Innovative philanthropy and the quest for unrestricted funding

“In the real world, if you were to invest in a company you thought would make you a tidy profit, you wouldn’t tell the senior management they had to make a product of your choosing, restrict the number of vehicles they purchased, or expand operations into a new country. Why should we do any differently in the social sector? Why not simply invest – fund – on the basis of return in the form of impact? Isn’t that the point?”

Kevin Starr, Stanford Social Innovation Review

Just as Kevin Starr “stumbled into philanthropy”, I stumbled into running an organisation. I’ve been fortunate to meet Kevin on a number of occasions, and we have a fair bit in common. For a start, we ended up in places we weren’t expecting, and we’re both graduates of the School of Learning by Doing. Although this approach can be painful at times, you often find yourself stumbling across answers you wouldn’t have if you’d followed a more traditional, established route. There’s a danger if all you ever do is stay in your comfort zone.

(I remember talking to my mother back in November 2002 when I’d just been offered my first piece of mobile consultancy. I was supposed to build a conservation portal on Vodafone live! but had never done anything with mobile before (very few people had back then). I accepted the gig, although I had absolutely no idea if I’d be able to deliver. A simple fear of failure drove me on over the proceeding twelve months).

Kevin has largely figured it out for himself, too (in between extended bouts of surfing) and the end result – the work of the Mulago Foundation – is as inspiring as it is simple. If you’ve not seen his Pop!Tech talk from last year, do yourself a favour and check it out.

In short, the Mulago Foundation looks for “the best solutions to the biggest problems in the poorest countries”. These projects need to answer four quite simple questions:

  1. Is it needed?
  2. Does it work?
  3. Will it get to those who need it?
  4. Will they use it correctly when they get it?

None of this is rocket science, of course, but it’s what comes after a project answers with four “Yesses” that you might argue was most innovative. Mulago provide unrestricted funding, the holy grail of fundraising. Funding is provided based on a vision, and a path to scale, and it’s down to the organisation to decide how best to spend the funds to achieve that. The rationale is really quite simple. As Kevin puts it:

If you don’t think an organization is smart enough to use your money well, don’t give them any

We’ve been very fortunate to have received critical – essential – funding for FrontlineSMS over the past four years (for the first two it was largely self-funded). Grants from a number of donors have enabled us to continually develop and build on what we started in 2005. The end result? A piece of software in use today in over a hundred countries, driving a dizzying array of projects.

Of course, there’s little use in developing such a useful piece of software if the organisation behind it isn’t able to survive and thrive in tandem. And this is one of the biggest challenges facing many organisations in the non-profit world, not just those focusing on mobile. Rightly, in most instances, there’s a growing expectation that NGOs need to figure out how to live without donor money, but that’s easier said than done (something I’ve also written about before).

About half-a-dozen donors can rightly lay claim to being a key part of the FrontlineSMS story, but when it comes to our organisational development there’s – so far, at least – just the one.

In the past 18 months there have been massive changes in how we go about our business. With roots in camper vans and kitchen tables, today we have offices in London and Nairobi, with another opening soon in Washington DC. We’ve gone from one person to around ten – with a dedicated developer team based in the iHub in Nairobi – and a single US Foundation to a UK-based Community Interest Company and a sub-branch in Kenya. We’re well on the way to resolving complex governance issues, appointing a Board and developing a number of exciting non-donor income streams, not to mention new mobile-based social change tools. A majority of this work has been orchestrated by an excellent senior management team, with Laura Walker Hudson driving things from the UK and Sean McDonald doing the same for us in the US.

Project-based funding is still a critical part of our growth and development strategy, but all of this has happened thanks to the fantastic support of the Omidyar Network who, like Mulago, fully appreciate the value of also providing unrestricted funding to their grantees. The Omidyar Network’s investment criteria is based on five key areas. According to their website:

  • Alignment. We look for organizations aligned with our mission of creating opportunity for people to improve their lives. We seek for-profit companies and nonprofit organizations that use innovative, market-based approaches within our investment areas.
  • Impact. We identify organizations that intend to develop new markets or industries, influence policy or practices among existing institutions, alter public perception, or demonstrate the power of business to create social and financial returns. Ideal partners will inspire further entrepreneurial activity in their field.
  • Potential for scale. We look for organizations with significant growth potential, with the ability to scale operations and develop new markets. We ask for-profits to have the potential for a highly successful business model and nonprofits a path toward operational sustainability.
  • Leadership. We invest in management teams with a proven track record in their field of operation and an ability to articulate a clear vision and strategy, reinforced by a viable business plan. The organization must practice exemplary governance with operational efficiency and controls, transparent practices, and disciplined financial planning.
  • Innovation. We seek organizations that employ creative, entrepreneurial strategies to accomplish their goals. Investees may disrupt the status quo, establish a new business paradigm, or pioneer services for untapped markets.

If you need living proof of what a strategy like this looks like, check out Omidyar‘s and Mulago‘s impressive grant portfolios. You can also follow Omidyar on Twitter.

There is much talk of innovation in the technology arena but less, it seems, on innovation in philanthropy. Thank goodness this is beginning to change. We are, after all, all in this together.

69 thoughts on “Innovative philanthropy and the quest for unrestricted funding

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  6. Daniel Chavez Moran says:

    I’m of the opinion that, instead of being reductive, boiling things down to their bare essences can often lay bare simple truths. Those four questions laid out that way are a perfect example of that.

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