Many things are booming in the Bay Area right now: housing values; company hiring; startup growth. But, unfortunately, another boom is also underway: a boom in poverty. Without safety net programs, the Santa Clara County poverty rate is at 20 percent.
Those of us working in nonprofits that serve the people hit hardest by this poverty boom are finding that traditional government contracts and donations from individuals, foundations and corporations—while necessary—are increasingly insufficient. The estimated hundreds of millions in annual donations can’t fill the gap left between capitalism’s shortcomings and government’s tattered safety net.
It’s time to look beyond these traditional sources. And a recent three-day accelerator program co-hosted by our two organizations has us feeling even more bullish that the answer can be found in social entrepreneurship. It’s time for nonprofits to think and act more like entrepreneurs—albeit entrepreneurs on a mission for both social solutions as well as growing, sustainable revenue.
Most nonprofit leaders are a lot like the customers they serve: overwhelmed. Poverty is so extreme and the needs are so great, that nonprofit leaders tend to live in survival mode, keeping the doors open, managing their cash and staff. But the GSBI® Boost Accelerator showed us that the benefits of an entrepreneurial approach are multifold:
New investors. Those who invest in social entrepreneurs are called impact investors. They are individuals and foundations, like the Silicon Valley Community Foundation, who are looking for both social impact and financial returns with their investments. There are also organizations, such as San Francisco-based Kiva, that lend money to social enterprises and Toniic, a membership organization for impact investors. One thing they all have in common: they won’t be impressed with the kind of nonprofit-speak that sometimes passes for a business plan when seeking grants or philanthropic money. They want the leaders they invest in to speak authoritatively about their nonprofit’s bottom line business fundamentals: what’s the unit cost to house a homeless person? Who is your target market, and what’s the value proposition you bring to them? What proof do you have that you are actually solving, not just treating, the problems you address?
New efficiencies. Taking the time to think and focus on their business can help nonprofits identify programs that might have sounded like good solutions, or even won grants in the past, but weren’t actually having an impact. Several nonprofits in our three-day workshop realized this. Some had provided data to funders about how many people received job training, but not whether those people actually got a job that paid a living wage. Others realized that growth plans they had been counting on were never going to succeed if they didn’t implement interim steps, such as building out their IT infrastructure to track their customers and the impact they are having.
Competitive advantage. Even if a nonprofit leader is never going to make a pitch to an actual impact investor in the near future, thinking entrepreneurially can help reduce his or her organization’s cost, delivering more impact for the same money. That not only gives a leader more credibility the next time they have to pitch themselves to the city of San Jose, for instance, it also makes them more competitive. Remember, with 14,000 nonprofits in Santa Clara County alone, even the traditional funders have lots of providers to choose from.
Exciting opportunities to take risks. Once a nonprofit has command of the business fundamentals of their current operations, they are in a much better position to offer new ideas that impact investors—who are innovators and problem solvers by nature—want to fund. The entrepreneurial approach requires nonprofits to ask themselves, “Am I willing to take risks? To try something new, really innovate in my space?”
For instance, Catholic Charities is highly interested in using real estate investment trusts as a vehicle for solving the affordable-housing shortage—not your typical nonprofit solution. That would require the cooperation of governments to provide baseline funding to build new housing and for investors to top it off in exchange for a set return. To garner the trust from both of those funders, we will need to have a strong business plan and financial analysis in hand—an “elevator pitch” par excellence, if you will.
Our three-day accelerator was run by Santa Clara University’s Miller Center, which has 15 years of experience accompanying social entrepreneurs around the world. And it showed us all that it’s possible—but certainly not easy—to shift nonprofits to a more entrepreneurial mindset.
The need is too urgent and the payoff seems too great not to try it. After all, if it can’t be done in Silicon Valley, where can it?
Gregory Kepferle is CEO of Catholic Charities of Santa Clara County. Pamela Roussos is chief innovation officer of Miller Center for Social Entrepreneurship at Santa Clara University. Opinions are the authors’ own and do not necessarily reflect those of San Jose Inside. Send op-ed pitches to [email protected].