Professional Documents
Culture Documents
Changing The Ecosystem
Changing The Ecosystem
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This paper was published with the support of the John D. and Catherine T. MacArthur Foundation.
Blueprint Research + Design, Inc. helps grantmaking foundations, individual and family donors, and philanthropic net-
works achieve their missions. We offer services in strategy + program design, organizational learning, and
evaluation, and we think and write about the industry of philanthropy. Since 2004, Blueprint has provided the John D.
and Catherine T. MacArthur Foundation with research, advice, and documentation of the Digital Media and Learning
Initiative. That work includes the writing and distribution of five reports on field building, written for the public, as a
means of informing the field of philanthropy and as a way to strengthen the emerging field of Digital Media and
Learning.
The MacArthur Foundation’s Digital Media and Learning Initiative aims to determine how digital media are changing
the way young people learn, play, socialize, and participate in civic life. Answers are critical to education and other social
institutions that must meet the needs of this and future generations. Through November 2009, the foundation has
awarded 106 grants for a total of $61.5 million to organizations and individuals in support of digital media and learn-
ing. The grants have supported research, development of innovative technologies, and new learning environments for
youth — including a school based on game design principles.
Changing the Ecosystem of Change
no longer the only choice. As foundations are actually in a unique posi- only choice.
Leaders in the field of evolutionary economics In order to achieve widespread impact, social
have observed two types of innovation that entrepreneurs like Skoll are eschewing nonprofit
advance social systems: advances in physical and organizational structures in favor of traditional,
social technologies.5 The former include yet social-minded, businesses in order to solve
environmental and technological developments, community and environmental problems nimbly
while the latter include new models of organiza- and even profitably. Returned Peace Corps
tion. The twenty-first volunteer Sam Goldman founded D.light to
Social entrepreneurs … are century has brought replace kerosene lamps with safer and cheaper
eschewing nonprofit organizational wide-ranging physical solar lamps throughout West Africa. Goldman
structures in favor of traditional, change in the form of considered starting a nonprofit organization but
yet social-minded, businesses … technological advances, ultimately decided that the venture could only
and now may well be a spread across the developing world by operating
perfect opportunity to as a for-profit enterprise. “We could have done it
consider new organizational models that can lead as a nonprofit over a hundred years, but if we
to advancements in social innovation as well. wanted to do it in five or ten years, then we
believed it needed to be fueled by profit,” he told
Different Sources for Innovation and Change the New York Times. “That’s the way to grow.”6
Alice Waters and Judy Wicks’ pioneering contri-
butions to the locavore movement were catalyzed Different Funding Styles
by their status as chefs and business owners first; More often than not, in order to fuel change and
their activism emerged later. Increasingly, the growth, funders need to consider not just their
business community has been producing many grantees’ work but their own internal organiza-
such social-minded innovators who are interested tional culture. Consider the recipients of the 2009
in maintaining one foot in the commercial sector Scrivner Award for Creative Grantmaking given
while working toward social change. Another by the Council on Foundations to Geri Mannion
example is former eBay head Jeff Skoll, who, in of the Carnegie Corporation and Taryn Higashi,
addition to launching his own grantmaking foun- formerly of the Ford Foundation. The two grant-
dation, also runs a for-profit film production makers co-founded the Four Freedoms Fund in
company. Skoll bet that instead of funding 2003 to support integration and civic participation
environmental organizations as his sole strategy to efforts for immigrants, building an infrastructure
been viewed more than six million times since its the law permits grants attention from philanthropic
funders for its ability to achieve
December 2007 launch. A brief documentary made to individuals,24
scalable, sustainable impact and
about the perils of consumerism, the video has private foundations have its potential for generating some
been screened in schools across the nation and has tended to fund individuals return on investment.
been integrated into countless lesson plans. The only in the form of schol-
hosted website also contains links to a number of arships or to make contri-
nonprofit organizations, educational resources, butions via fiscal sponsors, which are 501c3
and volunteer opportunities, and click-throughs entities willing to vouch (for a fee) for the
have no doubt been recorded and noted by the individual’s permanence or acumen or to lessen
site developers and funders. While one school the administrative burden and cost of disbursing
board has banned the video, many other educa- small grants to multiple individuals. 25
tors laud it for raising sensitive issues and offering
a segue into difficult conversations.23 “The Story However, today, a number of options — from
of Stuff ” offers a creative repackaging, if not an funding of individuals to a number of other alter-
entirely new idea — an approach at odds with the natives to the 501c3 regulatory model — exist for
traditional foundation funding model but still the social sector. These alternatives enable foun-
successful by most measures. dations to consider and utilize a much wider array
of options in their quest for impact.
