Getting foundations to think differently

The Funding the Gap article makes an interesting and true point about the way foundations think in terms supporting social enterprises. On one hand, "philanthropists are reluctant to give grants to profit-making organizations, and commercial investors are wary of investing in organizations that are driven by social mission." While private money should be used to support these type of innovations, the desire of funders to maintain the status quo and fund traditional nonprofits has resulted in a lot of missed opportunities to solve many of the issues they have devoted their dollars to addressing. There is a way that private foundations can support social enterprises and for-profit companies- the PRI, or program-related investments. PRI's allow foundations to basically loan money to for-profit entities whose work has a strong social mission or whose work will advance the larger social mission of the foundation. Let's say for example that a foundation believes that an innovative online curriculum can drastically improve the way students learn, but recognizes that first money is needed to further develop and test the product. Assuming this curriculum is developed by a for-profit company as these things typically are, a PRI could be very helpful in getting this curriculum into the schools and in the hands of teachers. Once developed and tested, the curriculum company can sell their materials to districts and repay the loan. This initial "loan" is really seed money for tis enterprise allowing additional support to be sought. So how is it that something so simple is rarely used? Again, it goes back to the reluctance on the part of funders to think and act outside the box. Also, as the reading stated, there is lack of understanding on the true definition of social enterprise. This makes foundations even more skeptical about supporting something that might do more to pad people's pockets rather than help those in need. And while as a funder I completely understand the concerns, it is clear that a change is needed. Far too many grants going to traditional nonprofits are unsuccessful. Perhaps if just a fraction of our dollars every year went to support social innovation aligned with our established priorities, we would truly begin to see a greater social return on our investments. I believe the solution is for both parties to come together. Funders need rethink how they put dollars into the community to solve problems and social entrepreneurs need to better define the work they are doing in a way that links directly to funding priorities. Private money should be used to develop and support creative solutions to difficult, persisitent problems. Unfortunately, this can't happen if funders aren't willing to take a chance. Sure, there is a chance that the effort will fail and the money won't be paid back, but this risk is no different than the one we take with any other grant…and with the traditional grants there is never the intention of paying any of that money back. If the program doesn't work, the money is gone along with the opportunity to use those dollars for other purposes. PRI's are a good start in increasing foundation support for social enterprises; but what is needed more is a shift in thinking amongst foundation boards and program staff about the way problems are solved.