Joseph Flesh looks at how investing in projects that consider sustainability from day one can increase return on investment for trusts and foundations
For the past several years, the philanthropic world has tested strategies to create programs that don’t rely solely on grant funding. Because self-sustaining programs can have impact beyond the duration of a grant, they are a more efficient use of philanthropic funds.
In this post, I’m going to examine two different examples of how grant-funded programs can become self-sustaining. One, Health Leads, is a large organization with over 70 staff. The other, Ohana, is an open-source software project with three full-time contributors.
Health Leads took shape as an organization while funded by philanthropic donors. It is possible for an entrenched, grant-funded organization to find new sources of revenue in pursuit of self-sustainability, but the Ohana project suggests a new, radically lean approach that seeks self-sustainability from the start.
I’m comparing these two organizations because they work to solve similar problems. Both Health Leads and Ohana help people in need find community resources, such as:
- A walking program at the park district
- Subsidized housing
- Employment training
- Homeless shelters
- Low-cost counseling
Believe it or not, in this age when everything seems to be online, local community services like these are still very difficult to find through Google.
(Full disclosure: I am the founder of a mission-driven for-profit called Purple Binder that also works in this space.)
Self-Sustainability Approach #1: Transitioning to market-based sources of revenue
Health Leads sets up “help desks” in health clinics that refer patients to community resources. Founded in 1996, they have over 70 staff and have raised over $11 million in the past few years. They’ve also been true thought leaders, changing the conversation around how to provide better healthcare to vulnerable patients.
To become self-sustainable, they’re starting to charge clinics and hospitals for their services, much like a consulting firm. Similarly to a consulting firm, their prices need to support the size of their staff.
Self-Sustainability Approach #2: Creating solutions that aren’t attached to staff
Ohana is an open-source software project that makes it easy for people to find community resources. It started as a Code for America project in 2013 and then won an 18-month, $210,000 grant from the Knight Foundation. They have three full-time contributors.
Less than one year into the grant, an ecosystem of contributors and partners is emerging around Ohana’s solution. Other cities are deploying the Ohana platform for their residents. My company, Purple Binder, has adopted the Ohana platform for certain projects. If Ohana’s funding ended tomorrow, the toolset they’ve created would continue to have an impact through this ecosystem.
Funding Staff vs. Developing Ideas
Health Leads is funded under a model that has allowed them to scale their staff along with their programs. Because they now have a large staff, they will have to seek correspondingly large revenues from their partners as they transition to self-sustainability.
Ohana showcases a new, lean model for foundations to sustainably develop new ideas. Under this model, the funder only shoulders development costs. The grantee creates solutions that are tangible artifacts outside of their organization — in Ohana’s case, an app and a data standard.
Collaboration comes organically with Ohana’s approach. Because the Ohana core team is focused on product development, they rely on other stakeholders for implementation, deployment, and data. They are catalyzing an ecosystem of collaborators ranging from local governments to non-profits, from healthcare systems to third-party vendors.
Lean Funding: Self-Sustainability By Design
By investing in projects that consider sustainability from day one, foundations can get more bang for their philanthropic buck.
In this model, philanthropic dollars provide the “seed round,” allowing for the development of a solution toolkit that solves a social problem. The grantee develops their toolkit with an ecosystem of partners in the market who scale and deploy the solution. And when grants run out, that ecosystem continues to advance the grantee’s original work.
Be sure to follow Joseph Flesh & Purple Binder on Twitter for further updates on their philosophy for successful philanthropy, and of course, their role in making community resources more accessible to those who need them. Make sure you ask them any questions you have in our comments below, or on Twitter.