Bridging the Gap Between Private and Public

The non-profit sector is an organic sector within the U.S. that helps solve issues that the government is either incapable of doing or the private sector cannot make it profitable. Many politicians have stated that the non-profit sector is an important sector that needs help to continue creating new social innovations. The only issue is that little is being done to help this sector continue its work.

The U.S. government must streamline its current laws and policies to help non-profits form and create incentives for them to continue to grow. In the article by Michele Jolin, she states that the U.S. should provide seed money for non-profits to start and provide them with sufficient data to help them alleviate social issues. This is a good strategy but leaves non-profits vulnerable if the government is unable to subsidize some of their funds or find a private group to fund them. It has become increasingly more difficult for non-profits to find funding from private organizations as social innovation is often a high risk and low return investment.

  

The government can remedy this by becoming an intermediary between non-profits, who need money, and private investors, who have money. This would help pair non-profits with private investors and help eliminate some risk that is involved in social innovation. The government would have to establish goals and checkpoints for non-profits to ensure that private investors’ money is not lost if the non-profit fails.

President Obama in recent years has been trying to provide money and opportunity to non-profits trying to develop social innovation. He has also proposed a pay for success incentive fund to get state governments to try and find solutions for problems and attract private financers to help supplement future funds. The federal government, with this fund, intends to match funds used for social innovation in state governments to try and decrease risk if the venture fails. Many state and local governments are risk adverse and are unlikely to try new methods if they aren’t proven to work. With this fund, they can try new approaches and eventually innovate new solutions.

Many non-profits often fail because they are unable to find money to start. Charitable organizations and private businesses often offer money to social innovators but the issue is that there is not a platform that brings these two groups together. If the government is capable and has the data readily available, they can act as an intermediary to bring these two groups together to spur change. The primary issue is that there is a disconnect and investors often know very little about the company asking for money.