March 31, 2016
At Living Cities we are looking beyond grants to focus on blending all types of capital to get better outcomes for low-income people, faster. One of the primary tools we have is the Catalyst Fund, a pool of philanthropic capital that we have used to fund the acceleration, scaling, and replication of promising practices. Based on what we learned from the Catalyst Fund, we recently raised our second fund, the Blended Catalyst Fund, which blends grants, philanthropic debt, and commercial lending from ten different investors. It's exciting to be able to bring together a diverse set of investors for a common purpose. But the diverseness of our investors also meant they each came to us with a different set of goals and restrictions, and as a result we had to overcome some challenges before we could close our fund. The challenges were similar to those faced by many organizations leading a cross-sector partnership.
Here are four things we learned about collective impact through raising our newest fund:
1. Be clear about the "why." What are you hoping to do collectively that participants can't do on their own? In our case, we assumed that because of our investors’ involvement in Living Cities, they already intuited our why. It wasn't until we were able to articulate what we wanted to do together that our investors fully bought into the idea of a new fund. We realized that you're never really past the why. The why is the shared end-game that we all want to achieve, so articulating it is the most crucial component to getting everyone on the same page and the key to keeping all your participants engaged. When we bring potential investments for the Blended Catalyst Fund to our investors now, we are purposeful about emphasizing the impact and innovation, because that is our why.
2. Allow and expect your partners to articulate their own positions and concerns. When we first started building our fund, we — like many "backbone" or intermediary organizations at the center of cross-sector partnerships — believed we had to be the main interpreters and speak for our investors. We were operating in a hub-and-spoke manner. Instead of acting as a network, we were having one-on-one conversations to understand individual investor concerns. As we saw two groups of investor interests emerging, we continued the individual relationships and acted as a messenger between the groups, negotiating with each party, controlling the conversation and what was happening. When we opened up the process and asked our investors to voice their own opinions and concerns, it not only helped build trust within the group, but it also built our investors' trust in us. After the change in our approach, we had valuable discussions with investors setting expectations for what each wanted out of the fund, discussing how much risk each was comfortable taking on, and pushing each other to stretch.