Last June, when we incorporated and started working on Philanthropedia full time, we had just 1 cause and 8 recommended nonprofits from a pool of 39 experts. By the end of this summer, we will have 13 causes, more than 150 top recommended nonprofits, more than 1,200 experts with an average of around 16 years of experience for the entire pool, and information on the full list of more than 1,500 total expert recommended nonprofits.

Here is some more information about our progress-to-date.

Local Research

We have completed all of our work on the Bay Area causes we ran. Now, we have information about high-impact nonprofits in 5 areas:

• Bay Area homelessness (already on our site)
• Bay Area climate change (already on our site)
• Bay Area arts & culture
• Bay Area early childhood education
• Bay Area middle-secondary education

We have already published the results of these first two areas and by the end of this summer will publish the results of the last 3 areas, highlighting more than 40 additional outstanding nonprofits working in the Bay Area.

National Research

At the national level, we have been working on 5 more areas, as well to add to the causes we already have. Most of these new causes are still underway:

• National climate change (already on our site)
• National microfinance (already on our site)
• National education (we are refreshing/re-running this research)
• National reproductive health, rights, & justice
• National arts & culture
• National workforce development
• National childhood nutrition

Because of this research, by the end of summer we will likely add around 80 more top-nonprofits to the website.

We also have a special, custom fund for Haiti disaster relief which brings our causes total to 13.

At the same time, we are in the process of reworking our website so it’s easier to navigate and can handle the additional content and data we want to provide donors with. Therefore, we plan to wait to release these results until we can roll out the new site. This should be around the beginning of September.

In addition to sharing information about the top nonprofits and the expert comments about impact, strengths, and areas for improvement, we will also be sharing the entire list of all nonprofits recommended by our experts. Now you will have access to our entire data set of nonprofits. In most cases, this is 100+ nonprofits per cause. While we cannot say for certain these are the highest-impact organizations, we still wanted to share the expert reviews of all organizations we’ve collected. We believe this longer list represents the diversity of each cause and the fractured nature of the nonprofit sector. There are a lot of outstanding organizations out there and we want to be sure that donors have access to all the expert recommendations we have collected over the last 12 months. This means we’ll have content and information on more than 1,500 nonprofits by the end of the summer for donors to review.

We hope you will stay tuned to see the results of the research and offer your thoughts and feedback.
Thank you!

I am very excited to announce that Kyle Reis, Manager for Strategy and Operations at the Ford Foundation, has agreed to join the steering committee of our upcoming service Expertise on Demand. Kyle will represent the voice of foundations and help us design Expertise on Demand in the next few months. Welcome Kyle!

As a reminder, Expertise on Demand is a new Philanthropedia service that acts as a trusted intermediary and connects major donors, philanthropy advisors, and foundations with cause experts who can help fill knowledge gaps quickly and efficiently and channel more money to high-impact nonprofits and projects. More information can be found here: http://myphilanthropedia.org/expertise_on_demand.

I am in NYC until June 26th to meet with other members of the community dedicated to creating an impact-based social capital market. My first stop is the 2010 Inaugural Conference on Scaling Social Impact, held on June 17-18. The first day has just passed and it was a terrific opportunity to hear great nonprofits present and meet thoughtful leaders from the sector. If you want to stay up to date on the conference, Adin Miller is leading an effort to cover the most important topics on his blog: http://www.adinmiller.com/blog/3.

If you are attending as well, feel free to find me and introduce yourself – I would love to meet you!

This is our next, and last research cause for a little while. Then we will focus on getting up the results of all our work onto our site so donors can start donating to these outstanding nonprofits experts have recommended.

If you are an expert in the childhood nutrition/health field, you should be receiving an email from us soon and we hope you will be compelled to participate! If for some reason we have missed you and you think you have a valuable perspective to offer, please contact me at erinn.andrews@myphilanthropedia.org.

Additionally, I’m sure I haven’t been able to capture every nuance in these sectors, so I invite your feedback and thoughts about how you might think about this work. For those readers less familiar with this topic, I hope you will learn something new and tune in again when we have the results of this research. Thank you all for your participation!

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Over the last few years, high obesity rates have been making news headlines. And then this year, First Lady, Michelle Obama announced her Let’s Move childhood obesity initiative. The goal of this campaign is to reverse the trend of childhood obesity in one generation so kids today can grown up healthy and well. In addition, the Childhood Nutrition Act (a federal program that that addresses the food served in schools) is up for reauthorization this year, so childhood nutrition/health is a timely and important topic in the US.

