High engagement philanthropy (or venture philanthropy, as it is also known) has become more and more common over the last decade. Funders and nonprofits are finding new ways to work together to complement and maximize the impact of monetary grants, often with great success.

In the under-resourced nonprofit world, it can be tempting to welcome any kind of help a funder might offer – after all, the more the better, right? Not necessarily. The choice about whether to enter into an engaged relationship with a funder must be weighed carefully. These partnerships can be powerful ways to strengthen an organization’s capacity, but engaged philanthropy isn’t for everyone. To make a smart decision about whether your nonprofit organization is “ready to engage,” consider whether some of the key elements of a successful relationship are in place.

Common goals and values.

Entering a high-engagement relationship with a funder is a bit like choosing a companion for a cross-country road trip: a good match can be the foundation for a positive shared experience, while a bad one might mean discovering half-way through that you weren’t even aiming for the same destination to begin with.

Before you decide to partner with an engaged funder, it’s crucial to make sure that you and the funder have the same broad goals for your organization. Some investors, for example, focus exclusively on growth or even national expansion; is this your top priority, too? If not, you and your new partner may find yourselves in conflict at key decision points, a situation made even more challenging when the funder has already made a significant, multi-year financial commitment. In contrast, when goals are well-aligned from the beginning, an engaged funder can be a powerful ally. Be sure to have candid discussions with a potential high-engagement investor -- before you partner -- about your goals for your organization and the relationship.

As you have these conversations, you can also begin to imagine what an ongoing partnership would be like. Is the potential investor responsive to your needs and questions? Do they communicate clearly and effectively with you? Are they open to learning from your organization? Do they follow through on what they say? Your early discussions can be a good indicator of how things will work after your partnership begins.

Investment of resources – theirs and yours.

High engagement is a two-way street. At its best, it’s a collaborative relationship in which each party shares its resources (including time), experience, and knowledge so that together, the two organizations can accomplish their goals. It can go terribly awry when there are disagreements about the level of participation that’s expected.

"High engagement is a two-way street."

Drawn by the allure of receiving long-term support from a potential funder, many nonprofits underestimate what will be required of them in a highly-engaged partnership. This can vary across funders and even across a single funder’s grantees, but one thing is clear: both parties must actively participate in order to reap the benefits of engaged philanthropy. Be sure you understand in advance how much time – and whose – your organization will need to contribute for meetings, joint projects, reporting, and other activities. You’ll also want to know how much participation to expect from your potential funder. In addition, consider whether the funder’s skills and assistance match what your nonprofit really needs, especially since you’ll be asked to dedicate time and energy to these efforts too. (The most effective engaged philanthropists will minimize any requirements that don’t serve a useful purpose for your own organization.) Finally, if you are considering partnerships with more than one engaged funder at once, think carefully: nonprofits often find that one such relationship at a time is all they can handle, because of the significant effort required.

Transparency.

True transparency is a quality that is sadly lacking in the traditional philanthropic sector. Nonprofits are often understandably uncomfortable baring their weaknesses to funders, and funders can be vague about how they will measure the success of their grants. In high engagement philanthropy, however, these barriers can significantly hinder the development of an effective relationship.

Experienced engaged funders know that nonprofits can be plagued by organizational challenges, and in all likelihood, they’ve already seen the kinds of problems you’re facing in their other grantees. It may feel scary to tell a major investor about your real organizational warts, but unless you do, they are powerless to help. Over time, as the trust and respect between partners increases, these candid conversations will become easier. The first one, however, can feel like a leap off a cliff – but it’s crucial to building an honest, productive partnership.

Funders, too, should have transparency as a goal. They should be very clear about what they plan to provide, and what they expect from you in return. As the relationship progresses, they should create regular opportunities for two-way feedback, where they share their impressions of the relationship and also ask for yours.

Long-term commitment.

Multi-year relationships are critical to the success of engaged philanthropy – it takes time to build trust and to understand how to collaborate effectively with a new partner. Think carefully about entering a relationship with an engaged funder that will last for less than two years; will you really be able to accomplish what you hope to? An effective engaged funder will stay involved over a number of years (at least three and preferably more), and will work with you to help build your organizational capacity so that when the funding relationship does end, your nonprofit will be prepared.

High engagement philanthropy has great potential to bring funders and nonprofits together in innovative ways. Our experience at REDF has shown that successful relationships can produce increased trust, effective collaboration, strengthened organizational capacity, and lasting social change – particularly when both parties enter the partnership having carefully considered whether engaged philanthropy is right for them. Nonprofits can help ensure success by investing time for careful thought and reflection before they agree to an engaged relationship with a funder.

