SVP Blog

Written by Lynn Coriano

 As a liberal arts major and then a graduate student in nonprofit management, I was never particularly drawn to topics in finance and capital.  Imagine my surprise when, after attending the Money Matters conference in New York, I came back eager to talk with Paul about all things finance and the implications for SVP’s work.

The topic on my mind:  Is SVP Seattle buying or building the organizations we fund and support?

National thought leaders from both the financial and philanthropic sectors attended Money Matters, which was hosted by GEO and the Nonprofit Finance Fund. This was late October, so news of significantly decreased endowments and reserves were known, and folks came eager to engage in important discussions about financing the nonprofit sector.  Among those present were Clara Miller, Executive Director of the Nonprofit Finance Fund (NFF) and George Overholser, Founder and Managing Director of NFF Capital Partners. 

One of the concepts introduced early on was the idea of whether funders are “buyers” of services and programs, or “builders” of a nonprofit enterprise.  It is a compelling theory and one I keep coming back to as I think about SVP’s funding model. 

Overholser introduces these concepts in his working paper titled, "Nonprofit Growth Capital: Defining, Measuring, and Managing Growth Capital in Nonprofit Enterprises. Part 1:  Building is not Buying."  He defines the terms as follows:

Buyers

• Provide reliable revenue to pay for what an organization is already doing.
• Do not intend to help the organization expand or experiment with impact or innovation.
• Are the life-blood of reliable, high quality services.

Builders

• Provide capital to help an organization change
• Intend to help the organization expand, use different technology, respond to changing market conditions, merge, downsize, etc
• Builders’ capital is essential to attract reliable, consistent buyers (and more of them).

Clara Miller drew upon this in her opening remarks at the conference: “Buyers are not builders.  Providing the funds to support programs year in and year out is different from building the enterprise that delivers them.  Many investors think they are ‘builders’ contributing to the establishment of a stable organization.  In reality, however, they are buyers whose money goes to purchasing more services for more users.”

With SVP’s multi-year general operating support, strategic volunteers and outside consultants, I wondered is SVP a buyer or a builder?

“In the philanthropic world everyone wants to be a builder – it just sounds more important. The majority of grants are too small to get the favorite organization all the way up the growth curve.”  

- Clara Miller

Looking through a strictly financial lens, I was fairly convinced SVP was more buyer than builder – especially with Investees where SVP’s contribution represented a very small percentage of a budget.  However, in some cases it did seem like SVP was a builder, with organizations whose budgets were in the $300,000 - $500,000 range, it was hard to argue that an investment of $225,000 over five years didn’t have a significant impact on the organization.

But what about SVP’s non-financial resources? Does strategic volunteering play a role in determining whether a funder is a buyer or a builder? 

I think it does.  There have been many cases over SVP’s history where volunteers were able to engage in projects with an investee that were clearly transformative and contributed to efficiencies in a lasting manner regardless of the size of the organization or its budget.  Database development and training, human resource planning, new fund development strategies, and leadership development work can all have lasting impacts. 

This combination of volunteers and capacity building support, plus the multi-year general operating support that SVP provides, definitely influences how we define ourselves in terms of Builders vs. Buyers.  What cannot be overlooked as well is the significant influence the investee brings to the table: 

• Leadership & Degree of Engagement (strong, transparent leadership that’s willing to engage on a variety of levels)
• Stage of Organizational Development (Is the organization as a whole ready and committed to doing the work and really focus on capacity building?)
• Type of volunteer engagement  (Is the organization identifying projects that have the potential to transform the organization, its people and/or the way it does its work?)

To be a true builder and a smart buyer, a funder must work in partnership with the organization it is supporting.  Thus our role is in part defined by the nature of this relationship. 

We introduce these concepts, not to force SVP into one camp or another.   It’s a way for us to think about SVP’s partnerships with nonprofits through a different lens – and consider the implications for our model as we pursue new opportunities and collaborations to support the nonprofit sector in a very different economic time. 

What Do You Think?

In terms of buyers vs. builders, how do you define SVP?  How important is this differentiation to you?

What are some ways in which we could improve our approach to augment our role as a builder or a buyer? 
  

Please provide your comments below.  We’d love to hear your thoughts!

