Where's the Capital Market for the Social Innovation Fund?
One of the interesting comments I received on my Social Innovation Fund (SIF) posts came from Steve Goldberg, who participated in the proposal review process. He writes, “by selecting the best intermediary proposals irrespective of extraneous considerations like geography and social issue, the SIF fosters a more coherent and intelligent nonprofit capital market.” I tend to agree with Steve’s statement and don’t believe I called into question the geographic or priority issue distribution. My post earlier this week focused more on noting the absence of innovation and health-focused funding – a theme that echoed results from the recent Social Impact Exchange conference – and the current distribution of SIF subgrantee funding in the northeast.
Steve’s second point about fostering a more coherent and intelligent nonprofit capital market is true. But here, I think that’s the case only to a limited degree. The way the SIF has been established and managed has resulted in a list of both intermediaries and subgrantees (which will expand as more are identified) that warrant additional growth capital and investments.
The SIF at this moment is an imperfect market. Possible investors in the capital market only know of those applicants that successfully won grants in this competition. The universe of 58 intermediary applicants and their pre-selected subgrantee candidates (if any were identified) that did not get awarded grants remains hidden. In theory, those organizations represent other funding collaborations and partnerships that leverage philanthropic resources with demonstrated innovative approaches. And as my colleague Geri Stengel, who also served as a SIF reviewer, noted, at least one “had the most transformational model.”
So, how do we get to see the whole SIF market place, i.e., the forest alluded to by Steve? At a minimum, the Corporation for National and Community Service (the Corporation), which administers the SIF, could follow the U.S. Department of Education’s example, particularly with its Investing in Innovation (i3) program (hat tip to Mark Fulop for reminding me of that). The i3 program will announce its grantees next week (August 5). In a fantastic step in transparency, the Department of Education will also release peer reviewers’ comments for all highest-rated applications and proposal narratives for highest-rated Scale-Up applications. At a later date it will publish the narratives for the highest-rated Validation and Development applications.
Of equal importance, the Department of Education has truly embraced the idea of creating a marketplace for the application ideas it received. It has placed all the proposals in a public searchable database that provides details on each application received. Further, it has directed its applicants to Foundation Registry i3, a website launched by the Bill & Melinda Gates Foundation with the help of other funding organizations, to attract additional philanthropic support that can be used to fulfill the matching requirements of the program. Nearly 1,700 eligible proposals were received, but only 70 are expected to receive grant awards (see Jennifer Cohen’s excellent Mining the Investing In Innovation Grant Data post). A lot of good ideas may end up not getting funded by the Department of Education. But, the data.ed.gov and Foundation Registry i3 sites are helping to create a true nonprofit marketplace that could channel additional funding to those worthwhile proposals not awarded grants by the Department of Education. This approach should be emulated by the Corporation to further expand the reach of the SIF and create a true nonprofit marketplace.