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| Opportunities & Exposures |
Many Happy Returns
Ralph Smith
08/02/2004
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Philanthropy in general does too little to support innovation or reward
risk-taking, hard work and superior performance. Too few dollars go toward
strengthening organizations, promoting long-term success or replicating
successful programs. Many in the field would readily agree with foundation
consultant Lucy Bernholz’s biting critique: “Such a system is so illogical in
practice that it is comforting to know that it was not a product of deliberate
design.”
But there is good news: a more rational capital market for the
social sector is no longer just a utopian dream. Many affluent individuals seem
ready to invest more strategically in the growth, development and durability of
effective nonprofit organizations. Similarly, a few foundations seem determined
to break ranks, change course and commit substantially more dollars to building
the capacity of a limited number of organizations and fewer dollars to
developing new programs.
A rational capital market for the social sector
would attract and match willing investors to the capital needs of at least three
types of social purpose enterprises: start-ups, scale-ups and mature, successful
organizations. Start-ups need venture funding to develop new products or
services. Scale-ups are proven performers needing an infusion of capital to
replicate and expand successful efforts. Mature, successful organizations
produce good results and function at appropriate scale, but still need to close
the gap between expenditures and the income derived from memberships, fees for
services and reimbursements. In truth, what many mature, successful
organizations might need, even more than general support, is the capital to
develop durable, revenue-producing social enterprises.
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