Folly #49: Innovation Funding
How philanthropy impairs new ways of thinking.
Nonprofits are like startups in many ways. They tackle huge problems and difficult situations. Their missions demand new solutions to intractable circumstances – like Star Trek, they must boldly go where no man has gone before.
Only, they can’t.
What funder would support a completely new and unproven approach to a societal challenge? Startups pitch this all the time, but nonprofits that talk this way are described by donors as unproven and lacking a track record.
Funding and Talent
It comes down to resources. Startups have funding and talent. For the most part, nonprofits don’t.
Please don’t misunderstand me – I am in awe of people who work in nonprofits. There is absolutely no dearth of insanely talented people in the sector. What they lack is nonprofit roles that allow them to disrupt. They are square pegs who must fit into the round holes approved by funders.
The risk-averse philosophy of funders means that funding goes to nonprofit programs that reinforce the status quo.
Foundations rarely fund innovation.
(McKinsey & Co. defines innovation as the systematic practice of developing and marketing breakthrough products and services.)
Startup investors accept risk, and are rewarded handsomely with the occasional big success. Nearly all nonprofit funders (major donors and foundations alike) are risk-averse.
We Can’t Get There from Here
A scarcity of innovation funding punishes nonprofits. They’re not rewarded (with money) for trying new models. Among other things, that would require admitting that outcomes of current programs are lackluster. This is not a message that most nonprofits want to give a funder.
A colleague got me thinking about this. She’s one of those people I treasure – I never know where our conversations will meander, but they are always meaningful and thought-provoking. This time we talked about how hard it can be to foster innovation within the philanthropic sector.
This organization is highly respected, and an issue-focused convener of both nonprofits and funders. They also cannot achieve their mission by doing more of what they’ve been doing.
If you saw the Oscar-winning film Oppenheimer, you watched a high-risk approach to problem solving. (If you prefer a milder example, watch Arrival: scientists and linguists work together to communicate with aliens.) Their process was full of risk and disagreement. It was multidisciplinary. it encouraged questioning. There was no precedent for success.
Instead, nearly every foundation funds … doing the same thing.
I’ve spent my decades-long fundraising career within an hour’s drive of Silicon Valley, the epicenter of innovation. And while there are many generous donors who built their wealth in tech, there is also a surprising number who choose not to be philanthropic.
I have a simple explanation as to why this is. Smart businesspeople don’t believe that nonprofits can “do something” as well as they can. So they tell themselves one of two stories:
I’ll wait until I hit this next milestone and retire, and then I’ll get involved in giving back, because now I’m too busy to do it right.
I’ll wait until I have more money to give, because my successful fill-in-the-blank business will mean that I can give much more later, and that’s better than less giving now.
There are some creative philanthropic organizations that do fund social impact outliers, and that’s a discussion for next week – I’ll dig into the talent side of nonprofits’ innovation deserts.
Tell me more below on funders you know who invest in risky new ideas for social impact and nonprofit innovators. Or that you disagree. I’d love to hear your perspective.
Very thought provoking! Thank you for this and all of your other Follies! Always an interesting read.