The Birth of a New Era for Innovation?

The Birth of a New Era for Innovation?

The President spoke today to a room full of “do-gooders” in the White House about the administration’s new $50 million Social Innovation Fund, a pot of money created to find and expand existing social innovations — as opposed to creating new government programs — in the hope of solving serious social problems.

The fund, as I understand it, will essentially work as a giant driver of growth capital: Melody Barnes and her team build a massive due diligence program, take a road trip to find the best social innovators in the country, offer them a matching grant (the second half is required to come from the private sector) with the sole purpose of program expansion, and voila.

This sounds ideal. It shows that the Obama administration understands the (likely) fact that social innovators and entrepreneurs know their sector better than government bureaucrats do. That trusting the people who’ve been doing this for decades, building up an understanding of what really works, might be the best course of action. Basically, instead of flying in, cape in hand, to create a panoply of new social programs, the White House has decided to…well…outsource.

All of this is good news. Growth Capital-esque funding? Good. Fewer Government programs clogging the system? Good. Letting the experts be the experts? Good. Demanding collaboration between social innovators, government, and the private sector? Good.

But I have three questions I’ll be trying to answer as this new endeavor plays out:

1. With countless private foundations around the country squabbling to define the ideal due diligence process, how does Washington know exactly how to build one? How will we be certain that those deemed the “best” programs really are the best programs? The Innovation Fund team has a considerable social and political weight to carry here; how they draw up this criteria could change the nonprofit sector.

2. How far does $50 million really go? In my experience, scaling a good program nationally — even state-wide — is hugely expensive. It can cost $20 million to scale a good program to one new site or city. With matching dollars, the fund’s amount can leverage $100m, perhaps even $200m; but is that enough to really bring about the kind of social change that was discussed this afternoon? The Education Secretary’s “What Works Fund” carries $650m, after all; why is there such a large disparity?

3. When push comes to shove, how skilled are we at expanding good programs? Matthew Bishop mentions on his Philanthrocapitalism blog that, “There is not much of a track record of scaling up non-profits to draw on for guidance.” Unfortunately, this is largely true. The sector has a few outstanding performers, many of who have come from the private sector, who scale their non-profit programs expertly. But there are countless failures for every success story. Growing a business is just as difficult for a non-profit as it is for a for-profit. There are mis-calculations in budgets, market niches, growth rates, revenue, and expenses. With just $50 million, will we be able to prove the worth of this type of support?

So, no. I don’t think the Fund’s path is completely sorted out. There will be bumps on the road, but, in my eyes, this is already a success simply because of what it represents. Besides, social innovators have charted territory before, and they will again. And Obama said himself today, “There’s no such thing as a lost cause if you’re willing to…take some risks… .”

1 Comment to “50 Million Dollars Worth of Social Innovation”

  1. [...] are not always particularly responsive to the nonprofit community. As Betsy Fuch points out in her Modern Giving blog, the Education Department’s What Works Fund has $650 million in stimulus money to play [...]

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