Earlier this year, I shared some of the high level lessons VPP has learned helping nonprofit organizations strengthen their infrastructure and grow to serve more children and youth in the National Capital Region. We have also captured and presented some of the lessons our investment partners learned as they expanded out of the neighborhoods and communities where they got their starts in our latest publication, Greater Than the Sum of Its Parts, Part 2: Lessons on Regional Scale.
In my column this month, I would like to elaborate further on one of VPP’s biggest lessons: Regional Scale is Complex, but Critical for Social Change. When we first began our work in 2000, we were very focused on the mechanics of helping an organization grow, and creating a new model of philanthropic investing. We spent considerable time developing our selection and assessment processes, refining our approach to providing strategic assistance, and figuring out what capacity we needed in order to do this work well. But frankly, it was not until we were a year or two into real-time investments that we began to realize some of the challenges our investment partners faced beyond the limitations of their own capacity. We began to see that one of our biggest assets might very well be our ability to help leaders and organizations navigate the formal and informal channels that either allow growth to happen successfully and sustainably, or prevent new organizations and services from ever taking root in new areas of our region.
As we look harder at the needs of organizations as they scale regionally, beyond capacity and growth capital, we have identified a number of lessons that may be of interest to other place-based funders with a focus on scale, particularly those just starting out.
- Planning, Research, and Data are Key
Just like our nonprofit investment partners, VPP must have access to comprehensive information about the demographics and needs of children and youth in the region, current and potential policy and regulatory developments, and more. Through our partnership with the Brookings Institution, we have recently updated our research on the changing demographics of the National Capital Region. We have also had in-depth presentations from and conversations with government officials and human services providers in DC, Fairfax, and other surrounding counties to benefit from their research, data collection, and frontline perspectives.
As we support the nonprofits in our portfolio, we also need to have a hyper-focus from day one on their business models for growth and have enough information ourselves on the private and public funding environments, to know the short-, mid- and long-term viability of those models. Business planning lays out the costs of growth, but it does not define the long-term financing strategy. We must have the rigor and discipline to ask the hard questions about models and feasibility long before we exit an investment.
- Growth Does Not Happen in a Vacuum—It Takes an Ecosystem
Another huge lesson we have learned—and we are still exploring the implications—is the need to consider and effect “micro-policy.” In order for our investment partners to scale and grow, it is often necessary to address deep, underlying system impediments. Regulations, the way capital flows, and local, state, and federal policies all may create impassible barriers to sustainable scale and to social change.
As a growth funder, we need a full understanding of the environment in which our partners are trying to expand. We need to look for opportunities to leverage our network to its fullest extent and consider supporting our investment partners and/or the larger community to come together and take action. While we do not now fund direct advocacy organizations, we are increasingly aware of the need for nonprofits to take on advocacy as some aspect of their work.
- Communities are Complex and Nuanced
We started our work knowing that increasing services to children and youth was nothing like opening franchises to sell hamburgers, but, at the same time, we did not fully realize the extent to which each community and neighborhood was incredibly unique, with its own assets, needs, dynamics, and issues. While a deep understanding of the communities in which they work is a strength of our investment partners, we have found that it is important for us to continually emphasize cultural competency as they expand to serve new communities and jurisdictions. We also need to help our investors and others understand the importance of this kind of understanding and sensitivity for ourselves and our partners.
As we select new investments, we know that leaders and organizations can not “parachute in" to a community. Whether it is a local nonprofit wanting to reach a new neighborhood or a national organization completely new to our area, they must have the willingness to engage deeply with the community and the potential to earn that community’s trust and respect. We look for these same qualities in our own team. When we are helping our partners expand, it is important that we operate from a non-deficit model and accept the community’s position, beginning there rather than projecting our own plans and “solutions.”
It is also crucial that we and our investment partners continually seek feedback from those we are serving. Our most recent effort to this end was summarized in the report Perceptions Matter, where we share findings from more than 80 interviews of our investment partners and respected thought leaders, conducted by an outside evaluator. The most important piece of soliciting feedback, though, is acting on it. And this is something that, again, we go to great lengths to do and strongly encourage our investment partners to do as well.
