Nonprofit vs For Profit
From Philanthropy to Business: Shifting Priorities at the Clinton Global Initiative
Published June 25, 2009 @ 11:47AM PT
I think there is a lot of power behind the Clinton Global Initiative. Not so much in just the brand, but in the idea that a commitment made publicly, with a group of others making similar commitments, might be more likely to come to fruition and certainly has a more resonant power.
At the same time though, I've never been a fan of the way they (or other foundations for that matter) clearly demarcate vertical program areas like "global health," and "poverty alleviation." I understand why this particular "specialist" heuristic of philanthropy evolved, but I think it often rubs up against reality in which different problem sub-categories run up against and in fact contribute to one another. My interest in collaboration and horizontal partnerships is largely about structuring approaches to problem solving that get away from the vertical specialist intervention.
I'm really excited to see a slight shift in the approach that CGI will take this year. According to a Reuters article published just a few days ago, there is going to be a broader emphasis this year on how companies can integrate social and environmental impact to improve the bottom line:
"We recognized that the CGI (Clinton Global Initiative) of old was no longer going to be a feasible model to move forward on," said Edward Hughes, CGI's deputy director and director of program for the fifth annual summit this September.
"(Companies) couldn't simply treat us as a place where their foundation would come and write checks to NGOs (nongovernmental organizations), but rather for them to remain engaged, (CGI) had to deliver value to their core bottom line, to their business operations," he said. "We needed to justify this as being a real value-return exercise."
Perhaps even more exciting for me is the new way they're describing their focus areas:
This year, the Clinton Global Initiative will concentrate on four new areas -- harnessing innovation for development, strengthening infrastructure, developing human capital and financing an equitable future.
This seems like an example of what I was writing about in the context of Rwanda yesterday. We have to think systematically and make investments in the infrastructure for good to thrive. I'll be excitedly watching to see whether this year's CGI can help push that conversation.
Better World Books to Offer Equity to Non-Profit Partners
Published May 26, 2009 @ 12:19PM PT
Studying in Gorée, near Dakar, Senegal (via Ferdinand Reus)
When people new to the field ask me what organization most embodies "social enterprise" or "social entrepreneurship," more often than not I find myself describing Better World Books.
Better World Books takes donated books that would otherwise end up in landfills, resells them through it's online marketplace, turns a great profit and pours money back into literacy programs around the world. They're already one of the most socially-integrated companies around; the first thing you see when you arrive on their website is the convenience of their product, the amount they've donated to literacy, and the number of books they've saved from landfills.
Today, they've made an announcement that suggests a bold new future of non-profit/for-profit partnerships. They've begun to offer an actually ownership stake in their company to their non-profit partners.
From the press release:
"Today Better World Books announced the creation of an Incentive Stock Option program for its non-profit literacy partners, an unprecedented financial innovation in social entrepreneurship. The program puts aside approximately 5% of the company for use in stock option grants to an initial group of five literacy partners with potential to add others in the future: Books for Africa, Room to Read, Worldfund, the Robinson Community Learning Center and the National Center for Family Literacy.
In keeping with the company's core values, Better World Books is implementing this program to ensure its literacy partners can share in its financial success. Working alongside its primary equity investor, Good Capital, the company carved out a 5% ownership stake for its key literacy partners.
"We worked closely with Good Capital to come up with a way to more closely link our social mission to our business model, ensuring the future success of Better World Books results in benefits to our non-profit literacy partners," said Better World Books CEO, David Murphy.
"We created Better World Books to show that it is possible to do good while at the same time run a successful company. Our literacy partners are essential to our mission, and we want them to flourish," said Better World Books co-founder Xavier Helgesen. "Today's announcement ensures that as our company grows, our partners will too."
Better World Books plans to supplement the initial round of stock options with subsequent rounds of performance based options, which reward its literacy partners for their successes in promoting and supporting literacy; for the synergies they create with Better World Books; and for their innovativeness in addressing literacy and education challenges in the United States and around the world. These stock option grants will be based upon the partners' ability to achieve their own internal metrics for delivering on specified goals and objectives as well as how effectively they promote the collection and sales of books collected in book drives that provide Better World Books with its inventory.
"One key to our approach in social entrepreneurship is establishing clear, quantifiable benchmarks for success for our partners-and rewarding them when they meet or exceed those goals," said Murphy.
Hopefully I'll have a chance to get more about this up in the coming weeks, but I think this is a huge milestone. Kudos to the BWB team and to their partners at Good Capital as well for pushing this field.
The Story Behind Kiva.org
Published May 23, 2009 @ 07:46PM PT
(via liewcf)
Online microlending marketplace Kiva.org is, for good reason, one of the most talked about social benefit organizations in the world. Since 2005, it has given average people the chance to loan small amounts to micro-entrepeneurs around the world. The total loan volume has surpassed $66 million, with a 97% repayment rate. Loans are often filled within just a few hours. At times of particularly heavy traffic, Kiva caps any one individual's donations to $25 to give more lenders the chance to participate.
Yet occaisionally, Kiva's runaway success has lured other nonprofits to copy pieces of their model without precisely understanding how all of the pieces came together to make such a powerful proposition for all stakeholders involved. In one of my favorite posts on the topic, "Kiva Is A Menace," nonprofit consultant Curtis Chang wrote about how many young organizations get seduced into trying to replicate the hit organization.
In "The Profit in Nonprofit," a new piece on the Stanford Social Innovation Review, Bethany Coates and Garth Salone have provided some incredibly valuable background about Kiva's founding story. Particularly, they do a great job explaining the back and forth the Kiva founders Matt and Jessica went through while trying to decide whether to be for-profit or nonprofit:
Despite the simplicity of their model, Flannery and Jackley ran into a tremendous amount of resistance from microfinance experts. “The criticisms were about both the supply side and the demand side,” says Jackley. “On the supply side, critics said that the idea wasn’t scalable because of the time and effort needed to vet borrowers and then to post their stories on the Web. And on the demand side, the critics said, for whom is this product intended?” The microloans were neither investments nor donations. “No one knew what to do with this bizarre, in-between product,” she says.
Another issue was how much interest (if any) Kiva could charge borrowers and return to lenders. Kiva’s founders originally wanted to offer lenders the option of earning interest on their loans, both to attract lenders and to transform the usual wealthy donor-poor beneficiary hierarchy into the more egalitarian lender-borrower relationship. Yet returning interest on loans could have turned the loan into a security in the eyes of the Securities and Exchange Commission (SEC). Offering a security to the public would trigger a long list of SEC requirements, including sufficiently collateralizing the loans and investing only in entities that comply with U.S. accounting standards.
Kiva’s founders also debated whether to be a nonprofit or a for-profit organization. Establishing Kiva as a nonprofit was the fastest way for the founders to get the site up and running. Yet they could not readily ascertain whether a charitable organization could extend loans rather than donations. They were also unsure what tax implications Kiva and its lenders would face upon the return of the loan principals and, should they charge interest, profits.
The rest of the must-read article can be found here.