Through this research, we will be looking at childhood nutrition and health with a specific lens on obesity. The childhood nutrition experts with whom I spoke said their goal as a sector is to get kids the right amount of healthy calories and then have them expend those calories through physical activity. They call this the energy equation. This equation involves two main parts: healthy food and physical activity. We will be looking at both parts for this research.

While we won’t be focused on childhood hunger as part of this research, it is important to acknowledge the tension that exists between these sectors. The professionals who are focused on childhood hunger want to make sure kids are getting enough or any food. There is a conflict between this group and the childhood obesity professionals because some childhood obesity experts worry that the childhood hunger people don’t care what the kids are eating as long as they have something to eat. The fear is that childhood hunger will lead to childhood obesity problems later on. The experts with whom I spoke said the most effective campaigns and strategies will involve both parties working together to get all children access to healthy food options.

In order to learn more about this field, I asked childhood nutrition/health experts what organizations were doing to reduce obesity rates and make kids healthier. As you might imagine, there are a number of areas nonprofits are focused on. They might try to impact school food, school physical activity, nutrition education, community playgrounds, access to food in communities, media campaigns, video games, and more.

School Food: Kids need to have access to healthier foods in school and many experts believe it’s our responsibility as a society to provide kids with healthy food options in school. There are some nonprofits trying to get more local food into the school lunches. (This is known as the farm-to-school movement.) However, for schools to serve this healthier food they need the money to afford the new food and they need new equipment to prepare the food (no longer just fryers). Proponents of reauthorizing the Childhood Nutrition Act want to increase the money available to schools so they can buy the healthier food and can buy the equipment to prepare the food in a healthier way. They also want the USDA to have better oversight around regulations and more say in the quality of the food served in schools.

In addition to focusing on better food, there is a movement to get rid of sodas and unhealthy snacks from schools. The Clinton Foundation worked with a Generation for a Healthier Alliance and beverage companies in order to get sodas out of schools. This is quite controversial because, as one might imagine, the major soda companies are opposed to this movement. However, there is conclusive data that sodas and sweetened beverages are connected to obesity rates. There’s no nutritional value in those drinks and kids drink 800 calories a day in the form of liquids/drinks. Proponents of getting rid of sodas in school say that’s just too many calories to be able to burn through physical activity. Yet soda companies argue that kids just need to exercise more.

Why is better food at school important? The main argument for getting better food into schools is that healthier students make better learners. However, it’s also important to note that healthier children lead healthier lives later on which benefits society in general.

School Physical Activity: Another area in schools (and out of schools) that is addressing childhood health is through physical activity and play. To fulfill the second half of the energy equation, experts believe children need to have physical education classes and recess planned into their day, which also means having a playground and playground equipment.

To incentivize schools to make these changes, some experts want to redefine what constitutes an excellent school. They want health and wellness to be a consideration for determining excellence in education. That is, do the schools serve healthy food?, is there recess?, do they have physical education?, do they have a breakfast program?, etc.

Nutrition Education: Nutrition education is another area to focus on to teach kids how to make better choices. Getting kids to plant school gardens is a great way to teach students about vegetables and other healthy foods. Kids get to watch the vegetables grow, learn more about them, and interact with the food they’re growing.

However, nutrition education can go beyond the child and can be for parents and schools, as well. Parents are likely the ones who will be preparing food for their kids so it’s important for them to understand how to make healthy choices about food. Empowering schools is equally important so that school administrators can provide healthy options for kids.

The obesity prevention world is bigger than just the schools, however. It also carries over into the community.

Community: play spaces: Another route nonprofits and childhood nutrition/health experts take is working through the community. They focus on making walkways accessible and creating more sidewalks to encourage physical activity. They focus on making sure there are parks in neighborhoods so children have a place to play and that those parks are open long enough to allow kids to play there. And they focus on making neighborhoods safer so that parents will let their kids go to the park, ride their bike, etc.

Community: access to fresh foods: There is also a focus on urban planning where the goal is to get more grocery stores into communities. Some places just have a deli or convenient store, others don’t have any food for miles (these areas are called “food deserts”). Another problem is that farmers markets often don’t take food stamps, so it’s hard to get healthy food to the lowest-income population this way from local growers.

