Agora Partnerships

In The Search for Social Entrepreneurship, Paul Light writes, “If the idea is matters, so does management…to the extent that management is essential for scale-up and impact, socially entrepreneurial organizations need to embrace it.”

Light’s idea that high performing organizations should invest in management and organizational development systems makes sense, but in order for many social businesses to do so, the philanthropic landscape will need to change.

William Foster, partner at leading nonprofit consulting firm Bridgespan Group, recently wrote about the need for foundations to provide “growth capital” grants to later-stage organizations with sound business plans, strategic clarity and a sustainable financing model. In his Stanford Social Innovation Review article, “Money to Grow On,” he suggests that funding organizations should approach grantmaking in a similar way that venture capitalists approach making investments: high performing organizations with proven success should be awarded larger infusions of unrestricted cash to ramp-up and achieve long-term social change.

Foster writes, “Before venture capitalists invest in a company, they conduct a thorough review of the company’s management team, business model, and strategic plan, along with an analysis of the company’s competition and market. More often than not, they walk away from deals that are in many respects attractive. Few nonprofit donors undertake such rigorous due diligence. But they should. ”

For organizations working in the base of the pyramid space, this idea is already starting to take root. VisionSpring recently announced a prospectus, which is aimed at attracting $5 million in growth capital. The prospectus details how resources will be leveraged to create and measure increased social returns. Donors do not have to look far to reference past financial statements or catalogue other partners who are investing in their model — all these details are easy to find and effectively illustrated in the report.