Kristen Burns is the President of REDF. As President, Kristen sets REDF's strategy, oversees its operations, and provides assistance and coaching to REDF Portfolio members. Under her leadership, REDF maintains its rigorous measurement practices and demonstrates the effectiveness of social enterprise in creating lasting positive change in the lives of low-income and formerly homeless individuals.

Kristen Burns - Oct 19, 2004 5:36 pm (#1 Total: 9)
REDF


I'm interested in hearing others' thoughts on how a nonprofit can assess its own readiness for a highly engaged relationship with a funder; I imagine there are additional perspectives out there. Looking forward to a lively discussion!

bigchainring - Oct 21, 2004 9:20 am (#2 Total: 9)


hi

I work at the ymca in boston, to help integrate computer/internet technology into core ymca programming...or at least that's my 10 second line when people ask me what I do;)

This discussion caught my eye, because I have talked to my boss about the possibility of exploring venture philanthropy. I got a less than enthusiastic response.

I believe that vp may actually help to jump start because we are at a point where the tracking and gathering of data about the "cyberYs" (now that they are up and running to some degree) is becoming important for [continued] funding reasons.

From what I have read, I believe that the business process focus of vp would help not just the Y, but many nonprofits, who may be stuggling to exist in a world of efficiency.
I'm also aware that a focus on business can go too far in the nonprofit world...but that is one of the "edges" I am currently exploring;)

My frustration after exploring vp orgs is that they all want their portfolios to go national...and I have read about several nonprofits that are having real problems with going national...I don't believe the effort I am involved with is ready to spread across other ymcas.

Interested to hear other thoughts/reactions..
thanks.
matt

================================== Matt Crichton CyberY Developer YMCA Boston/Training, INC. 617-542-1800 x32 mcrichton@ymcaboston.org bigchainring@hotmail.com Cyber Y: http://www25.brinkster.com/ymcaboston/index2.htm Personal: http://www20.brinkster.com/bigchainring/index.htm AmeriCorps VISTA 2000-2002 (Seattle, Boston)

We also pay the price of learning to fear each other.|| You see it everywhere: the fear of smiling and greeting someone else,|| fear of sitting to closely to certain people on the T and the overt|| fear of even rising our eyes to meet another’s while walking.|| It’s funny that the city forces us to live so compactly on top of each other,|| but we resist acknowledging that we do. (What's UP Magazine Sept04)

Kristen Burns - Oct 21, 2004 5:35 pm (#3 Total: 9)
REDF


Hi Matt,

Thanks for your post . . . yes, sometimes even within the same organization there can be very different perspectives about whether a relationship with an engaged funder is the right thing to do!

When the fit is right, venture philanthropy/engaged philanthropy can bring lots of rewards, including an increased focus on demonstrating results -- and the support required to get there -- as well as the application of business principles as appropriate. At REDF, we currently have five nonprofits in our portfolio who tell us (and others) that their work is strengthened as a result of our relationship.

When the fit is wrong, however, a highly engaged relationship can be a distraction at best and a disaster at worst. We’ve learned this lesson first-hand as well! In fact, we’ve written case studies about it – you can read more in a .pdf file available on our website at http://www.redf.org/download/boxset/REDF_Vol2_3.pdf.

Some venture philanthropy funders do specifically target nonprofits that are ready to “go national,” and I think you’re wise to consider whether your project is really ready for that yet. That said, not all engaged funders require their grantees to be on a national trajectory (few of REDF’s portfolio enterprises are) – again, it’s all in the fit.

tutormentor - Oct 21, 2004 7:53 pm (#4 Total: 9)
Cabrini Connections Tutor/Mentor Connection


I would welcome a relationship with a donor who shares the same vision and goals is willing to provide time, talent and treasure to help the enterprise be successful. I use my organizations web sites to achieve our mission, and as an invitation to investors who'd like to help.

The candid conversation with an investor is one I'd love to be having with lots of potential investors. However, I have trouble getting past the "send me a proposal" stage.

So, I'm waiting for the interested investor to show up so we can start developing a relationship. Is there a place to go to put your organization on a list?

The web site is www.tutormentorexchange.net.

