Running a non-profit social purpose enterprise is akin to riding a bicycle on a high wire while juggling. With the right amount of determination and skill it can be done, but at the end of the day you’re exhausted and hoping that you haven’t dropped any balls along the way. When you add an additional level of complexity such as an ongoing partnership with a venture philanthropist, it might appear that you are now asking the cyclist, on top of everything else, to ride backwards.
As the past President and CEO of Community Vocational Enterprises (CVE), a non-profit organization (NPO) receiving ‘investment’ funding from a venture philanthropist (VP), I can attest first hand to the triumphs, challenges and changes an organization faces when entering such a partnership.
The first and most obvious change is in vocabulary. Words like ‘portfolio’, ‘investment’, ‘partners’, ‘double bottom line’, ‘venture committee’ and ‘return on investment’ are in everyday use – and they are not mere words; they represent philosophical values that play out in the day-to-day interactions between the different entities involved.
REDF and the VP model – five-year planning cycles, flexibility of funding to meet business needs, and mutually defined goals and expectations – bring a new way of thinking to the non-profit community. REDF’s funding cycle alone is worth the price of admission. While there is no guarantee that the funding will continue, in all likelihood REDF will continue as a partner for the full five years and perhaps longer. As a non-profit the significance of this cannot be overstated: time normally spent on researching and writing grants on a yearly basis can now be spent actually fulfilling the mission of the organization.
After the cheque is cashed
An NPO/VP partnership is unlike any other funding relationship. While it is true that there is an exchange of money for a promised outcome or service, the funder – and perhaps more importantly the funder’s voice – does not disappear when the cheque is cashed.
What this meant for CVE is that we were not alone in defining expectations and outcomes or even, to some extent, in running our enterprises. As an entrepreneur used to making my own decisions, with some initial distrust of REDF’s motives and level of commitment, I found this took time to accept. Accepting that problems could be shared freely with REDF without financial or other repercussions was particularly hard. In reality, funding bodies often ask for outcomes data, but as future funding often depends on how successful you are with the grant, successes tend to be played up and problems minimized. We came to learn that talking about our failures with REDF could be highly beneficial as we then took a team approach to solving our problems.
This can in fact be the single biggest contribution that a VP can make to a non-profit – especially when a non-profit expands beyond its comfort zone and takes on the issues of the business world. When the CVE team hits a knowledge/skill wall REDF comes in to help, either directly or through a consultant.
Difficulties can of course arise when the NPO and VP disagree on the direction of the business(es) and what role the VP should play in finding other funders to assist in the business enterprises and helping plan an effective exit strategy. All these issues have been openly discussed between REDF and CVE, and ultimately agreed upon.
Power and control
One issue to consider when looking at the VP/NPO relationship is that a minority funder may have a disproportionate voice in determining the future of the non-profit. In our case, REDF assumes a significant role in the future direction and growth of our enterprises. While this has presented no particular issue to the CVE board, staff or other funders, it could be a big issue for other organizations.
While the word partnership is both used and felt, the reality is that there is still a power imbalance. While a VP can find other partners to fund, a non-profit’s ability to find another multi-year funding partner with the same level of commitment almost non-existent.
Clearly this type of collaboration will not suit all non-profits. Some would find the partnership invasive. VPs in turn need to be clear about their level of commitment: are they really willing to take a ‘whatever it takes’ approach to help the non-profit reach its financial and programmatic goals? Finally, even when both partners believe in the concept, a good match between the non-profit and the VP is vital.
The CVE/REDF partnership has proved highly successful, resulting in a tripling of our business income over six years. In addition, it has for ever changed our way of doing business, and ultimately given us the tools to continue long after the partnership ends. I hope to create a relationship with a VP here in Virginia with my new organization, Northwestern Workshop. When all’s said and done, running a non-profit organization is still like riding a bicycle, but when you have a good VP partner it becomes a bicycle built for two.
John Brauer is director of Northwestern Workshop, Virginia, USA. He can be contacted on +1 540 677 0809 or at firstname.lastname@example.org
CVE and REDF
Founded in 1986, CVE creates opportunities for individuals with mental health problems to successfully reintegrate into the San Francisco community by providing employment training and work experience through its seven business enterprises. Because it owns the businesses, it can control factors such as what hours are worked and how jobs are delineated. CVE’s seven businesses combined bring in around $2 million per year, with placement and other support services bringing in a further $2 million.
The partnership with REDF began six years ago to help CVE grow Industrial Maintenance Engineers (IME), its janitorial business. It needed to expand and to create more sophisticated training, financial and accountability systems. Over time the partnership grew to include other existing CVE businesses and to develop new enterprises.
In addition to an annual grant of $100,000, initially agreed for five years, CVE was ‘entitled’ to request additional funds for such capital expenses as the growth of the businesses warranted. REDF also covered costs such as computers, consultants and personnel needed to help with the business expansion. At any one time, even with these ‘extras’, REDF’s contribution was never more than 10-20 per cent of CVE’s total budget.
The outcomes promised by CVE in return for this support initially involved financial expectations in terms of both gross revenue and net income. Over time, other expectations were added such as number of employees with disabilities to be employed per quarter, number and type of contracts, etc. These outcomes were achieved on a consistent basis. Occasionally CVE failed to achieve the full objectives for the quarter, but these were usually accomplished ahead of schedule, and were sometimes modified or increased to reflect CVE’s accomplishments. Monthly ‘venture committee’ meetings were held to review the objectives, results to date, etc.
REDF tends to run in five-year cycles, and meets with each group separately to talk about whether they should stay in the portfolio for the next year. CVE started in the REDF portfolio as one of ten non-profit social entrepreneurs, but by the end of the five-year period almost half had exited for a variety of reasons. Five of the ‘original’ groups went forward into the next five-year funding cycle, together with a handful of new groups.