Other: There are other ways groups are trying to make kids healthier, as well. There have been media campaigns to teach parents about body mass index (BMI). Video game companies are making an effort to help kids through sports video games where kids have to get up and move around to play. And some advocacy and policy groups are trying to get the Federal Trade Commission to regulate the marketing campaigns of unhealthy food providers. Food marketing to kids is a major problem various groups are trying to address.

How to Affect Change

There are a few different perspectives about the most effective way to make a positive change in the childhood nutrition/health field. Some people believe in direct education to kids and parents with a focus on behavior changing activities.

Others focus on the environment and making it easy for adults and kids to choose the healthy options and exercise. They do this by focusing on the school environment (providing the healthy food options, removing sodas, building in gym and recess periods, etc.) and the community environment (bringing in fresh foods to neighborhoods, making streets safe, providing playgrounds and playground equipment, etc.).

What Kinds of Nonprofits

Nonprofits in this field might focus on creating this change through policy and advocacy. This could be helping schools set nutrition standards, physical education policies, recess policies, etc. Others might focus on doing the research to show which programs are most effective, to identify where the problem lies, etc. Others might focus on direct services to provide the physical activity opportunities, bring in healthy food to schools, teach kids about healthy options, etc.

Interestingly, the physical activity and nutrition piece often exist independently. Rarely do funders fund both together. Through our research, we’d like to look at both because we believe both are important to solving the problems in childhood nutrition/health.

Scope of the Research

Therefore, the scope of this research will be focused on childhood nutrition/health nonprofits with a particular focus on childhood obesity, food nutrition, and physical activity. We would like to consider nonprofits working at the national or multi-state level, or that are developing a model that has the potential to scale and make an impact at that level.  These organizations could be focused on access to healthy foods and drinks in schools, nutrition education, physical activity programs and policies in or out of schools, access to safe play spaces for kids in their communities, access to healthy and fresh foods for kids in their neighborhoods, media campaigns to promote health and nutrition for kids, etc. These nonprofits should primarily be focused on impacting the lives of children, though secondarily could focus on adults and school administrators. And these nonprofits might focus on different kinds of activities: policy, research, advocacy, direct services, education, etc. The primary focus of this research will not be on food deserts, public transit, and helping local farmers or other for-profit organizations.

These are just a summary of my notes after having talked to 10 experts in the childhood nutrition/health field. What do you think? What have I missed? What might you add? Please feel free to leave a comment and help build on these notes.

We are beginning new research again! As I have said before, the purpose of sharing this additional information is to explain why we think these are interesting or relevant areas to research, what we learned about the nuances of the cause, and the difficulties we faced in narrowing the scope of the research, so you, the reader, can understand what we considered as we refined our thinking about the research.

If you are an expert on any of these topics, you should be receiving an email from us soon and we hope you will be compelled to participate! If for some reason we have missed you and you think you have a valuable perspective to offer, please contact me at erinn.andrews@myphilanthropedia.org.

Additionally, I’m sure I haven’t been able to capture every nuance in these sectors, so I invite your feedback and thoughts about how you might think about this work. For those readers less familiar with this topic, I hope you will learn something new and tune in again when we have the results of this research. Thank you all for your participation!

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The workforce development field is focused on helping people get the skills and the jobs they need to sustain themselves and their family. It’s about connecting employers who need skilled workers and ideally building a system of successful organizations because no one organization can do it all. Workforce development organizations must collectively understand the labor supply issues in a region and develop strategies for people to get jobs and businesses to get skilled workers.

I found that the workforce and economic development fields are often talked about in terms of supply and demand. All experts with whom I spoke saw these two fields as separate, though most felt that in the future, the two will have to work together much more closely (unsuccessful attempts have been made in the past). For the purposes of this post, I’ll only go into detail about workforce development because that will be the scope of our research for this topic.

Definition in terms of supply and demand:

Workforce Development:

Supply (the worker): This part of workforce development is about building the skills of workers, training workers, giving workers access to the resources they need to connect them with jobs or training, providing education or continuing education through university, community college, or alternative education routes, providing technical training and credentialing programs, moving people to work, helping people with job retention and stability, and helping people advance to better jobs.

Demand (the business): This part of workforce development is about creating new jobs, helping businesses develop positions that have potential career ladders within for workers, encouraging businesses to train and develop their employees or provide businesses with services to train their employees.

