In 2009, President Obama created the White House Office of
Social Innovation and Civic Participation with the primary goal of working with
the private sector to enhance innovations that will solve contemporary social
issues. The Social Innovation Fund is
one of the methods by which this department aims to achieve its goal. This fund grants money to intermediaries
(requiring a three to one private money to government money funding match) who
then invest the money in nonprofits to enhance social innovations. This program has been lauded for its efforts
and results thus far, but it doesn’t come without pitfalls. According to the director of the Social
Innovation Fund, one of their major pitfalls has been fundraising and the
intermediaries’ ability to get a 3:1 private money to government money funding match (1). When we discussed the federal government’s
Pay for Success program last week in class, my main concern was the ability of
the intermediaries to find new private investors. The Social Innovation Fund and the Pay for
Success program are both certainly innovative ideas that will help foster
social innovation, but it’s no coincidence that they both struggle when it
comes to the goal of raising private money.
We’ve already talked about how crucial it is that government,
non-profits, and the private sector all work together to augment social
innovation, but it seems we keep running into the same issue of raising private
money. I think for the optimal future of
social innovation, we must address this issue first. This brings about the obvious question, how
do you incentivize the private sector to invest in social innovations?
It's nice to know that some private investors really do care
more about the social good than they do about private returns, but are all
private investors that altruistic? I don’t
particularly think so. In order for
programs such as the Social Innovation Fund and the Pay for Success program to
expand their reach among private investors, they need to be able to sell their
idea to all private investors. I reason through this by trying to put myself
in the shoes of the intermediaries, or more specifically the individuals in
charge of raising private money to get that 3:1 funding match. Am I going to be more successful at raising
private money by selling the idea of altruism and social good, or am I going to
be more successful by selling the idea of social good and that there’s
something in it for you as a private investor (profit, tax breaks, tax credit,
etc.)? I think we can reason that most
people are self-interested so it’ll be easier to incentivize private investors
if you can guarantee that there’s something in it for them. I’m not exactly sure what it’ll take to get
this to happen, but I think it’s a crucial point for creating and continuing an
ecosystem for social innovation.
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