Learn More

To learn more about these concepts and to hear Clara Miller’s opening speech from the conference, check out these resources:

• Clara Miller’s Opening Speech (YouTube video)
  Money Matters Conference October 2008

• Stanford Social Innovation Review, Summer 2008
  The Equity Capital Gap by Clara Miller
• Nonprofit Growth Capital - Defining, Measuring and Managing Growth Capital in Nonprofit Enterprises
  Part One:  Building is not Buying by George M. Overholser
  
  
  

Every one of us has been to a meeting, a gathering in the last six months where that phrase was somewhere in the title. And well it should be. As the saying goes, deal with reality as it is, not as you wish it were. One measure of that reality is the sense that, in past economic downturns, some of us might say we knew someone that knows someone adversely affected. This time, I think every one directly knows someone that’s been significantly impacted. I know I do. And yet …

… And yet, for the past few weeks, I’ve had this rumbling in my gut. We cannot walk away from the day-to-day reality and challenges so many people in our communities face. Indeed, it’s why we do what we do. But we also have to find ways to alter the lens through which we view our world. In times like this, some people find the determination and imagination to look forward and upward. Since SVP has been through the dot-bomb and other ups & downs the last 11 years, we’ve learned that good organizations not only make it through tough times, but come out the other end ready to accelerate at a faster speed and more effectively than organizations that hunkered down. I’ve been trying to piece these separate thoughts together until …

… until I recently spent a day at a conference where the keynote speaker was Jim Collins.  Collins is a 200-mph burst of energy and optimism, grounded in real life, not theory. He was there to talk about his great little book – Good to Great and the Social Sector © (get a copy if you haven’t already or we’ve got a few copies around the office). I didn’t really hear what he was saying about the book; instead he was firing questions and concepts that helped resolve the uneasiness in my gut and clarify that lens through which SVP can view the world today. How so?

“In these times, there are massive opportunities” – easier said than done, right? But true. I twittered last week about a meeting SVP was in with 20 funders and 10 more on the phone. It was an intense discussion about how we can help build the capacity of the sector and non-profit organizations, right now and in the longer-term. Wow! We have come a long ways; 10 years ago a capacity-building conversation would have included birds heard chirping during frequent silences. Today, the PNW funding community is committed to building stronger non-profit organizations (not just programs). Out of this is going to come significant new institutions and support for effective nonprofits. SVP will help play a meaningful role. Stay tuned.

“It’s the Who, not the What” – amen to that. The April newsletter sent out Tuesday proves the point beyond the shadow of a doubt – Susan Loosmore and Tanya Kim, Neal Myrick and Sari Pascoe, Kevin Phaup and Kim McKoy, Rogers Weed, Yoram Bernet and Maya Kanzler. And Jeffrey & Paige Wilder. Read what they’ve done and you will know that we will make it through the tough times better and stronger than ever. Like most challenges, the solution is right there, in our own hands, our heads, and our hearts. One of Collins’ core ideas is Level 5 Leadership.  So many of our Partners and the people we work with are on their way to “Level 5 Social Sector Leadership,” * especially that vital element of humility. Who will be the next SVP Level 5 Philanthropic Leaders?!

“What Must You do and what Can You do?” What SVP must do is execute with better precision than ever, be more financially conscious than ever before, and pay even closer attention to our investees and fellow Partners and strengthening the community we’ve built amongst us. What we can do is find rays of optimism amidst the clouds of challenges, be a leader by raising our sights to take on new initiatives when it seems hardest to do, and move ahead with a sense of not just what is tough today, but what is possible tomorrow. Come to the Spring Partners’ meeting on June 2 and we’ll raise our sights together and see what is possible. 

Not one single word here is meant to diminish or ignore the hardships that so many people in our community feel. The tough times are real and for some people, they are life changing. Collins left us that morning with a story …

… a story a few of you may know … Vice Admiral James Stockdale was one of the most decorated officers in the history of the United States Navy and was the highest ranking officer to serve as a POW in Vietnam. He was held for seven years, locked in leg irons in a bath stall, routinely tortured and beaten. His story goes on and it is unfathomable. He survived and made it out in 1972 because he was, he said, a realist, not an optimist. Other POW’s were convinced they’d be home by the next holiday and eventually succumbed to their dashed hopes. Stockdale dealt with the brutal facts, not blind faith. But the most profound thing he did, in his own words, was to decide that “this would be the turning point in my life.” …. One has to absorb that statement for a moment before you can even believe it.

None of us have to even remotely deal with what Vice Adm. Stockdale did, but we can and we must take that kind of inspiration and make these tough times a turning point in our lives and for SVP. A turning point where we move into new terrain to help strengthen the state’s early learning networks, where we build a stronger and more vibrant SVP community, where we invent new opportunities to more effectively and creatively help our investees and the non-profit sector not just survive, but succeed. Those are all tangible, real plans that will come to fruition in 2009, because of who we are, not just what we do.

I went back and re-read our 5-year vision and plans last night for inspiration. What do you think we can and must do at SVP? What do you think can make us great? We want to hear from you. 2009 is the massive opportunity in tough times to be a new turning point for SVP.

Written on Friday, October 24

I’m sitting at 6:37am watching the markets take another roller coast dive, Dow down 338 points in 7 minutes. I’ve had a number of thoughts rolling through my head for several days now (as I’m sure all of you have too).

