Category Archives: n2y2

The Vocabulary of Philanthropy

June 11, 2007 – 9:16 am

More blogs weigh in on the for-profit vs. nonprofit war of words, here, here, here and here.

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).

By Sean Stannard-Stockton | Also posted in Cross-Disciplinary Conversations, Giving Blogs, Philanthropy, Social Entrepreneurship, Venture Philanthropy | Comments (16)

More Philanthropy Debate

June 7, 2007 – 7:51 am

Very few foundation employees ever comment on this blog. I’d love them to join the discourse, but I get the sense they feel it is far too risky to let an individual express an opinion that might not be inline with “official foundation statements”. I think it’s a shame, because their point of view is being left out of the debate.

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.

By Sean Stannard-Stockton | Also posted in Cross-Disciplinary Conversations, Philanthropy | Comments (5)

Philanthropic Capital Allocation

June 1, 2007 – 8:43 am

My friend Daniel Ben-Horin, founder of CompuMentor/TechSoup (the nonprofit behind NetSquared), took issue with the “Some nonprofits just suck” comment of CompuMentor board member Mike Brown and my subsequent post on the subject.

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.

By Sean Stannard-Stockton | Also posted in Effective Giving, Philanthropic Investment Strategy, Philanthropy | Comments (5)

NetSquared Winners

May 30, 2007 – 4:06 pm

Congrats to the winning projects of the NetSquared Conference:

  1. MAPLight.org
  2. Miro
  3. Freecycle.org
By Sean Stannard-Stockton | Also posted in Philanthropy, Social Entrepreneurship, Venture Philanthropy, nptech | Comments (0)

Some Nonprofits Just Suck

May 30, 2007 – 12:18 pm

Mike Brown, a venture capitalist, moderating an Economic Sustainability track at the NetSquared Conference:

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.

By Sean Stannard-Stockton | Also posted in Effective Giving, New Philanthropy, Philanthropy, Social Entrepreneurship, Venture Philanthropy | Comments (14)

Cross-Disciplinary Approaches to Changing the World

May 30, 2007 – 9:53 am

“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.

By Sean Stannard-Stockton | Also posted in New Philanthropy, Philanthropy, Social Entrepreneurship, Venture Philanthropy | Comments (0)

NetSquared First Take

May 29, 2007 – 5:21 pm

Put 21 groups of passionate social entrepreneurs and 300 funders, technologists, social impact experts and web 2.0 leaders in a room and shake. What do you get?

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.

By Sean Stannard-Stockton | Also posted in Effective Giving, Philanthropy, Social Entrepreneurship, Venture Philanthropy, nptech | Comments (2)

NetSquared N2Y2

May 29, 2007 – 7:52 am

I’ll be at the NetSquared conference all day today and tomorrow. Check out the four ways to participate online.

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:

By Sean Stannard-Stockton | Also posted in New Philanthropy, Philanthropic Technology, Philanthropy, Venture Philanthropy, nptech | Comments (0)

Tactical Philanthropy Podcast: Daniel-Ben Horin

May 25, 2007 – 8:33 am

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.

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

Read More »

By Sean Stannard-Stockton | Also posted in New Philanthropy, Open Source Philanthropy, Philanthropic Technology, Philanthropy, Venture Philanthropy, nptech, podcast | Comments (0)