Only in the last 10-15 years has “workforce development” become the main term for this field. In the past, this sector was primarily focused on job placement for the disadvantaged. Workforce development was seen as a “second chance” system, a social service trying to help people in poverty find work. Because the results of these efforts were disappointing, the field evolved and expanded.

Now, the scope of workforce development includes skill building and credential building (as well as everything outlined above under “Workforce Development Supply”). For the first time, there’s a real effort to bring together the supply and the demand side. In a sector that was traditionally driven by the supply side (the worker), there has been a shift. Now, the demand side (businesses and employers) are seen as a primary “customer.” Additionally, there’s been an effort to tie the needs of businesses with the supply of labor available in each local community. However, a result of this expansion is that workforce development has become a very fragmented field. This is a problem because many people will specialize in one of these areas of the field, but not be familiar with all—making it difficult to push the field forward.

One negative trend some experts noted was that over the last few years, the government has shifted to a “universal service” model where they don’t want to run and fund programs just for the disadvantaged, but they want universal access to these resources for all. So the criticism is that there’s now even less money to serve this very large audience of disadvantaged people. Those with the greatest need get the lowest level of services.

What are some of the problems nonprofits in the workforce development field are facing and solving?

• There’s a gap between the labor market and the community’s needs. Workers often have remedial skills, need social skills development, soft skills development, etc.
• It is hard to get all people the skills they need to develop in the workforce.
• Industries and sectors are changing all the time. So, workforce development organizations must involve the businesses to strategize about how many workers they will need, what skills they will need to be competitive, and how to grow their own workers from within.
• Of those people who are unemployed right now, only 5% of those with a college education are without a job, while 20% of low-skilled workers are unemployed.

There are a number of different kinds of organizations at work in this field:

1. Funders: National foundations, local foundations, corporate foundations, community foundations, the federal government (Department of Labor, Department of Health and Human Services, Department of Commerce, Department of Education, Federal Workforce Development Act), and state and local governments.
2. Education Institutions: Community colleges (traditional education, technical training, credentialing programs, continuing education, etc.).
3. Community Based Organizations and Service Providers: Nonprofits providing services to connect individuals with resources (education, training, networks, employers, career centers, etc.)
4. Labor Unions
5. Business and Industry Associations, Chambers of Commerce
6. Technical Assistance Providers
7. Alternative Staffing Agencies
8. Research and Policy Organizations

Scope of the Research

Therefore, the scope of this research will be focused on workforce development nonprofits that are working at the national or multi-state level, or that are developing a model that has the potential to scale and make an impact at that level.  These organizations could be focused on job retention/stability, advancement to better jobs, capacity and skill building, helping the formerly homeless, imprisoned, and hospitalized to move to work, helping employers to invest in their own workforce, etc. These nonprofits might work with various populations: adults with low literacy skills, adults or youth with disabilities, immigrants, refugees, youth (around after school employment), welfare recipients, businesses, or the community at large. And these nonprofits might focus on different kinds of activities: policy, research, advocacy, direct services, education, technical assistance, etc. Specifically excluded from consideration will be for-profit organizations such as head hunting and for-profit staff placement companies.

These are just a summary of my notes after having talked to about 10 experts in the workforce development field. What do you think? What have I missed? What might you add? Please feel free to leave a comment and help build on these notes.

This post has been cross-posted at Tactical Philanthropy, where I am guest blogging this week. You can read part I here, part II here, and part III here.

In the first three parts of this article, I described what an impact-based social capital market is, why it matters yet doesn’t currently exist, how we can jumpstart its creation using a catalyst, and what other elements need to come together to make it a reality in the next 2-5 years. I will use this last post to address some common issues that people raise when discussing the concept:

Issue: An impact-based social capital market focuses too much on “thinking” and not enough on “feeling” which is a core motivation for donors.

Answer: An impact-based social capital market is based on a simple premise: ensuring that charitable contributions are going to organizations that are actually having an impact. In that sense, it includes a component of “thinking” in that it nudges donors to not waste their money on organizations that do not prioritize having impact. However, it is incorrect to assume that this precludes feelings from playing a role in donor decision making. As we say at Philanthropedia, donors participating in an impact-based social capital market will choose causes with their hearts, and organizations with their minds. In that way, there is perfect alignment between what donors are passionate about – contributing to a cause they feel connected to – and an impact-based social capital market which allows them to make sure these contributions are given to high-impact organizations.

