<nettime> Venture Philanthropy - Developing the Standards for Success

[Jonathan Peizer <JPeizer@sorosny.org>]

Don' know if this is relevant but after the Bridging the Digital Divide article
I wrote one on the difference between value-based and for profit operations and
created two models to do sustainable social value work in each. Its called
sustainable development in the digital age:

http://www.mediachannel.org/views/oped/values.shtml

I've written a new one that I am working on getting published as well:

Venture Philanthropy - Developing the Standards for Success

Which I have attached.

RGDS

JP

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Venture Philanthropy - Developing the Standards for Success

 As more and more entrepreneur-funders enter the field of social philanthropy,
there is an increasing call for adequate metrics to measure 'social' return on
investment. The argument is that unlike profit making enterprises that have
clear and measurable indicators of success, projects that generate social value
are much more difficult to assess. Clear metrics don't exist, and if they did,
it would be easier to quantify, duplicate and scale successes.  It's easy to
point to billions of dollars poured into a variety of public sector projects
over the years with little discernable effect, and to blame this on
inappropriate assessment tools and techniques.

There is a value in developing social metrics that can adequately assess the
breadth and depth of a program's efficacy. However, focusing on evaluation
after-the-fact as the panacea for measuring social impact is not the best way
to insure a program will be successful in the first place. Evaluations measure
only effect, not cause. It should be obvious if a program whose objective is to
affect social change has had a positive impact on people's lives. If the change
isn't obvious, then it's the implementation phase that should be the focus of
attention and not the evaluation process.

It is true that some social value projects take more time to show discernable
impact than for profit enterprise. On the other hand it is not uncommon for a
business to take 2-3 years, and sometimes much longer to attain profitability.
In either case however, there are milestones that point to success or failure.
While these milestones might be more subjective in the case of a social value
project, in my experience its been pretty easy to tell if a project was having
a positive effect or not even before it was completed.

Funding agencies are spending far too much time focusing on evaluation and
evaluation criteria and not enough time focusing on how a program is best
evaluated and implemented at the outset to insure it can meet its objectives
successfully. Many funding agencies have spent years overlaying administrative
procedures on their grant making processes to prevent such things as conflict
of interest and to satisfy procedures set up to insure board, legal and
fiduciary accountability. While the intentions of such procedures are good,
they have led to less of a focus on grant impact and more of a focus on the
process of grant making. The act of making a grant, fulfilling all the
paperwork requirements and convincing numerous executives and boards of its
appropriateness has too often become and end in itself. It 's a fairly long and
drawn out process at many institutions that may take months if not years to
complete for an individual proposal. There are grantees I am aware of that do
not request funding from some agencies simply because the process of receiving
the funding is too drawn out to be viable for their projects. The
administrative processes required of them by some funding agencies may simply
be too onerous for them to comply with unless they add significant
administrative overhead to the grant budget.

Institution's seeking funding from the public sector to survive have adopted to
this reality out of necessity and self-preservation. Many employ expert grant
writers to make the case knowing that the fate of a project rests not on its
implementation but rather on selling the idea at the outset. Too often their
limited resources go into the development of the proposal, and not on insuring
there are people with the skills to actually implement the project. Grantees
know that many divisions of public funding institutions only follow up on the
progress of a project through an annual reporting requirement that necessitates
the funded organization submitting a tally of funds spent and progress made.
All that is necessary to meet this requirement is another expertly produced
report. If an evaluation of the project is undertaken, it is often initiated
and paid for by the original funding agency, which has a significant stake in
the final outcome. In these cases, what makes for a successful project
implementation and what value-added support the grantor can provide after the
grant is made never enters into the picture.

Proactive philanthropy, that is, focusing on success of the grant, and not on
the grant making process has been coined 'venture philanthropy'. Both venture
philanthropy and traditional philanthropy incorporate 'risk taking' as part of
their mandate. They seed social value projects to test if they are successful,
scaleable and sustainable. However, venture philanthropists take a more
proactive role with funded grantees just as venture capitalists do with the
entities they fund. In traditional philanthropy, the process of grant making
has too often become an end to itself. The focus needs to be redirected towards
applying resources in the area of both human expertise and financial help, to
assist a grantee in succeeding. Presumably public institutions hire people to
fund grantee projects because of their expertise in the particular subject area
they work in. That expertise is best spent working with a grantee to leverage
their projects instead of focusing on finalizing the grant as the end product
of their endeavors. Because this often does not occur, an over-reliance on
applying evaluation metrics to social value projects after the fact has
replaced focusing on implementation issues to insure project success.

A case can made that public funders are not mandated to engage in the
operational aspects of a grantee project once they funded it. However, they are
not mandated to ignore it after funding either. All public funders have a
programmatic and fiduciary responsibility to assure the grant provided is used
as effectively and appropriately as possible. This is true whether the grant is
made by an institution that acts at the behest of a long dead donor,
disseminates hard earned tax payer dollars to achieve social good or complies
with the will of a living or corporate donor.

