To address a social challenge of this size, the sheer
magnitude of available capital must increase exponentially, and that
capital must be invested strategically. As stated in Premise Eight,
federal and state governments can and must step up to the plate—but they
cannot do it alone.
Many new philanthropic models could help. For example,
we believe that the philanthropic and high-tech communities should join
forces to create a pool of equity capital for outcomes-based technology
investments in and by low-income communities—as well as to develop a
pool of talent that can provide strategic management assistance to augment
the capital. With participation from the largest foundations and
businesses, this "social venture fund" could grow to a billion
dollars or more.
Regardless of whether old or new models are used, the
philanthropic sector simply must do far more to promote innovation in the
use of technology to achieve social outcomes. Just as the Robert Wood
Johnson Foundation has done in the field of health care, all philanthropic
givers should take a close look at how they can help nonprofit
organizations apply technology to achieve outcomes in their respective
fields of focus, from housing to education to crime prevention to child
care. Today, many grantmakers view technology as little more than an
additional overhead expense.
Over the past decade, several new concepts in philanthropic
giving have begun to move from design to execution.
Social venture funds, the main vehicle of the new and
as-yet unproven "venture
philanthropy" movement, attempt to catalyze social change
by strengthening community-based organizations. Investors in social
venture funds are not looking for financial returns on their
investment, but they seek meaningful (yet not unrealistically high)
social returns in the form of real-life human outcomes. They make a
substantial commitment of both money and managerial expertise and
are guided by the philosophy that helping to build capacity is the
best way to achieve breakthrough results. In the words of management
Grossman, and William
Ryan, "Behind every effective program, and especially every
sustained effective program, is an organization that performs well.
The challenge of large-scale impact can be reformulated as the
challenge of helping more nonprofits perform better."
Social investment funds represent a different model.
Investors in such funds can earn competitive financial returns while
at the same time helping to realize social returns. The Calvert funds, which
are mutual funds with a civic mission, are pioneers in this field.
Fund managers buy and sell stocks and bonds in for-profit companies
that have "an expanded view of corporate responsibility."
They also allocate a small portion of assets for investments in
low-income housing; micro-enterprise projects; and small, untried,
for-profit enterprises that have identified potentially profitable
ways of addressing social problems.
Then there are community development venture funds, like Silicon Valley Community Ventures.
Here, too, investors expect at least a modest financial, as well as
high social, return on investment. SVCV is a venture capital firm,
however, not a family of mutual funds. It provides capital and
management expertise to for-profit companies that provide
substantial economic benefits to a group of targeted San Francisco
Bay Area communities, such as Oakland and East Palo Alto. Among the
companies in SVCV’s investment portfolio, approximately half are
led by entrepreneurs who grew up or live in the target communities,
and more than half of all people hired by those firms come from the
surrounding low-income neighborhoods.
To Premise Ten>>