Issue: Donor behavior cannot be changed and donors do not want to participate in an impact-based social capital market.

Answer: In my mind, there is little evidence to support the claims above. For example, Charity Navigator has successfully changed donor behavior, even if on the basis of the wrong set of metrics. So while it is certainly true that getting people to think about impact is no walk in the park, I believe we can achieve that goal if we as a sector collectively focus on a common set of beliefs and corresponding language, and then invest to create appropriate products and services that help guide the donor.

Issue: The catalyst you proposed suffers from many important limitations, for example X, Y, and Z.

Answer: Undoubtedly, all catalysts will have both pros and cons – this is an expected consequence of any approach that we can possibly think of. Spending too much time worrying about being a bit more “right” is a mistake however – instead, we need to focus attention on the much bigger challenge of putting together the other necessary elements of an impact-based social capital market once we have a “good enough” catalyst.

That is the approach we have taken with Philanthropedia too: we have explicitly aimed for a set of recommendations that are good enough and inexpensive to source. This mindset, combined with a methodology that focuses on continuous improvement, can produce great results over time: for reference, compare our national climate change research results to our Bay Area climate change results (choose a random organization and click on “expert assessment” to read expert comments). The rise in quality of expert comments in the span of less than 6 months is staggering!

Conclusion

I hope that this 4-part article provides a clear definition of the concept of an impact-based social capital market and its related elements. Obviously, there are many remaining questions and challenges and I welcome your feedback in the comment section or at feedback@myphilanthropedia.org.

If you want to get more involved, please reach out to the email above as well. You will be joining a group of more than a 1000 experts and tens of organizations that are committed to the vision that I described above.

Thanks for reading!

This post has been cross-posted at Tactical Philanthropy, where I am guest blogging this week. You can read part I here, part II here, and part IV here.

In part I and II of this blog post, I explained what an impact-based social capital market is and why it is the biggest opportunity in philanthropy, and elaborated on how we could jumpstart its creation by using a “catalyst” that has certain specific characteristics. In the last two parts, I want to focus on the remaining elements that need to come together to create an impact-based social capital market and answer some common questions and concerns.

An impact-based social capital market will require at least two more important elements:

Minimum scale: It is important to recognize that the catalyst I described in the previous part needs to compile information on nonprofit impact on a sufficient minimum scale in order to attract enough donations that can jumpstart the creation of an impact-based social capital market. What is this minimum scale? Although different organizations might have different answers, for us at Philanthropedia this means covering the most prominent 8-9 national social causes and 4-5 local causes. (Note: we will have this minimum scale by the end of the summer and our research results continue to rise in quality thanks to the hundreds of experts participating.)

Demand: Without a critical mass of donations, the market will obviously not work. As we think about inspiring donors to give based on impact, we need to consider the following:

• Building a donor audience is difficult and costly. That is why partnerships are a key tool in the battle for a better philanthropy because they can expose information to millions of donors quickly and effectively. Fortunately, GuideStar has taken the lead with their TakeAction initiative that we proudly support. In addition, Charity Navigator has announced plans to follow a similar path and I am excited to see how they progress. We should also not forget local initiatives such as GiveMN, which have done an amazing job of mobilizing donors and have tremendous potential if they decide to focus on impact.
• We are currently experiencing a tectonic shift in technology with the advent of social networking and social media. This creates a unique opportunity to leverage the power of personal connections to inspire people to give based on impact.
• Finally, we need to acknowledge that there is a lot more research necessary in order to find effective ways to motivate donors. I am not sure whether the right approach is to utilize Twitter or Facebook, Philanthropedia’s concept of mutual funds, or the many other ideas that I have seen, but I do know that we need to put a lot of effort into finding out if we are to create an impact-based social capital market.

I hope the post above combined with parts I and II gave you an idea of the different elements that need to come together to create an impact-based social capital market. I will use tomorrow’s post to answer some common questions and concerns, describe how you could join the effort of creating this market, and conclude.

This post has been cross-posted at Tactical Philanthropy, where I am guest blogging this week. You can read part I here, part III here, and part IV here.

In the first post of this 4-part article, I described what an impact-based social capital market could look like and why I believe it is philanthropy’s biggest opportunity. In this follow up post, I want to elaborate on why such a market has not materialized so far and what we can do to make it a reality in the next 2-5 years.