Different Corporate and Tax Structures
Traditionally, it has been advantageous — not to One alternative to the traditional 501c3 is the
mention easier — for funders to make their for-profit social enterprise — what Bill Gates
donations to nonprofit organizations. In the calls “creative capitalism” and Muhammad Yunus
United States, this has meant that funders usually calls “social business.” The for-profit social enter-
contribute to organizations that have adopted the prise sector is increasingly gaining attention from
501c3 tax-exempt status normally conferred philanthropic funders for its ability to achieve
upon charitable, religious, and educational groups. scalable, sustainable impact and its potential for
Although other nonprofit organizations also generating some return on investment. As the
enjoy tax exemption, their status as lobbying or sector continues to develop, vehicles to help both
Networks
Barr Foundation, “Networks and Philanthropy,”http://
www.barrfoundation.org/usr_doc/Networks_and_Philanthr
opy_- Marion_Kane_-_Funders_for_Smart_Grow.pdf.
6
Prizes and Competitions Marci Alboher, “A Social Solution, Without Going the
Grantcraft, “Using Competitions & RFPs,” Nonprofit Route” New York Times, March 4, 2009,
http://www.grantcraft.org/dl_pdf/competitions.pdf. http://www.nytimes.com/2009/03/05/business/small
business/05sbiz.html.
McKinsey & Company, “And the Winner is…,”
7
http://www.mckinsey.com/clientservice/socialsector/And_ Council on Foundations Press Release, “The Council on
the_winner_is.pdf. Foundations Celebrates Philanthropic Leaders, Announces
Annual Award Recipients,” April 7, 2009.
Social Enterprise
8
Blueprint Research + Design, Inc., “Community Taryn Higashi and Geri Mannion, “To Our Four
Foundations and Social Enterprise,” http://communityphil- Freedoms Fund Colleagues, with Gratitude and Deepest
anthropy.org/downloads/CF_FutureMatters_Winter08.pdf. Respect,” http://www.publicinterestprojects.org/
files/imce/With_Gratitude_and_Deepest_Respect__2_.pdf.
REDF, “If the Shoe Fits: Nonprofit or For-Profit? The
Choice Matters,” http://www.redf.org/learn-from-redf 9
“About FACT,” http://factservices.org/about.html.
/publications/123.
10
The Tax Reform Act of 1969 established a six percent
Robert A. Wexler, “Effective Social Enterprise – A Menu of minimum payout rate for foundation investment assets; in
Legal Structures,” The Exempt Organization Tax Review 1976 the rate was reduced to five percent.
63:6 (June 2009): 565, http://www.se-alliance.org
/resources_wexler09.pdf. 11
Quoted by Sean Stannard-Stockton, Philanthropy
Advisors website, “Are Foundations Inept, Boring & Scared
Social Enterprise Alliance, “Funding Them to Fish: Final to Fail?” September 19, 2007, http://tacticalphilanthropy.com
Report,” http://www.se-alliance.org/sundance /2007/09/are-foundations-inept-boring-scared-to-fail.
_final_report.pdf.
12
Heidi Waleson, “Beyond Five Percent: The New
Foundation Payout Menu,” http://factservices.org
/DLs/Beyond5_Report.pdf.
NOTES
13
John Hunting, “Giving While Living: The Beldon Fund
1 Spend-Out Story,” March 2009, http://www.beldon.org
Joel Fleishman, The Foundation (New York: Public Affairs,
/files/beldon/BeldonFund_1.pdf
2007).
14
2 Eric Frazier, “Every Dollar Spent,” The Chronicle of
Lucy Bernholz, “Necessity is the Mother of Social
Philanthropy, May 21, 2009, http://www.beldon.org
Innovation,” December 5, 2008, http://philanthropy.