Dan Bassill

peelcee - Oct 22, 2004 3:01 am (#5 Total: 9)
People's Life Center


--Your Message Here-- Greetings from peoples' life Center. It is 20 years servicing organization close contact with depressed people. We are having seven sectors. Through these sectors we implement the programmes. sectors name 1) DEVA Child development sector 2) Vidivelli working women federation 3) Dalit empowerment sector 4) Transsexuals empowerment sector 5) Minority council 6) Micro entreprenuership 7) Research and development sector. Kindly support us in all the ways (financial, technical, ideas and etc)

Kristen Burns - Oct 22, 2004 5:32 pm (#6 Total: 9)
REDF


When funders decide to make long-term, highly-engaged commitments to their grantees, a common side effect is that they may not be able to take on as many grantees at a time with the resources they have available, or that they can’t initiate new partnerships as often.

It might be valuable to make sure that the engaged funders you’re targeting are aware of your work even before they’re ready to consider a deeper relationship with you, so that when the time comes, you’re already on their radar screen. I’m not aware of a list for this purpose, but maybe another reader is? In my opinion, targeted conversations with the funders you’re interested in pursuing might be a more effective way to increase their awareness about your efforts.

A proposal can be a positive step; if you’re finding that your proposals aren’t successful, perhaps one of the funders you’ve approached would be willing to give you some feedback on the reason it was turned down? In the San Francisco area, I know of several organizations that offer classes and advice to nonprofits interested in increasing their proposal success rate; there may be a few in your city too. Even a few hours with a development consultant, reviewing your past proposals and gaining specific recommendations for future ones, might be time and money well spent. This is a challenge that most nonprofits share -- I encourage other readers to post their ideas as well . . .

For peelcee, I noticed from your other posts that you’re based in India. I’m less familiar with international efforts, but one organization you might be interested in checking out is NESsT (www.nesst.org). They operate in Eastern Europe and South America, and focus on nonprofit-run enterprises. Perhaps they’d be an informational resource for you.

edward - Oct 25, 2004 1:22 pm (#7 Total: 9)
self


In providing advice to a range of not-for-profits, I have concluded that a critical need for your organisation if considering engaging with a venture funder/partner, is to think clearly at the very start about eventual evaluation of projects. How will you, and your partner, monitor and evaluate the progress and outcomes of the joint activity? This thinking needs to cover what you will monitor and evaluate, how you will do this and why you will do it. I have seen in several cases that misunderstanding (and worse) arises between partners when it later becomes clear that there was no real shared and joint understanding of respective perceptions, needs and obligations to other stakeholders (perhaps including shareholders). If a not-for-profit thinks through these issues of monitoring and evaluation, this will be an important part of any assessment of readiness. This all sounds very obvious, but in the real world where we are all highly committed to our missions, it's always so much more tempting to 'just get on with getting a partner' than do the mundane work of figuring out the structures and processes around project delivery. --Your Message Here--

Kristen Burns - Oct 25, 2004 5:05 pm (#8 Total: 9)
REDF


A great point, Edward. It's critical to make sure you and your prospective partner agree in advance about what "success" will look like, and how you'll know whether you've attained it. And it's true, in the real world where money and resources are scarce, nonprofit leaders can be tempted to skip this step and engage with any partners who present themselves . . . a very risky move!

bigchainring - Nov 3, 2004 10:41 am (#9 Total: 9)


hi kristen I was disappointed to see so few posts...I think this is an important topic.

Here are some more questions I have...

This from…www.redf.org/faq_intro.htm..

1. “Venture philanthropists look for ways to be appropriately engaged in supporting the work of the nonprofit beyond simply providing funding.” What is appropriately engaged?

2. Access to long-term, adequate and appropriate financing. “If you want a venture that is economically successful, you will need managers able to deliver. They may come out of the nonprofit sector, but they must have the appropriate skill set to bring you the success you deserve.” Is there a bias towards forprofit being the only way to go for trying to do a business deal..? All forprofit and no nonprofit is bad. I believe each world can learn from the other.

3. Anybody have experience around social intrepreneurship? I feel this is what I’m doing inside the YMCA.

4. “At the same time it is important for nonprofits to understand the limitation of [MBA] student interns. While they provide a significant, meaningful contribution to nonprofits, there are also challenges to integrating them into the organization in an appropriate way. How to best make use of interested students is an important issue to be managed by each nonprofit.” Anybody have good/bad experiences with [mba] students?

5. “Smaller organizations have greater flexibility to approach their work and carry less of an institutional memory that needs to be shifted in order to pursue enterprise creation.” The YMCA is huge…and insititutional memory is probably very deep…anybody have experience with this?

thanks. matt crichton