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Stir the Pot, v2.0

December 10, 2007

(Paul Shoemaker is the executive director of Social Venture Partners Seattle and also serves as board treasurer for Grantmakers for Effective Organizations. The following post, his first for PhilanTopic, has been cross-posted to the GEO discussion list.)

Some of you probably remember a rather lively discussion that took place on the GEO discussion list earlier this year about the benefits and challenges of providing general operating support. Fun stuff. And hopefully you have read GEO's action guide on this topic that came out as a result of that conversation. (The guide is available as a free download, with registration, at the GEO site.)

Now, as GEO prepares to do some broader work on "the money" and how the structure, timing, and format of the money impacts nonprofit success, I thought I’d "stir the pot" again and share MY thoughts on what needs to change in the nonprofit capital market.

I believe we need to see five major reforms:

  1. A common grant application process and/or repository, including financial statements (ala www.pacdp.org)
  2. No more funding restrictions placed on grants by funders -- i.e., 100 percent unrestricted/operating support
  3. A more organized, segmented, structured capital market (this is the fuzziest one) where funders are more explicit about the stage of development, kind of org., etc. they fund so that we give good nonprofits a more coherent way to scale and sustain
  4. A common outcomes framework that both funders and nonprofits commit to
  5. A common reporting format and/or repository (#1, #4, and #5 might even be related to each other as a system)

And these goals are undergirded by a handful of shared principles:

  • All of the above is core, shared, common across the third sector, but leaves things open for additions (which should be minimized)
  • Mutual accountability between funders and nonprofits is a 100 percent valid principle, and we agree that funders must be responsible stewards of their resources
  • Everyone is going to have to give a little (at the "parts" level) to get a lot (at the "whole" level)
  • This is very hard and this is also doable. Many of the above parts have already been done in isolated cases
  • We believe in maximizing "net grants" to nonprofits
  • Proportionality -– all of the above needs to be proportional to the size and length of the particular funder-nonprofit commitment

LOTS still to be addressed, etc., but that is one high-level, v1.0 swag of how to change the nonprofit capital market.

Your thoughts?

-- Paul Shoemaker

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