To understand why an impact-based social capital market does not currently exist, it is helpful to start with the graph I used to summarize the concept:

What is particularly important to realize about marketplaces is that they require a critical mass before producing any tangible benefits. In other words, a market that distributes $50 thousand a year is not very interesting; a market distributing $1 million per year is intriguing, and a market dispersing $10+ million per year is fascinating. Of course, the fact that marketplaces require a critical mass to start is not all bad: on the flip side, once started, marketplaces are a very reliable source of capital and tend to grow sizably due to inherent network effects.

Given that an impact-based social capital marketplace does not exist currently, it is no surprise that the vast majority of nonprofits not only ignores the Internet as a viable funding channel, but also does not invest resources in measuring and reporting their impact. After all, nonprofit leaders need to use optimally the limited resources at their disposal – and their very rational conclusion is that it does not pay off to focus on participating in a marketplace, which does not exist and therefore cannot provide much-needed capital.

So how can we jumpstart the process of nudging people to give for the right reasons (i.e. based on impact) on a scale that allows a market to form subsequently? I would like to propose a simple approach: to overcome the lack of critical mass, we need a catalyst that can get a sufficient number of donors to give based on impact. This will create incentives for nonprofits to participate in this marketplace in order to tap into a reliable and growing capital pool while also increase the effectiveness of the limited philanthropic dollars.

So what could this catalyst look like? There seems to be three important characteristics:

• The catalyst needs to provide information about nonprofit impact at a cost that is bearable.
• The catalyst needs to be scalable – i.e. meet donors in the causes and issues they care about today as opposed to dictate what donors should be concerned about in the first place.
• The catalyst needs to provide actionable information that can actually engage donors in a world characterized by limited attention spans and overwhelming content.

There have been many attempts to create such a catalyst, some of which Philanthropedia reviewed in a recent whitepaper. Our conclusion was that none of the existing solutions offered an attractive combination of features that could satisfy all three of the important characteristics outlined above. To fill that gap, Philanthropedia has spent the last 3 years developing a methodology that has all three key characteristics in order to realize the potential of the impact-based social capital market that we believe in so much.

Our methodology is focused on extracting information about nonprofit impact from the very people who spend their entire days focused on it: program officers at foundations, nonprofit senior staff, university faculty, policy makers, consultants, journalists, and so on. As any other methodology, Philanthropedia’s approach suffers from both pros and cons, however, it scores very well on the three most important dimensions for a catalyst:

• High quality at low cost: we ask experts for 40 minutes of their time per year and in return offer rich information about a handful of nonprofits that donors use to direct their donations effectively in causes they care about. It is worth noting that despite earlier discussions our latest research demonstrates that experts are a great source of information and we can successfully compile ever better information from them. Stay tuned for a blog post on that or see for yourself by comparing the impact comments from our 2009 national climate change research to our 2010 Bay Area climate change research (choose a random organization and click on the “expert assessment” tab).
• Scalability: our approach works in all social causes and all geographic regions because the types of experts I outlined above are present in virtually each social cause.
• Actionable information: while still a work in progress, our expert funds provide an easy to understand yet smart donation strategy for donors.

In conclusion, I hope this post gave an idea of the necessary features of a catalyst that can jumpstart an impact-based social capital market and demonstrated that such a catalyst can be built successfully. In tomorrow’s post, I will turn my attention to the remaining elements that need to come together to create an impact-based social capital market.

This post has been cross-posted at Tactical Philanthropy, where I am guest blogging this week. You can read part II here, part III here, and part IV here.

One of the best parts of my job at Philanthropedia is that I get to spend a lot of my time thinking about how to make philanthropy better. And when I say better, I am not talking about incremental improvements (10% or 20% better) but rather disruptive improvements (10x or 100x better), which Philanthropedia is focused on.

With this four-part blog post, I would like to tell you about one such disruptive improvement to philanthropy: creating an impact-based social capital market. My goal is to define this concept, provide a common framework and terminology that we can use to discuss it, and ultimately inspire as many of you as possible to join me in making this vision a reality.

What is an Impact-Based Social Capital Market?

An impact-based social capital market concept has several important characteristics:

• Donors reward nonprofits first and foremost based on the impact of their programs. Surprisingly, my own research reveals that there is a shortage of good definitions of impact, so let me provide the definition that we use at Philanthropedia for reference: a high-impact nonprofit is a nonprofit which produces lasting improvements that address the core problems in a particular social cause.

