopes to be a hub for related research, publishing, education and training as well as an annual conference, business plan competition and regional meetings.

While this effort is still in its infancy, I think the organizers have gotten some key elements right. With the high profile funding from Robert Wood Johnson Foundation and the involvement of Duke University, the Social Impact Exchange is one to watch.

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By Sean Stannard-Stockton | Also posted in Capital Market Philanthropy, Effective Giving, Fundraising, New Philanthropy, Philanthropic Capital Markets, Philanthropic Equity, Philanthropy, Transparency | Comments (2)

Leveraging Expertise in Philanthropy

October 20, 2009 – 8:20 am

Here’s an example of a way that donors with knowledge about a specific area of social impact can leverage their knowledge by sharing it with other donors. This comes from Social Venture Partners Rhode Island, but it is a format that any group with domain expertise in a particular grantmaking arena could copy.

Leveraged Investments in High-Potential Social Enterprise

Want to participate in Rhode Island’s growing social enterprise movement? Consider SVPRI’s Social Enterprise Investment Fund. The fund, which will be formally announced at the SERI Summit (November 12, 2009 at Bryant University), seeks to maximize social return on investment (SROI) through qualified investments leveraged by hands-on human capital in business models that help sustain the mission of high-quality non-profits.

The fund will invest in social enterprises that are "non-profit owned, mission-driven businesses which seek to maximize the efficiency, sustainability and social impact of its non-profit parent.” An investment in social enterprise is different from a contribution in a social program. It is an investment in the long-term success of the organization and its ability to best serve its clients and stakeholders. Each investment is leveraged with a team of SVP partners providing pro bono consulting services, so that non-profits benefit from access to the growing institutional knowledge and significant social capital of the SVPRI human capital network.

Investment Units

A full investment unit – with voting privileges and a partnership for two in SVPRI — is $5000. Smaller investments, including half shares, are available. A portion of each investment provides working capital for building the team and managing the process. For more information, please contact Chuck Holland, SVPRI Board Chair.

So let’s run with this idea for a minute. There are 24 Social Venture Partners chapters and over 2,000 members. With this fund, the Rhode Island chapter is effectively unleashing their knowledge, making it available to the public and offering to steward any gifts made by the public since they are already providing services beyond the grant to the nonprofits they support.

In effect, this sets SVPRI on a path that potentially competes with community foundations. They are offering geographic specific advice on outstanding nonprofits without requiring that donors place the money with them (such as in a donor advised fund) and they are doing it for free. Why for free? Because information about social impact becomes more valuable as it spreads since the “owner” of the knowledge generates social value when other investors use their knowledge.

Of course, SVPRI’s fund will not offer personalized one-on-one consulting. They are not getting into the relationship management game. But they are “unbundling” information about which nonprofits are doing a good job from the administration and relationship management services that have traditionally been bundled within community foundations.

One of the underlying premises of Tactical Philanthropy Advisors is that high end advisors to major donors no longer need to have a geographic focus because geographic focus is only relevant in regards to grantee information and today we’re witnessing a massive trend towards sharing knowledge about grantees.

On Friday, I’ll be at the Social Venture Partners conference in Dallas. One of the session I’m leading will be on SVP’s potential role in sector-wide initiatives. I think the new fund being launched by the Rhode Island chapter is a fascinating example of how SVP (and other smart grantmakers) can leverage their knowledge and engage with the sector as a whole.

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By Sean Stannard-Stockton | Also posted in Community Foundations, Effective Giving, New Philanthropy, Philanthropy, Social Enterprise, Transparency, nonprofits | Comments (3)

Philanthropedia

October 9, 2009 – 9:17 am

For some time now I’ve been pushing the idea that facilitating a way for philanthropy and social cause experts to share their knowledge with individual donors is the big opportunity in philanthropy. The Tactical Philanthropy Knowledge Network is our effort to tackle this problem. Another effort is under way by a group called Philanthropedia.

Philanthropedia surveys foundation professionals about the best nonprofits in a given sector and then presents the top ranked organizations to users of their service. Unlike many other ranking methodologies in which a relatively small set of indicators is applied across a variety of groups, Philanthropedia is leveraging the wisdom of experts (not crowds!) in order to access the qualitative evaluation process that is inherently at the heart of great grantmaking.

Philanthropedia’s first focus area was Education (they’ve also completed San Francisco bay area homelessness, Climate Change and are working on microfinance). After surveying 39 experts using a methodology developed by RAND called the Delphi Method, they published a list of eight outstanding organizations. They also include profiles of the groups, what the experts saw as strengths and what they saw as areas of improvement, as well as comments from beneficiaries. They also include information on the experts as a group as well as giving individual bios.

