The Future: Social Enterprise and Venture Philanthropy
By Ross Mason
The impact and rate of successful implementation of innovative strategies, products, and ideas in large U.S. non-profits, corporations and foundations is not encouraging. The American Red Cross raised $500 million to build houses in Haiti and only built 6 homes in 5 years. New Story Charity (NSC) launched in Silicon Valley on June 1, 2015 and built 100 homes in Haiti in 88 days for $600,000. In U.S. corporations, 1 out of every 100 innovative ideas is considered, 1 out of 10 of those ideas is funded and 1 out of 10 of the ideas that are funded are successfully commercialized. In Silicon Valley, young entrepreneurs present hundreds of new innovative ideas that receive venture funding and turn into companies that transform international markets, economies and communities every single day.
Over the last 15 years, the Gates Foundation has selected 100 companies or nonprofits in public health annually and invested $100,000 in each of these organizations. The foundation has then invested an additional $1 million in the top 20 (of the 100) enterprises selected. Tragically, the resulting impact in sanitation, clean water, vaccines/antivirals and other areas of public health has been disappointing. In fact, the foundation has changed the measurement of success in these investments from "curing disease" to "moving science forward".
The next generation of billionaire technology philanthropists is determined to attack these challenges in a much more scalable and sustainable way through partnerships at the local community level. The millennials, the largest generation in U.S. history, make purchasing and investment decisions, not only based upon quality, price or brand loyalty, but social impact at the local community level. This generation is focused on the impact, social conscience, accountability and transparency of organizations.
Fundraising is a necessary evil for most nonprofits. It takes an enormous amount of time for the executive director and staff to raise funds to cover the budget each year. However, fundraising is essential to fulfilling the mission of the organization. If a nonprofit is able to create a successful business or partner with a business to create a charitable annuity income, it will allow the staff to focus more of their time on fulfilling the mission of the organization and becoming more efficient and effective. This growing source of monthly income allows the charity to eventually fund most or all of their operating and overhead costs, raise more money because a larger percentage of the donor’s charitable dollar goes to the cause, and have a much greater impact over time.
For example, one of the most successful and recognized social enterprise brands is Paul Newman’s consumer products company, Newman’s Own, which donates 100% of its profits to charity. Newman’s Own gave over $250 million to causes supporting needy children during Paul Newman’s lifetime and has now given away over $550 million since he founded the organization in 1982. Another wonderful example is charity: water which brings clean and safe drinking water to people in developing countries. Charity: water has over 150 “well members” that pay all of the administrative, overhead, and marketing costs so that 100% of the money given by donors goes to the cause (even to the point of reimbursing credit card processing fees). Since starting in 2006, charity: water has funded almost 80,000 water projects in 29 countries, which has served over 13 million people (771 million people lack basic access to clean and safe drinking water).
To help innovative nonprofits in this area, HINRI.org has created a social enterprise business model which identifies businesses interested in dedicating a percentage of their revenues or profits to charitable causes. HINRI selects charities to fund based on the areas of interest of their business clients. These companies understand that businesses with a social enterprise component not only support charities, but strengthen customer loyalty, brand identity, and employee satisfaction. Millennials in particular prefer to work for, and buy products from, companies with a “social impact” mission. HINRI has worked with over three dozen social enterprise partners to help employ vulnerable populations (disabled veterans, victims of sex trafficking, and special needs children and adults). HINRI is now partnering with two private equity funds that plan to invest $5-10 billion, three venture capital firms, and many of their portfolio companies. Social enterprises like Newman’s Own, charity: water, and HINRI are not only the future of social impact and venture philanthropy but will transform every area of philanthropy and business for future generations.