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.

Wrong model. Wrong place.

If conventional wisdom were anything to go by, this is what might typically happen to a social entrepreneur with an idea:

Said entrepreneur comes up with an idea. Entrepreneur puts together a sample budget and an early-stage business model. Funding is sought for a pilot or prototype. Said pilot runs and impact/results are measured. If the signs are good, entrepreneur goes back to his or her donor, seeks increased funding, then scales. Said project becomes financially sustainable (or not) during the new funding period. Based on proven impact, sustainability and/or long term investor interest, said project either remains and grows or joins others in the giant “failed business ideas” graveyard in the sky.

Although this approach may be fine in the wider world of social entrepreneurship, it begins to struggle whenever there’s a strong ICT4D component, or where the individuals with the ideas aren’t social entrepreneurs at all but technologists or development workers out in the field. Despite making little sense applying the same model to both scenarios, this is precisely what often happens. Welcome to the world of “one size fits all”.

The realities of innovation in ICT4D are often very different to those elsewhere. For a start, the best ideas are not necessarily seeded in a lab, or a business school, or the global headquarters of a large international company. Workers on the front lines of conservation, human rights, disaster response or agricultural development often have to adapt and innovate based on the realities of their experiences in the field. Ideas that end up “sticking” don’t benefit from the process and order of the conventional “social entrepreneurship” approach. Business models and impact metrics all come a distant second to developing an appropriate solution to a very real problem, whatever and wherever that may be.

In reality, this may be a more sensible way of going about things. Only people who show initiative – and ideas which show promise – rise to the surface, and only then do others put time and money into figuring out how to best build on them. But as if there weren’t enough to do, inflicting foreign entrepreneurship models on a technology innovation which is at best a bad fit simply adds to the confusion. It’s time we recognised that adopting an approach based on “scale, sustainability and impact” doesn’t always make sense. One size doesn’t fit all, and ICT4D warrants a new approach.

I’ve spent a lot of time over the past few weeks thinking about this. Despite the promise, there are still far more mobile pilots than fully fledged, long term projects. Far more failed and lost projects than successful, ongoing ones. And too many people assessing success or failure based on potentially flawed, misleading or irrelevant metrics.

In short, we need to acknowledge three new (hard) realities in our field:

  1. Not all projects will have business models
  2. Not all projects will be financially sustainable
  3. Not all projects will be able to measure impact

So, where does this leave us? Well, we can at least acknowledge that applying conventional entrepreneurship models to mobile-for-development might be decreasing rather than increasing our chances of success. That financial sustainability may or may not be possible. And that figuring out precise impact may or may not be realistic or achievable. “Failure” on these fronts does not make a bad project. If it did then there’s a very large number of bad projects out there.

For me, this “ongoing failure” more likely indicates a flawed model, and a bad way of measuring success. We need a new model, and one of our own. Because – as the advert reminds us – we’re worth it…

Sustainability: Who’s the Daddy?

No doubt one of the most commonly used words in the non-profit sector (sometimes innocently lumped together with other words to make beauties such as sustainable development), sustainability is an interesting concept. It’s perhaps also not a million miles off holding some kind of ‘holy grail’ status, too. Built into nearly every project proposal by default, it remains elusive most of the time. So what’s the big deal?

Donors like to think that their money – and sometimes effort – are going to last way beyond the project cycle (to coin another phrase). In other words, when the money runs out they like to think that things aren’t going to come crashing down. This is kind-of sensible, I’d say. The trouble is, it’s really rather tricky.

For a start, projects are often funded for fairly short periods of time – up to five years if you’re lucky but often two or three (many smaller projects, of course, run for much less). This isn’t long if you’re hoping to create a long-lasting, positive change. Through my own experiences getting muddy on projects, or studying the subject from the comfort of a university campus, this leaves only a limited number of options. Two of they key ones must be:

Create a business model: If you need to make money to keep the project going, then you’re open to market forces. People will only buy crap products “because they’re ethical” for a while, and before they realise that they’re perhaps just that – crap products. Zillions of small businesses around the world fail without having the complexity of being part of a conservation and development project, so achieving financial sustainability is a real challenge. Sadly there aren’t that many success stories.

Factor yourself out of the project: Rather controversial for many larger NGOs, although some actively pursue it. Some research would be nice. Anyway, whether or not a project needs to become ‘commercial’ (see above) keeping costs down is vital if it’s to have any chance of survival. This could mean local staff, local salaries, local overheads, little or no ‘head office’ consultation fees, or people flying left-right-and-centre around the world for no apparent reason, etc. Maybe the best projects create the desired change, and when the experts have long packed their bags and left it’s able to continue running on a shoestring.

Gerald Durrell had the right idea when he said that his dream was to shut down his zoo in Jersey. Of course, he’d then have to go and find something else to do, but that didn’t matter. It would have meant he’d succeeded in his mission to save endangered species, and that was all that mattered to him.

Trying to unite profit and social venture – which I think includes conservation and development projects – doesn’t only worry or challenge me. Plenty of other people are already writing and blogging about it. Let’s hope the debate reaches a useful conclusion. A few more positive outcomes would certainly help us along.

Just paying lip service to the ‘s’ word doesn’t really get us anywhere in the long run.