It goes without saying that we are living through a period of time, who knows how long it will last, that is different than anything any of us have ever experienced. It seems destined to make the ’01 dot-bust look like a blip / dip comparatively. You all know that the social needs in our neighborhood, cities, region, nation, world are going to grow and the public funds are gonna concurrently tighten (they have to). Philanthropy can’t begin to replace but a fraction of those dollars and this is going to affect all of us.

When people ask me in the last few weeks how all his will affect SVP, I say I don’t know yet, it’s been so quick. I do know that in ’01 individuals were more persistent and stretched their giving longer and further than institutions did or could, though none of our wallets are bottomless.

But even more important than our financial capital, and I mean this 100%, is our spirit and our human capital. None of us can avoid feeling the stress and pain we are going through, but we can choose to not let it overwhelm and redefine us as human beings and citizens and philanthropists. I’ll share two thoughts I’ve received in the last few days –

“There’s plenty of reason for hope. Following a decade of record-breaking, boundary-spanning philanthropic efforts, bigger dollars and more people are engaged in philanthropy than ever before. By showing bold, effective leadership at a time of such global uncertainty, we could tap latent interest and entice others to join us in this collaborative effort to improve lives.” – Kathleen Enright, www.geofunders.org

“I will not be sending stock. (My gawd, it’s sooo LOW that would be crazy), but I will send a check tomorrow. And just so you know, I thought about backing off, but in these times, figured it was even MORE important to continue giving – at least to those orgs that are efficient & effective.” – SVP Partner, 10/22/08

What we can do is be role models, we can persist, we can be the kind of people that don’t lose hope and remember that history shows there is ALWAYS a new AND better day on the horizon, no matter how far off it may appear. America, SVP, each of you, and countless philanthropic and non-profit organizations WILL persevere and we will make a huge difference in the lives and institutions that we all care about deeply. Our wallets are not bottomless, but our courage, our optimism, and our fortitude can be.

At SVP, we have spent nearly 11 years building a model and body of work that has leverage, effectiveness, passion – we need to amplify and accelerate our efforts, not back off. We need to look upward and outward and work harder, not hunker down.

It’s 51 minutes later now and the Dow is down another 131 points … I was looking for one specific quote from Martin Luther King to close with – “The ultimate measure of a human is not where he stands in moments of comfort and convenience, but where she stands at times of challenge and controversy.” And as I was searching for that one, I found many others that might speak to each of us personally and intimately so I’ll share a few of those too, just in case one of them speaks directly to one of you.

I suspect times will get tougher before they get better, but we have each other and we always have our hearts and minds and souls and strength to continue to make a positive difference in our world, especially when it is needed most. Carry on!

Almost always, the creative dedicated minority has made the world better.

Change does not roll in on the wheels of inevitability, but comes through continuous struggle … A human can’t ride you unless your back is bent. Darkness cannot drive out darkness; only light can do that.

Every person must decide whether he will walk in the light of creative altruism or in the darkness of destructive selfishness.

Faith is taking the first step even when you don’t see the whole staircase.

Life’s most persistent and urgent question is, ‘What are you doing for others?’

We must accept finite disappointment, but never lose infinite hope.

We may have all come on different ships, but we’re in the same boat now.

Whatever your life’s work is, do it well. A human should do her job so well that the living, the dead, and the unborn could do it no better.

Statement #10 - I have a great idea for a new program - I’ll start my own nonprofit.

It’s the last time we’ll say it – just don’t!  Or certainly make it your last option. There has been a proliferation of non-profits over the last 10-20 years, some of them quite valid and needed.  This also means there are more and more small organizations struggling to get enough resources to reach some level of sustainability and organizational capacity.

In short, it is much easier to start a non-profit than a for-profit company, but it is much harder to effectively sustain a non-profit over the long-term. When you have a new idea, please be sure to look around to see if anyone is already doing the work you care about; or if there is someone to partner with or someone that might want to take on a new “line of business.”

Paul S.

Lesson #9 - “I want to be sure our family foundation is around for a long time to come so I need to be sure to spend only as much as I have to every year”

There is nothing wrong with that approach, but you might want to consider what more and more philanthropists and foundations are doing now ( i.e. giving away their full corpus within a stated time frame.) Bill and Melinda Gates said 50-100 years, Warren Buffet said 10 years! Whatever the amount, the decision is driven, in part, by the good ol’ time value of money--a dollar spent today often has more value than the same dollar spent in the future.  If that economic concept applies anywhere, it should really apply to the application of philanthropic funding to social needs and problems.

Some causes and non-profits  might deliver more positive good in the world if they had the same amount of money sooner vs. spreading it over a longer period of time.  Again, this certainly is not a “mandatory,” but it is worth your strong consideration if you are creating a family foundation or some kind of permanent corpus.

Paul S.