To be clear, I do not think that a donor should fund an organization just because a bunch of experts like it. Experts fall into “group think” all the time and some of the organizations the experts like may simply be popular with their peers. But I do believe strongly that the work Philanthropedia is doing offers an outstanding way for donors to find organizations to look at more closely.

We need a lot more projects with this sort of focus. Today there are 5,000 staffed foundations employing thousands of professional program officers. Yet this group only controls 13% of annual charitable giving. On the other side we have millions of individual donors who control 82% of annual charitable giving and yet have limited access to good knowledge about how to give well and to whom they should give.

We need to find ways to disperse the knowledge of professional grantmakers so that it can inform individual donors.

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By Sean Stannard-Stockton | Also posted in Effective Giving, Evaluation, New Philanthropy, Philanthropy, Transparency | Comments (3)

The 2010 Crisis in Philanthropy

September 25, 2009 – 9:21 am

Lucy Bernholz, the most prescient analyst of future trends in philanthropy, is working on a book about the future of philanthropy and the social economy. So she has been using Twitter to ask people the following question:

“What trend, change, entity, idea will matter most to social sector in 2010?”

I thought I’d answer the question here and invite you to add your thoughts.

Foundations as Social Impact Knowledge Brokers

Foundation giving is going to fall off a cliff in 2010.

Private foundations are required to give away 5% of their investment assets each year (the average amount given is about 6%). The 5% is based on the average value of their investment assets from the previous year. That means that foundation giving in 2009 is based on 2008 asset levels and 2010 giving will be based on 2009 asset values.

The average value of the S&P 500 (the most important indicator of the stock market):

  • 2007: 1477
  • 2008: 1219
  • 2009 (if the market closes the year at today’s value): 940

That means we can estimate that required giving from foundations fell 17% this year compared to last [See correction at end of post]. 2010 is going to see another massive leg down. If the market trades exactly sideways for the rest of the year, required foundation giving in 2010 is going to fall another 23% compared to 2009.

It gets worse.

This year, many foundations decided to keep giving levels constant with last year or at least gave more than the required 5%. It was clear that the need for charitable giving was higher than normal and many foundations stepped up with additional giving. To the extent their giving exceeded 5%, they can count it towards next year’s required giving.

An example: A 2009 payout of 7% means that the 2% that exceeded the 5% minimum can count towards 2010 and so the foundation can legally distribute only 3% next year.

In other words, from the standpoint of foundation giving, more than half of the impact of the stock market crash has yet to be felt.

But even with 40% or so less grant dollars, foundations’ knowledge about philanthropy is just as strong.

As we’ve been developing the Tactical Philanthropy Knowledge Network, I’ve been talking to foundations about their role in the philanthropic sector as due diligence experts. Lets look at the Firelight Foundation as an example.

The mission of the Firelight Foundation is to support and advocate for the needs and rights of children who are orphaned or affected by HIV/AIDS in Sub-Saharan Africa. They have a portfolio of roughly 200 African based grantees on which they’ve performed extensive due diligence and continue to monitor results. On their website, they already list their grantees along with a short description of each organization. Other foundations already make grants to Firelight as a way to leverage their due diligence (a form of regranting, which we discussed earlier this week).

With their grantmaking budget decimated in 2010, forward thinking foundations are going to look for ways to leverage other sources of charitable assets. Encouraging other foundations to support their grantees is the easy path. It is also a bit like rearranging the deck chairs on the Titanic. The big opportunity, the real lifeboat that can significantly offset the effects of collapsing asset values, is for foundations to extend their due diligence to major donors. Individual donors give $6.30 for every dollar foundations give. Helping these charitable dollars flow towards high performing, well vetted nonprofits is the most dramatic way that foundations can leverage their own giving.

I don’t think most foundations are going to pursue this path. But some groups get it. Firelight clearly does. Just yesterday a representative from a major San Francisco Bay Area foundation approached me to say just how much she supports this concept.

The full effect of the financial crises will not hit the foundation sector until next year. When it does, the thing that will matter most to the social sector will be whether the influence of the collective expertise of foundation employees is greatly diminished or whether foundations step up to the plate and find creative ways to get their knowledge into the hands of major donors.

9/28/09 – 8:30am – CORRECTION

In this post I suggested that the value of the stock market was the determining variable in valuing foundation assets. However, foundations invest in a wide range of asset classes. While directionally my comments are correct and while I stand by the thrust of the post, the percentage decline of the stock market overstates the degree to which foundation giving will be impacted.

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By Sean Stannard-Stockton | Also posted in Foundations, Philanthropy | Comments (10)