The Challenge Ahead: Unlocking Growth Capital for Nonprofits

Unlocking growth capital, now there’s a challenge, one addressed by a knowledgeable panel at the 2011 Social Impact Exchange’s Conference On Scaling Impact.

Foundations don’t invest enough for nonprofits to succeed, according to Kelly Fitzsimmons, chief program and strategy office for the Edna McConnell Clark Foundation. The missing links:

• money to experiment and learn,
• money for capacity-building.

It’s a point made at last year’s conference as well but one well worth repeating.

Collaborative funding is the keyword this year as it was last year. Gary Syman, chairman of SeaChange Capital Partners, suggests that donors set up small, test collaboration if they are unclear on the concept of collaborative funding. For significant collaboration to take place, an evangelist, someone who can bring funders together around a project, is needed.

That’s what SeaChange does: It finds nonprofits with measurable success and pulls together a coalition of funders, from wealthy individuals to foundations. His firm is the evangelist, the intermediary that tracks outcomes.

Funders often want to strike out on their own rather than working together, according to Paul Carttar, director of the Social Innovation Fund. It’s not wrong to strike out on your own, he says, but it is ineffective.

To solve big problems, funders need to work together. Success is more likely if you fund together, according to Carttar.

Being part of a network of entrepreneurs who “feel your pain” is also important, according to panelist Cheryl Dorsey, president of Echoing Green, whose focus is launching social enterprises. Part of the assistance Echoing Green provides is to help entrepreneurs meet the reporting requirements that investors need.

That’s another missing piece: common language reporting. As nonprofits look to collaborative funding options, they will have to set and meet standards of reporting that gives a group of funders – some of whom may be investors rather than grantmakers – the information they need in order to continue support.