This past weekend I was at the 25th anniversary fellows conference for Echoing Green and something stuck with me. In 2012 Echoing Green got over 3500 applications for 36 slots. Similar numbers are to be found with the TED Fellows program. I imagine the same to hold true for PopTech, Rainer Arnhold and others. So what happens to the other 3464 programs? The odds are staggering nowadays AGAINST getting into one of the programs that will train you how to become a social entrepreneur. What do you do when you don’t get into a program? Where do you turn for support?
I truly believe what Ashoka says, that everybody is a changemaker, that everybody has it in themselves to embark on some journey of social enterprise. So with the coming new year I have decided to embark on a new experiment at my consulting firm Fifty Frogs. One I hope will help some of those people who didn’t get into a fellowship program to start their Social Enterprise. I will be doing a series of FREE WEBINARS, approximately one a month, to give you all the information that somebody amasses at one of these training sessions. After the first webinar I will have guests on from some of the best social enterprises in the world. Hopefully I can reach a good 1000 of you wishing to start your enterprises.
In addition I will be selling for an extremely affordable price digital archives of the webinars along with a package of all of the tools and templates I have developed for myself over the past 8 years of my Social Enterprise experience. These will save you countless hours as a new entrepreneur and I imagine will be worth many times the price in value extracted.
My hope by the end of 2013 is to inspire scores of new social enterprises operating outside of the traditional fellowship routes. To take those students who are currently studying social enterprise, or those afterwork do-gooders occasionally volunteering for a program, and help them materialize the programs in their heads to do concrete good in the world.
The first free webinar of the series “Social Enterprise Toolkit” will be an overview of how to run a social enterprise, leveraging stories and best practices of some of the world’s top social entrepreneurs. It will take place January 12th at 2pm eastern.
Please register and I hope to see you on the 12th. To your success! Excelsior!
June 9, 2010
In the past few months, responding to two disasters in two countries has taught me allot about disaster funding, and the nature of the fund raising industry. My hope is that some larger market players in the fund raising industry can learn from the following.
In response to the major devastation that hit Guatemala with tropical storm Agatha AIDG recently did what we did for Haiti and what many NGOs do in a disaster, we put out an appeal to donors in our newsletter.
Now for background our newsletter has about 3000 active subscribers, our Haiti quake appeal pulled in over $125,000. The appeal for Guatemala pulled in $5250 ($5000 of which came from a long time donor and Tedster). Unfortunately $5250 isn’t even gonna buy the first community’s pipe.
So what happened? Do people like Guatemala less than Haiti? No. Not from the emails that came back without gifts.
In truth what happened is that the Haiti donations in large part weren’t actually new money. They were existing donors giving what they would give for the year but giving it then, for Haiti. This was a huge chunk of our budget for the year from our regular donors that suddenly was legally bound by restrictions to just respond to the Haiti disaster. While helping immediately the donors accidentally stripped funding from the general resources of the organization. And they were tapped, so when a second disaster hit they actually didn’t have any more to give to AIDG.
With these results and with the trouble I have had in getting grant funders, who did receive major relief money, to move at any pace faster than 6 months to process anything it was pretty clear to me last night that I needed help. Despite phenomenal impact on the ground, mind blowing press, and my best efforts to talk to people with deep pockets, the funds are not keeping up. So I started researching external fundraisers.
I had been waiting for an introduction to a fund raising consultant from another ED, but I was feeling dubious. In my different fellowships I have taken some fund-raising consultant sessions before. From fluffy-clouds-and-rainbows stuff about speaking from the heart to hardline metrics-and-evaluations-dashboard-reporting-per-customer-served-big-mac-style-philanthropy wooing. But to be honest I am not sure this is something to be fixed with just some charm school about what I can say to donors. I’m just not sure I’m THAT guy.
I mean let’s be honest here. I’m no bed of roses. I’d peg myself somewhere between a bad stand up comic and Rain Man on the social graces. I’m an alright ED and I have an encyclopedic knowledge of BOP tech. I’ll tear through the BS in a system and get to the core error. But I’m not a salesman for high end luxury goods. To hire THAT person at going rates with the cash flow we maintain is way outside of our budget and finding them in the time frame needed is pretty unlikely.
What I need is outsourcing. Somebody with a proven track record and connections to move the job forward. So I decided to look for a fund raising contractor, and turned to google. My search journey I’ve captured for you:
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It ended up with a couple spent minutes here:
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Aside from Tom Cruise’s stellar insight into how many social entrepreneurs occasionally feel, and how my constituents will eventually feel if I can’t solve these issues, this really opened up a window for me.
Where are all the big fund raising contractors? The professional solicitors? This is an industry with thousands of professionals yet none of them has a google adword? Interestingly similar fundraising term searches with adwords had hacker SQL injection attacks in the adwords. Hackers and scammers know NGOs need money, why don’t the pros?
