I had the privilege of being one to the speakers at the 2012 Willamette Valley Development Officers 4th annual Regional conference and spoke on the topic of Venture Philanthropy from the perspective of nonprofit leaders.  The opening keynote of the conference was given by Doug Stamm, CEO of the Meyer Memorial Trust, who spoke of nonprofit disruptions and spoke about the need for nonprofits to think differently about strategy, planning, outcomes & impact, and for the need of nonrpofits engaging with philanthropy differently (link to his speech text).  Quite by coincidence, the session that I facilitated grappled with the same dimensions from a “nonprofitcentic” point of view.  I have embedded the slides from my presentation (see below) as a point of reference and in this post wanted to recap the key concepts that came out of the discussion among the thirty (or so) workshop participants. At the end of this post, I also provide a list of key reading resources on the topic.

The premise of the workshop was that nonprofit leaders who think like venture philanthropists will be more successful in maintaining and growing sustainable organizations.  The mindset that marks venture philanthropy include the following core concepts: a) nonprofits and donors need to embrace a long-term partnerships to address significant needs, b) that donors can have significant involvement in the organizations operations & management, c) that organizations should focus on performance measurement & outcomes, and d) nonprofits should think about scaling efforts to create significant change.  To help create this thinking, the workshop presentation and discussion reviewed several practices that support venture philanthropy thinking.  I summarize five key points below.

1. Strategic planning must be the intersection of strategy, capacity, programs & outcomes, and a sustainable business model.
While many nonprofit organizations embrace the concept of strategic planning, the practice of strategy is often reduced to scaling programs, services, and agency capacity in response to the projected revenues for the next year. As the funding trends continue to mover towards the  demonstration of outcomes and accountably such reactionary planning is inadequate. Proactive and intentional strategic planning needs to become the core and substantive focus of nonprofit organizations.  Such planning must recognize and embrace the concurrent consideration of capacity, programs, outcomes and a supporting revenue strategy that addresses both capital needs and operational needs.

2.  To exist, your agency must be clear on your social impact model.
I have written elsewhere about the concept of social impact planning (see here) and during the workshop, we spent some time considering a version of a social impact model that I often use in to help clients clarify how their mission, vision, programs, revenues, and capacity work together as a coherent whole.  A clear and compelling social impact model answers the fundamental question of what justifies your organization’s right to exist. Your impact model is your manifesto of what you contribute to solving compelling social needs.

3. It is a struggle to grapple with true cost of operations and it is critical to develop a strategy to fully fund those true costs.
Perhaps the section of the workshop that caused the most provocation was when we began to discuss the need to clearly articulate for and begin to use the “true cost of operations,” as a basis for growth (for more on growth see here). The palpable frustration for several participants was that “considering full costs of services sounds great but such exercises always encounter the reality that funders and donors don’t like to pay overhead –so why think about true costs when we are stuck living with the overhead rates we are handed?”  There are sufficient studies to suggest that such a viewpoint is hazardous to a nonprofit organization’s health to underestimate true cost.  Performance inefficiencies, higher turnover, and hidden costs stymie organizational effectiveness. In short, the “nonprofit starvation cycle” is detrimental to organizational stability.  Indeed, from a venture philanthropy mindset, it is unacceptable to “starve” organizational capacity because nonprofit success is dependent almost entirely upon the strength of the organization rather that the strength of the program.

Coincidently on the point of true costs, I was speaking to a program officer from a foundation on Friday at the conference.  This program officer told me that she was telling a group of conference participants, “As nonprofit leaders, you need to drive the overhead conversation with foundations.  Convince me with data that your overhead is justified and most of us will listen.”  True indict costs matter and armed with data your nonprofit will be in a position of strength when talking with foundations and other donors.

4. Creating clear thinking around business models must balance autonomy, reliability, concentration and the type of growth that is being considered.
While the workshop introduced the concept of building a strong revenue model that distinguishes between capital needs and operational needs and balances the dimensions of autonomy, reliability, concentration of revenues.  While I have written on revenue models previously (see here), the workshop session did not allow for more than the introduction of the concepts.  In the attached resource reading, however, there are several important articles that allow for further study of business and revenue models.

5.  Without data, it will be increasing difficult to gain support whether that support is money, volunteers, or community engagement.
The final conversation of the workshop focused on the need for nonprofits to implement strong performance and outcome evaluation. Again, I have written about evaluation elsewhere (see here).  In the presentation be considered how venture philanthropy thinking is concerned about three dimensions of evaluation: how much, how well, and does it matter.  Nonprofit leaders must thinks strategically about evaluation if they are thinking about long-term sustainability. In a donor world that is increasingly self-organizing, resources will increasingly gravitate towards nonprofits capable of credibly demonstrating results.  The evaluation question is no longer counting beans -how much did you do? but increasingly funders are asking how well are you doing your work? and, more importantly, are you making an impact?

Venture philanthropy, for all that has been written on the subject, still occupies a very small place in the world of foundations and giving.  With the exception of the network of Social Venture Partner Chapters and a small number of national foundations, venture philanthropy funding is rare and outside of the reach of many nonprofit agencies.  There are too few (and too difficult to access), venture philanthropy dollars that makes venture philanthropy funding not worth the time and energy for many nonprofits to pursue. However, the point of the workshop presentation was to illustrate venture philanthropy thinking is critical as a systemic way for nonprofit leaders to think about nonprofit strategy and strategic planning.  Nonprofit organizations that pursue such strategy with rigor and discipline will find themselves in a stronger position to growth, thrive, and truly make a significant social impact in the communities that they serve.

As always, your thoughts are welcome and as always, if you are looking for a partner to assist you in your strategy, I hope you will consider Facilitation & Process as your partner in success.

Short Bibliography of Materials on A Venture Philanthropy Mindset  Download (2 pg PDF)

Mark Fulop
Mark founded Facilitation & Process in 2009 to help organizations and communities bridge the gap between where they are today and where they want to be tomorrow. He’s led dozens of Portland nonprofits, government agencies and philanthropic organizations through complex change initiatives including strategic planning, revenue planning, board development, collaboration, and facilitation.