Having started OSI's Internet program as a novice grant maker I relied heavily
on my operational IT experience to assess the ingredients of a successful
project. This served me well in an extremely time sensitive sector with
compressed timelines for everything. However, as the Internet continues to
permeate all aspects of life as the de facto vehicle for interactive
information sharing and distribution, all sectors are being affected. Grantees
are looking to the Internet to improve efficacy and efficiency in their
projects. They are also looking to public funders across all sectors to assume
the leadership role they have had in the past tackling a variety of social
issues with funding and other support. Rather than focusing on after-program
metrics of determining success and measurement of social value, I would like to
share the evaluation and implementation procedures at least in the IT sector
that are a more significant guarantor of project success.

Grant Evaluation: Because the traditional grant making process has spawned
professional proposal writing, it is incumbent on the venture philanthropist to
go beyond the proposal. The first thing to look for are the implementers behind
any vision. Is the project simply a brilliant plan or are their actually people
attached to it that can carry it out and make it work? What is their experience
and commitment to the project? The best way to insure failure is to couple lack
of implementation expertise on the part of the grantee with lack of proper
grant oversight by the grantor. These questions need to be answered by people
with the expertise in the area being proposed.  If a civil society project with
an Internet component is being proposed for example, than a person or people
with both a civil society and Internet related background should be answering
them.

Public funders that do not have programmatic IT or Internet expertise should
appropriate that expertise in order to stay relevant as grant makers in light
of the increased impact the Internet is continuing to make. In some cases, that
may mean hiring outside expertise. In others it may mean employing IT staff
involved in the internal operations of the funder to weigh in on a proposal.

Soliciting Partnerships: Every good venture capitalist knows that it is better
to go into a project with partners than it is to go it alone. Venture
philanthropy operates by the same rules. The OSI Internet program made an extra
effort for many of the projects it was funding to solicit partnership funding
from other foundations. As a result it raised an extra 50% of its total budget
over seven years in partner funding. NGO's have a much harder time soliciting
funding from various foundations that other funders do between themselves. This
is true in the commercial and the public sector.  I discovered early on that
most prospective grantees took a rather obvious route to the same foundations
depending on the project focus. Therefore it was rather easy for me to discuss
the projects I was interested in with various foundations that often times had
already seen the grantee and were also deliberating on their merits. It is a
positive sign that funders are beginning to initiate referencing grantees
projects in this sector to each other.

The Internet is after all a collaborative medium. The traditional foundation
practice of separating their grant making in various sectors from that of other
funders is antithetical to the medium particularly because it is permeating all
sectors of grant making activities. Project collaboration should therefore be
encouraged rather than discouraged, particularly when the public funding sector
as a whole competes with the commercial sector for the limited technical
expertise it has to evaluate these types of grants.


Follow up: After a grant is made, follow up with the grantee on an ongoing
basis to determine a project's progress. Help to resolve bottlenecks if
possible and determine what further assistance they might need whether it be
resources or expertise. Internet grants lend themselves to follow up. One can
log on to determine progress and even call up objective statistics on-line. If
follow up requires an on-location visit to resolve a problem or simply to check
progress, do it. Too often grant follow-up is limited to the standard IRS
reporting requirement which outlines funds spent and objectives realized.
Occasionally a funder-funded evaluation exercise takes place as well. This is a
poor substitute for staying involved during the implementation process, and
following up with a phone call or a visit.

Consulting Support: Grantmakers are generally chosen because they have specific
expertise in the field they are making grants in. Be sure to apply that
expertise for the benefit of the grantees. Take an active consulting role in
the projects where it is solicited and where such a role can help scale the
project.. OSI's Internet program now has as many organizations that come to it
for advice as they do for grant funding. The program makes an effort to share
expertise with grantees and grantors in order to facilitate best practices
across the spectrum for Internet related social value projects.

Project Leverage: Look upon each project as much on its own merit as on how it
might leverage another project being funded. In the case of the OSI Internet
Project, if an education or healthcare project was working in Romania, the
Internet Project made it would be sure a project in Slovakia proposing
something similar was talking to the Romanian team.

Vendor Leverage: As the OSI Internet Project funded new initiatives, it became
clear that different projects required similar products from the same vendors.
So the Internet Project began to aggressively seek regional discounts from the
most commonly used vendors, and it received them.  Successful new technology
solutions were also shared between projects being developing so that people
would take them into account in the project planning and implementation phase.
This ultimately created a pool of trusted vendors who understood our needs and
could satisfy them across sectors and geographic borders.

Finally..

Evaluating the Grant Process: If the process of grant making has become so time
consuming and bureaucratic that it supercedes proper grant oversight after the
fact, than it is time to look at how it can be streamlined. This is
particularly true for technology grants, where decision-making and grant
approval timelines must be compressed and expedited.

The Internet has created a new potential for NGO sustainability with its low
entry costs to reach a much larger constituency. NGO's have therefore started
thinking about for-profit ventures as adjuncts to their not-for-profit
activities. The irony is that often they don't fit neatly into standard
foundation evaluation criteria and are therefore hard to evaluate. At the same
time these ventures may well offer the long-term sustainability in lieu of
continued subsidy that most foundations now expect from their grantees.

If technology grants cannot be evaluated approved and expedited using the
standard grant making process, than they are best made using an alternative
process. I would suggest an unallocated or venture fund pool managed by a small
group who can make decisions and grant quickly. The makeup of this group would
best consist of staff with programmatic and IT expertise. If the projects being
evaluated have a sustainable, revenue-generating component as well, than adding
someone with financial expertise to the group is advisable.


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