What I have learned from this is that either A) the companies and private practices that should be good at this are thinking way too small and a market opportunity exists for a serious player to dominate B) These companies need to hire me part time to manage their SEO because they suck at it . . .really. I might not be so great at the fund raising but honestly folks your google results are pathetic.
This is an industry that is waiting for its day. Small orgs need the big gift the most. I have often lamented that impact philanthropy has strangled out all the institution building big gift philanthropy of the late 80s and early 90s. Most the groups I respect in terms of impact, Partners in Health, Echoing Green, Teach For America, City Year, all started with a major million dollar or more gift in the first year. For an entrepreneur that is pretty darn useful to start an enterprise, you can staff off of that, you can build both a program execution and a fund raising team. Starting with 50-100K it’s a bit more of a challenge. You are constantly just treading water to creep upwards with your budget.
Unfortunately for most small orgs today the world metric based philanthropy has crushed innovation and the big bet gift that has created some of the truly great philanthropic groups. Small groups compete with imaginary efficiencies (I’ll be glad to defend this point in more detail to anybody in another post, many big org metrics are skewed when you look deep at their books and on the ground impacts. Many groups “sell” to the public subsidized philanthropic products basically “loss leaders” and capitalize on brand to draw in the gifts. It is not $1 to feed that kid for a week or $25 to get them that cow in a $100 a cow market. Sorry.) .
There are incredibly talented development people with strong contacts who raise hundreds of millions of dollars for big organizations like the ones I just mentioned, who could do a lot of good in the world by going solo and helping smaller organizations bring some new innovation into social enterprise. Somebody accustomed to raising 50-100 million for a big org could probably do a lifestyle changing business, cutting their work week dramatically while earning the same salary, by only raising 10-20 million divided between a handful of smaller up and coming orgs.
Too many of these consultants though just step off the treadmill to do training. Which is hard for small organization EDs to really take advantage of, in the new organization juggling act. I know plenty of amazing EDs who become great fundraisers eventually, but not in balance with the needs of the orgs. There need to be more contractors and less consultants in this field, people who will treat it as their job to do the work and the heavy lifting of the fund raising task instead of just offering advice.
If the mission of the NGO is the service to the community, and fund raising is truly something administrative (as most donors like to classify it in costs analysis), then it should be something an NGO can easily subcontract. NGOs subcontract back end services all the time, book keeping, accounting, payroll. I don’t hire somebody to tell me how to reach into my heart and find my inner book keeper, I hire a book keeper. Why not fund raising?
Aside from finding the right contractor the boutique fund raising pricing is out of whack with the resources of its potential customers. Contrary to common development director and contractor beliefs, to build a truly sustainable client base they need to work just from commission or fee on delivery of gifts. The barrier to entry for customers in this industry is that most the the small, effective and compelling orgs lack the funds to pay a fee up front to hire one of these contractors.
If the contractor wants a stellar portfolio of orgs, ones that take off, they need to run from a comparatively small commission based or fee for award based service. Most small orgs trying to compete for the next level of grant support can’t afford a greater than 10% investment in fundraising. If a contractor can raise 20 million between a few groups, 10% is certainly sufficient to run a successful, profitable, boutique business providing these services.
In closing since this is posterous and not the TED stage I’m gonna pitch. AIDG needs to run a several million dollar fund raising campaign to adjust to our new post disaster programs and the reality of the countries we work in. If we want to do things right for the communities and become sustainable off of major international aid this is where we need to go. If you are a professional, you don’t get paid a cut greater than my indirect costs rate, if you have a track record and proven references I invite you to contact me to help us on this. Prove to me the industry is not the dimly lit thule I imagine it to be.You’ll be doing a service to the world. Trust me I’m serving my constituents much better dealing with a training curriculum or product design issue than thinking about the right turn of phrase for a donor letter.
Don’t leave me having to answer my constituents, when they come to me like Tom Cruise, “Sorry we can’t get you water because there is just no money to be shown.”
In Social Enterprise force yourself to be an entrepreneur first
October 22, 2009
Entrepreneurs or Idiots?
Don’t let the social overtake the enterprise.
As I sit at my desk in Guatemala reading the business plans of the finalists of our Guateverde competition (http://www.guateverde.com) I keep thinking about my start in social enterprise and all the mistakes I made in getting AIDG to the point where we will now invest in local enterprises over the next five years. I also think about all the other social enterprises I have seen over the years that have closed down.
I am routinely heartbroken by seeing good small international programs close down, putting kids back on the street, ending that production of biodiesel, stopping the youth empowerment program, because the social entrepreneurs that started them lost focus of some of the basic fundamentals of managing an enterprise. It is easy to get swept up in the mission but don’t be a “buro” and have to watch the doors on your program close.