It is worth adding that the focus on impact does not exclude other relevant organizational characteristics (e.g. leadership, staff, marketing, operations, or finances). It also does not exclude using emotional appeal to inspire donors to give. Instead, philanthropists need to focus on impact first because without it nothing else really matters. As we say at Philanthropedia, donors participating in the impact-based social capital market will choose causes with their hearts and organizations with their minds.

• The market needs to be focused on organizations (rather than individual projects or informal initiatives). Despite the emotional appeal of individual projects, only organizations can develop the capacity to tackle the big and important problems we face in a meaningful way. Otherwise, we are doomed to continue making tiny progress on disconnected fronts as opposed to tackling core issues in a way that can really make a lasting and substantial difference.
• The market needs to engage individual donors, because they provide the bulk of philanthropic capital today: more than 80% of total charitable giving. I will come back to this point below when I explain why an impact-based social capital market can dramatically improve philanthropy.
• Finally, a market cannot exist without a marketplace where supply and demand meet. The Internet presents a tremendous opportunity to build such a platform because it is both ubiquitous and very low cost.

At this point, most people imagine a simple graph to summarize the concept like this:

Why Does an Impact-Based Social Capital Market Matter?

To understand why an impact-based social capital market has the potential to improve philanthropy dramatically, we need to recall that more than 80% of all charitable contributions come from individuals ($229 billion out of $285 billion in 2008). And yet individual donors today are bombarded by cleverly crafted marketing messages that omit the most important thing in the nonprofit world: what impact the organization is having. And if donors actually decide to seek extra information to make a more informed decision, they are mostly limited to looking up irrelevant financial ratios and basic 990 information. Therefore, not only are philanthropists wasting billions of dollars funding nonprofits without real impact, but we are also not rewarding good organizations properly, which further diminishes philanthropic effectiveness.

One way to look at this status quo is with desperation at the magnitude of the challenge that many others have attempted to tackle before. However, I choose to see the inefficiency of today’s philanthropy as an amazing opportunity to improve the sector. As a matter of fact, I believe that solving this inefficiency is the only way for philanthropy to remain relevant in the 21^st century and become an effective tool for solving social issues.

So why has such an impact-based social capital market failed to materialize so far? And what can we do to make it a reality in the next 2-5 years? I will answer these questions in my next post.

You can now read part II here.

We have been hard at work researching new causes so that donors can have more Expert Funds with information about high-impact nonprofits from which to choose. We are analyzing the data from our recent surveys on Bay Area arts & culture, Bay Area early childhood education, and Bay Area middle-secondary education and will be adding that content to the website in the coming weeks. At the same time, we have turned our attention to causes at the national level and are starting new research, new surveys to identify high-impact nonprofits in 4 more areas.

In addition, because our original research in education was two years ago as a pilot study, we are going to re-run that cause with the latest version of our methodology. This blog post is to announce that we are starting that process now!

When we looked at education in the Bay Area, we divided it into two areas: early childhood education and middle-secondary education. You can read our post about that here and learn more about the problems education nonprofits are facing in this sector and how we think about the various kinds of nonprofits our experts might consider recommending. For the re-running of our national level education cause, we are going to merge the two categories into one: K-12 education.

National Public K-12 Education

We are interested in learning more about education nonprofits working at the national or multi-state level that are having a high-impact. We’re also interested in nonprofits that may not have reached that level of scale yet but have the potential to scale well and make an impact at the multi-state/national level. We are focused on nonprofits that address some part or all of the K-12 audience.

These organizations could be focused on in- or out-of-school education. They could be working on literacy, school readiness, school reform, the achievement gap, human capital, instructional improvement, curricular content development, low-performing schools turnarounds, data, standards and assessments, after school programming (ie. youth development kind of work), summer programming, parental involvement, etc. Types of nonprofits could include research, policy, advocacy, training, traditional nonprofits or community based organizations, the traditional after-school kind of nonprofits/CBOs, or even the public/charter schools themselves.

If you are an expert on any of these topics, you should be receiving an email from us soon and we hope you will be compelled to participate! If for some reason we have missed you and you think you have a valuable perspective to offer, please contact me at erinn.andrews@myphilanthropedia.org. Are there other major education buckets/types of focus areas I missed in the K-12 realm?