Are Nonprofits at the Heart of Social Problem Solving?

For the first time in history, there is a question as to whether nonprofit organizations are best positioned to be the source of real solutions to our social problems. The nonprofit sector has long been at the heart of (and indispensable to) tackling complex issues like chronic homelessness, disease eradication, and child welfare, where government interventions have not been sufficient and economic markets have failed to bring about solutions. Yet with the insurgence of for-profit social ventures, hundreds of billions of dollars in impact investment capital, and a new breed of social entrepreneur unafraid to disrupt traditional models, the traditional nonprofit role is shifting.At Mission Capital, we believe that nonprofits must and will remain at the heart of social problem-solving. We also believe that our sector must fully embrace and employ the new ideas, business models, and financial capital that are emerging as tools once restricted to the for-profit world. The two ideas go hand in hand.

Uniquely Positioned to Serve as Change Agents

Nonprofits hold a unique place in our economy and local communities which positions them to be truly effective drivers of social change.  Nonprofits benefit from favorable tax rules, the ability to attract philanthropic gifts, and a general sense of public trust. Nonprofit leaders should be emboldened by this positioning, and leverage it to exercise a stronger, organizing rallying cry for actually solving our social problems at scale. Nonprofits are the true experts in delivering  social outcomes that materially change peoples’ lives and the communities we live in. For-profit social ventures, governments, and businesses all can learn tremendous lessons from the nonprofit sector’s 100+ years of experience in producing social return on investment.

The Opportunity to Adapt and Grow

Now is the time for nonprofits to build better business models, attract new forms of human and financial capital, and invest in internal effectiveness and long-term sustainability.Nonprofits should continue to embrace ideas such as sliding scale models, starting new programs that can employ their clientele, entering into creative partnerships with other nonprofits and businesses, and more. Additionally, impact investing (money invested into social causes with an expectation of return, as opposed to being invested into for-profit ventures) is to soon exceed all of philanthropic giving combined. This gives increased opportunities for nonprofits seeking to diversify their fundraising efforts. For example, nonprofits can incorporate real business planning and market analyses into strategic planning efforts, identify opportunities to ask for both philanthropy and loans to fund enterprising programs, and apply for programs providing new forms of investment and attract a broader group of potential investors.

The Power of High-Performing Nonprofits

Our recently-published Nonprofit Effectiveness Framework challenges nonprofit organizations to achieve organizational effectiveness on a variety of levels. While there is no one definition of an effective nonprofit, these six elements can guide organizations seeking to better understand and define their work. We encourage nonprofits to tackle hard questions like: Are we fully utilizing all of the resources and assets at our disposal to achieve our mission? Can we develop a business plan that might be attractive to earned revenue? Should we consider a strategic partnership, or even a merger, that might position us to be more sustainable and impactful?We at Mission Capital don’t place much weight on the current “either/or”  debates: the power of nonprofits vs. for-profit social ventures, the merits of philanthropic dollars vs. impact investment capital, or the value of social innovation vs. tried-and-true best practices. Rather we think there is now a great opportunity for never-before seen “both and” thinking.