Talking to major donor early in my program he did not seem impressed with my metrics or organizational strategy. My quick repartee? “But you have to take into account I only started with $800 and a bag of tools” His reply “I will take that into consideration”. Translation: “Honestly you were a well paid programmer and you started with only $800? You aren’t an entrepreneur, you are an idiot.”
Fortunately if you are starting a new program abroad you don’t need to be an idiot like I was. Here are ten “rules” of starting an international service organization that would have helped me if I had known them a few years ago, and maybe can help you. To anybody running an organization they may seem obvious but it is amazing how many early stage entrepreneurs ignore them while focussed on the mission of trying to just get the school built, the pollution reduced, the farm running, etc. With these rules maybe you can start an enterprise that is as much enterprise as it is social.
Rule number 1: Don’t start a new organization
There are literally millions of established organizations globally that are in need of support. Before you start something new ask yourself: “What can I do to help something that is already here become more effective?” There are several programs I know of now that if I had learned about them earlier and applied to a management position it could have likely saved me a few years in getting my program running.
Rule number 2: Clearly define what you do and stick with it
So in the face of massive unmet need there is always the temptation to run the feeding-housing-water-sanitation-ecotourism-renewable energy-child education-dolphin saving program. But unless you are say putting up a millennium village presenting this type of program to funders can be a tough sell. To draw an example from my experience at AIDG donors may not see the clear link between a program in say ecotourism and a program in say light industrial fabrication. Don’t be a swiss army knife. Do one or two things well and be selective about program expansion.
Rule number 3: Clearly define your budgets and cash flow, and track your variance
Put down your shovel, or wrench, or blackboard and pull out an excel sheet (A great template from the for profit world is available here: http://caribbean.smetoolkit.org/caribbean/en/file/195?1194044785 ). Figure out what your budget is month by month, your cash flow and income, set targets and track the variances. If you are living month to month do everything you can to cut your burn rate to the bare essentials, and then build your cash reserves. It does nobody any good if your program closes because that grant you were expecting in January doesn’t show up till March. And without getting it all down you will never see that dry spell coming.
Rule Number 4: It costs more than you expect, get more than you need
Honestly don’t be afraid to ask for enough money to really have impact. If you have a well communicated business plan, have made the right connections, have the right board and advisors you have a better chance of making your impact by starting with enough resources to actually enact your mission at some scale instead of constantly being stuck dealing in trials.
Rule number 5: Get legal, and stay legal.
In developing countries this can sometimes mean months and even years in bureaucratic limbo. But you want to be formal from day one. This also might mean paying yourself according to US labor laws if you are a US charity, getting insurance, getting title to that truck you picked up at the border. Get it all in writing, your contracts, your grants, your projects, your partnerships, and keep those records. The sooner you are clean cut and can show all the proper documents the sooner you will attract capital.
Rule number 6: Pay yourself and your staff from the beginning
Everybody wants to volunteer for a good cause but many early stage Social Entrepreneurs volunteer for months or years without compensation or on base living stipends. I’ve seen more than a few programs shut down or almost shut down because the social entrepreneurs were so flat broke/in credit card debt they had no choice but to go back to work again in the states. The worst service you can provide a community is to start a program that is good and then force it to close suddenly because you put yourself at financial risk.
Rule number 7: Communicate openly with your staff and board, and have clear roles and responsibilities
It is important from the point of hire to be clear with people what their roles and responsibilities are, who is accountable, and who has the final say in decisions. I have seen an organization lose a million dollar grant because of conflict between staff, board and management about goals with no clear deferment to one party.
Rule number 8: Treat both constituents and donors as customers
Most NGOs when they are small lose track of their donors while they are wrapped up in providing good services for their constituents. It is an unfortunate donor as ATM mentality. With some large NGOs this switches and the donors tend to take priority. To be successful treat both donors and constituents as customers you want to keep happy. If you talk to both donors and constituents on a regular basis you have a good shot of creating an effective organization.
Rule Number 9: Play nice with others
Partnership and collaboration in the Non-profit world is always better than competition. In fact if you ever want to work with multilaterals it may be your only way in the door (many multilaterals use partnerships as an introduction mechanism for funding). Start early and figure out how to leverage the strengths and experiences of other more established groups instead of doing everything yourself.
And the final Rule: Don’t be a non-profit.
Bogo light, Toms Shoes, SKS Microfinance, there are plenty of examples of organizations that can scale quickly in providing services to people because they are for profit entities. Investment can be easier to find than donation and making money with each client served is always more scalable than losing it. While sometimes, like the case with AIDG’s training services, there is a need that it would be difficult to establish a profit model around, there are plenty of social ills that can be met in a for profit model. See if your cause fits.
Posted by Peter Haas