This piece was originally published on the Stanford Social Innovation Review.
Sean Parker created quite a stir with his recent proclamation in the Wall Street Journal that young tech “barons” must apply their disruptive and inventive hacking talents to shake up the nonprofit sector. He criticized both philanthropies and the nonprofits they support as “largely antiquated institutions,” asserting they are “warehousing” billions of dollars in charitable donations, and that their “primary currency of exchange is recognition and reputation, not effectiveness.” Without a doubt, we should applaud Parker’s commitment to contribute so much of his wealth to charity and encouragement of others to do the same, along with his willingness to start a public debate about the future of philanthropy. His characterization of the current state of affairs, however, sells the social sector short. In my research of social entrepreneurs and philanthropists, I’ve seen no shortage of new approaches borrowed from the tech sector, and many are leading to brilliant solutions that the social sector is already widely recognizing.
Parker advises that the “hacker elite” of young tech entrepreneurs should start giving earlier, deploy more capital at earlier stages to social startups, and make bigger bets on them. A host of social innovators are already doing so—indeed, bold approaches to funding, program, and organizational design abound. Here are a few examples of how these innovators are applying models and lessons from their tech counterparts.
Angel funding to grow early tech nonprofits: The co-founders of Fast Forward, Kevin Barenblat and Shannon Farley, have applied the tech-sector model of angel investment to an accelerator fund to support a new breed of social-change organization best described as tech startups for social good. Each summer, Fast Forward hosts a handful of fellows trained in tech-sector business strategies and mentored in developing models for new organizations, which Fast Forward then funds. Examples of tech nonprofits Fast Forward has supported include Sirum, a mobile app to redistribute unused medicine to poor populations; One Degree, a Yelp-type platform that connects poor populations with social services; and Medic Mobile, which uses cell-phone technology to help community health workers around the world provide medical services more efficiently. Brilliantly, Fast Forward has engaged just the kind of successful tech entrepreneurs Parker suggests lead the way, including Aston Motes of Dropbox, Andrew McCollum of Facebook, Scott Kleper of Context Optional, Josh Reeves of ZenPayroll, and Joe Greenstein of Flixster.
Investment in the long-term with mezzanine funding: Venture capital firms established the so-called “mezzanine” round of funding primary to help startups scale up and bridge, generally, to an IPO or acquisition. The founder of Tipping Point Community, Daniel Lurie, recognized that mid-stage nonprofit organizations need similar bridge funding. Since 2005, he has elicited the support of high-net-worth donors, many from the tech sector, to offer longer-term investments in organizations rather than sunsetting funding after a two- to three-year grant period, as is typical with foundation funding. Lurie highlighted to me that “in the business world you would never give up on an early-stage investment that’s working. In some cases you want to double down.” For some of Tipping Point’s high-performing investments, the organization is funding at a rate of a million dollars a year. These are just the kind of “big bets” that Parker recommends.
Deployment of the tech-startup business model: Samasource Founder Leila Janah saw the potential for building a different kind of bridge: one that brought the wealth of employment opportunity in Silicon Valley to those living in the extreme poverty in East Africa. In 2008, she launched the organization to line up marginalized women and youth with work from tech companies such as Google, eBay, and Microsoft. But Janah didn’t stop at partnering with those tech companies; she actually built the organization like a tech company, drawing on many of its signatures of success—distributing leadership by giving “managing director” and “co-founder” titles to her executive team, and investing heavily in research and development to improve services and develop earned revenue sources. Foundations are impressed: The organization has raised more than $42 million in combined philanthropic support and earned revenue over the past seven years.
More substantial funding upfront: Beth Schmidt is a former high-school teacher who founded Wishbone.org, an online crowdfunding platform that provides low-income high-school students with summer learning opportunities. She realized that she could escape the trap of spending most of her time on fundraising by taking a page from the venture-capital playbook and raising one large round of funding to cover three years of operating expenses. Wishbone is on schedule to close a $6 million round of funding within three months, which will allow Schmidt to spend the majority of her time developing the organization versus dialing for dollars.
Each of these strategies is a brilliant example of how the philanthropic and nonprofit communities are innovating in the ways Parker suggests. We must recognize that creativity and bold thinking already flourishing in the sector to further it. And the criticism of the sector as failing to focus on effectiveness is off-base. Solving social problems as intransigent as racial injustice and extreme poverty is extremely challenging work, and measuring the impact of social programs is a complex problem that doesn’t lend itself to market testing and customer-response evaluation—such as click-through rates and users churn—that tech startups have made such good use of. The sector is working hard to improve effectiveness and to verify it in inventive ways. With such creative and bold thinkers on the case, we are sure to make great strides in that mission.