/files/beldon/ChronicleofPhilanthropy.pdf.
blogspot.com/2008/12/necessity-is-mother-of-social.html.
15
3 Beldon Fund press release, May 15, 2009, http://www.
Thierry Rayna and Ludmila Striukova, “The curse of the
beldon.org/files/beldon/beldonpressreleasemay1509.pdf.
first-mover: when incremental innovation leads to radical
change,” International Journal of Collaborative Enterprise, Vol. 1, 16
Mario Morino, “Chairman’s Corner: Nurturing the
No. 1, 2009.
National Reef,” June 2009, http://www.vppartners.org
4 /learning/perspectives/corner/0609_nurturing-the-nation-
Lucy Bernholz, “Institutional Isomorphism,” May 7, 2009,
al-reef.html.
30
21
Cyriac Roeding, “The Next Steps to Accelerate the On Being Small,” Ewing Marion Kauffman Foundation
Tectonic Shift in Mobile, Part 1,” on iFundVC website, website, http://www.kauffman.org/about-foundation/
http://ifundvc.com/2008/10/29/the-next-steps-to-acceler- schramm-on-being-small.aspx.
ate-the-tectonic-shift-in-mobile-part-1.
31
Ibid.
22
“A suite of modules for FrontlineSMS,” FrontlineSMS:
32
Medic webpage, http://medic.frontlinesms.com Ellen Schneider, quoted at Beyond Broadcast 2009, June 4,
/product-tour/. 2009. Cited in USC Annenberg News, http://annenberg.
usc.edu/AboutUs/News/090604Panel1.aspx.
23
Leslie Kaufman, “A Cautionary Video About America’s
33
‘Stuff ’ ” New York Times, May 10, 2009, “Changing Views on Social Issues: Allemande Left.
http://www.nytimes.com/2009/05/11/education/ Allemande Right,” press release, ABC News/Washington
11stuff.html. Post Poll: Hot-Button Issues (April 30, 2009), http://
abcnews.go.com/images/PollingUnit/1089a6HotButtonIssu
24
GrantCraft’s “Grants to Individuals: Investing in People es.pdf.
and Their Communities” informs us that under U.S. tax
34
code Section 4945, Regulation 53.4945-4, private “Service: Progress,” White House website,
foundations are allowed to make three types of grants to http://www.whitehouse.gov/issues/service/.
individuals: scholarships or fellowships, specific-objective or
35
product grants, and prizes/awards with no strings attached, Ibid.
http://www.grantcraft.org/index.cfm?pageId=1020.
36
“Healthcare X PRIZE Initial Prize Design,” X PRIZE
25
The majority of foundation funding is awarded to organ- website,http://www.xprize.org/files/downloads/health/HX
izations, creating a competitive environment among the P_Initial%20Prize%20Design_v1.pdf.
individuals seeking foundation funds. The Foundation
37
Center estimates that while 300,000 individuals received “What We Fund: Pioneer,” Robert Woods Johnson
funding in the form of grants or scholarships in 2006, the Foundation website, http://www.rwjf.org/pioneer
amount represents only 9.8 percent of total dollars disbursed /approach.jsp.
in foundation giving for that year. Most grantmakers place
38
very specific limitations on their giving to individuals, since Ibid.
provisions for grants to individuals require advance approval
39
of the program by the IRS. For this reason, grantmakers Van Jones, Letter to the Editor, New Yorker, February 9,
usually cannot make exceptions to their program guide- 2009, http://www.newyorker.com/magazine /letters/2009
lines, even if presented with a compelling case to do so. /02/09/090209mama_mail2.
41
“IRS Cautions Against Low-Profit Limited Liability
Investments,” http://www.cof.org/whoweserve/templates
/311.cfm?ItemNumber=16653&navItemNumber=14860.
42
“About the Digital Media and Learning Competitions,”
HASTAC webpage, http://www.hastac.org/about-digital-
media-learning-competitions.
43
McKinsey and Company, “And the winner is…,” 2009.,
http://www.mckinsey.com/clientservice/socialsector/And_
the_winner_is.pdf.