- You Can’t Go it Alone
All funders benefit from collaboration and coordination, but for growth capital providers, it is critical. If you provide the funds to help an organization triple in size, others will need to step up with increased funding for programs. Pro bono service providers, the corporate community, and public funding partnerships are all necessary to sustain growth.
When we first began our work, many feared our funding would drive others away. We, and our investment partners, were gratified to learn that, to the contrary, we were able to leverage our funds over $1 for $1. That leveraging was largely serendipitous and developed organically with our portfolio. In our second portfolio, we will be much more deliberate in creating “syndicated” business plans and helping investment partners raise the funds they need to fully implement plans and sustain growth.
- Balance Between Drive to Rapid Scale and Reality
We learned early on that, again, unlike fast food franchises or twitter users, “scale” in the human service world was not as exponential or as rapid as we or our investors would have liked. At the same time, we believe in growth and must balance the need to encourage and push our investment partners to have bold ambitions with the realities of what is possible in the markets they are trying to reach.
To that end, we have modified our definition of scale to include increases in outcomes and indirect scale caused by disrupting a system or creating models and catalysts for adaptation by others. We have also realized that the type of product or service being scaled has an impact on the pace and potential for growth. For example, an organization with a well-defined product-type offering can scale much more quickly than a complex, multi-service organization that has been community-driven in its evolution.
- Relationships, Relationships, Relationships
Just like our investment partners, VPP has needed to make sure it was known, respected, and understood by key players in new geographic areas. Our team must have relationships and networks that span the region, and we must look for people who can be ambassadors and validators for us as we help organizations expand to new communities. - Don’t be Afraid of Failure
Finally—and this lesson is instantly understood by our friends and investors from the venture capital world—you have to expect some bumps in the road. We are investors for the long haul, and that means that situations and environments will inevitably change. This work is messy and hard and takes a significant amount of time. It is o.k. to be out of your comfort zone, and, in fact, it is often necessary for real transformation.
The deep demographic shifts in our region were brought home to me in a very tangible way when our team was recently meeting with local government officials, school and nonprofit leaders, and community representatives in Langley Park, MD, an underserved, suburban, multi-ethnic and immigrant community north of the District. It was a rare opportunity to hear firsthand the struggles, challenges, assets, and pride these residents have in their community. Even more notable, this bilingual dialogue was enabled by simultaneous translation and skillful facilitation. We learned how many of these residents were benefiting from the expansion of our IPs into their community to have basic needs met. We also realized how much more must be done.
The National Capital Region is incredibly and increasingly diverse and complex, like many major metropolitan areas across the nation. And the movement of people across jurisdictional lines to receive critical social and human services puts tremendous pressure on the entire region, which means more pressure on the nonprofits addressing these needs.
A major lesson from our work is the need for a healthy ecosystem to nurture and sustain the kind of growth required to meet these demands. While we must continue to work with strong leaders in high-performing organizations. We must also bring our collective resources to build the needed ecosystem to sustain the growth and positive outcomes we have achieved.
Changing times…tough economic times require bold leadership and action. All leaders—business, government, nonprofit, civic and philanthropic—must be willing to step outside of their comfort zones to resolve the complex issues in our communities. All of us must expand our thinking, become culturally competent, truly work collaboratively, and hold ourselves accountable for making this a community that provides a good quality of life for all residents. Growth capital, strong pipelines for talent, strategic assistance, data and research, and a favorable regulatory and policy environment are essential if leaders and service providers are to boost opportunities for the most vulnerable in our region, low income children, youth, and families.
- Carol Thompson Cole
Editor’s Note - For the last two years, VPP has been in a transition phase: completing work with its first portfolio, raising capital for a second portfolio, landscaping for potential Portfolio II investments, and reflecting on lessons learned to refine and improve its approach and execution. The transition period has ended; the next stage of work begins.
