Lesson: Disruption for Social Good with Renee Kaplan

Step #4 Means: Creative fundraising for the new philanthroper

We have 87 organizations working in 130 countries, and the CEOs, the number one pain point for them is how much time they have to spend pitching or fundraising. It's really challenging because what we call operating support or flexible spending is so, so small. It's probably 10%, if that, of what the foundations end up funding or philanthropists fund.

So that flexible, open, unrestricted funding, which really is what builds our capacity, which allows them to do research and development, and create new avenues or just new innovations is really limited. They end up having to get restricted funding or specific grants that only allow for one particular program. That becomes a really frustrating process for them to grow their business.

Social entrepreneurs are very creative. I think there's a wide range of how they get funded. Most of the time it's the traditional route of going to a philanthropist or to a foundation and seeking that initial early stage funding. So whether that's a grant or whether that's a loan. But many of the social entrepreneurs have used their own personal equity. They've, again, mortgaged their homes. They've sold businesses to start their organizations. They've partnered with other organizations to say, "Okay, how can we share resources while they incubate and get bigger?"

So, they're very adaptive, very scrappy. They have a high ingenuity to get the resources they need when they need them. But overall, there's still this big gap that we see. So while they may start in a real scrappy way, they have, again, enough knowledge and enough perseverance and enough business acumen that they can see where they're going and what they need.

So, in our experience, the social entrepreneurs are very savvy financially. They understand that the cost effectiveness of what they're offering does have value to people and how they are able to then find the right people to which that value represents dollars and funding in the early stages, anyway, we see that being a strength of the social entrepreneur that's a little bit unique from just a traditional nonprofit who starts a business that's been growing over time and has a traditional group of funders or a board that funds them and grows from there. Social entrepreneurs tend to start in a bit of a different way.

We consider ourselves at the Skoll Foundation more mezzanine-level investors. So, for us, we like to be at that place where there is proof. There is some traction that an organization and some initial funding that they've achieved so they're not starting from ground up. So, for us, we like that next phase where they have some data, some research that hopefully we can help them really scale and be that J-curve or that inflection point.

It's not always the case. So, for us, when there is really compelling evidence that a particular innovation or an issue is really ripe for change, we may take the leap and go earlier stage. A recent example is an organization called Girls Not Brides that works to end child marriage globally. They were awarded the Skoll Award last year. It was a real debate in our organization because they had just formed. They were a coalition of 300 organizations working globally. But they hadn't necessarily been an organization that had all their funding. They hadn't been around a long time. They were pretty brand new. They had kind of incubated for a few years and were just getting started.

But we said the issue of child marriage is so ripe and the Millennium Development Goals had called child marriage as an issue that had to be more focused on. We said, "You know what? We're going to take this risk and bring them into the portfolio and fund them even though they are earlier stage than most of the other organizations," because as an inflection point, just like landmines might have been 20 years ago, we feel like child marriage can be solved and should be solved and have an opportunity over the next 10-20 years.

I'll share a story of our own experience. Our investment firm that invests Jeff's money, Capricorn Investment Group, that we work very closely with, we are on the foundation side. They are on what would be considered the for-profit traditional side. Recently the CEO laid down the gauntlet of, "They believe they're going to deliver more social impact over time than even the foundation."

So now we have an internal competition going, which is really healthy and really fun. But they absolutely believe and they have proof that the investments they're making, again, whether it's solar, renewables, biofuels, etc., will have for-profit returns equal to the market and on top of it, be social impact-driven. So we're excited about what we can prove over time.