As the COVID-19 crisis continues to wreak havoc on our social agencies, we need to think differently about how to “capitalize” these organizations. Even in a strong economy, our 2.3 million 501(c)(3)s in the U.S. struggle to raise sufficient social capital to sustain and scale their impact. The pandemic has drastically adjusted our perception of normal and creates fertile ground for thinking differently about sustaining mission-driven organizations focused on supporting those in-need. To quote Einstein, “The definition of insanity is doing the same thing over and over again and expecting a different result.” Mission Throttle believes that our country needs to adopt a more capitalistic culture embracing social justice with an equity lens when caring for those less fortunate. In a PC (post-COVID) world, we need to use this enlightened awareness to lead culture reform for innovative social capital tools like Impact Investing. If we revert to our BC (before-COVID) solutions, we will have jeopardized our chance to act into a new way of thinking about what our social impact agencies need to survive and thrive.
Giving USA estimates the total amount of contributions to impact organizations approximated $427 Billion in 2018. Mission Throttle estimates that the annual capital required to solve our country’s social needs exceeds $3 Trillion. This delta between sources and uses we call The Philanthropic Gap. As important as donative capital is, it is but a small fraction of the capital needed to properly support those in need. We need to challenge donors to go beyond check writing, towards dedicating a small percentage of their net worth to invest in equitable social change.
With the COVID-19 pandemic comes the reality that many of our social impact agencies will not survive the crisis. Emergency campaigns only add to the fatigue donors have by continually funding structural deficits.There will be consolidation, mergers, and bankruptcy of fiscally vulnerable agencies. Most social organizations focus solely on donative capital to sustain themselves. Although you may argue that there are too many providers already, social impact agencies continue to resist working together in order to protect their donor relationships; while the demand for life-saving services is exploding. If we are going to change the culture of philanthropic capital, we need to expand and disrupt conventional thinking and embrace sustainable sources of funding.
In capitalism, enterprises with profit motivated culture, sound best practices and free cash flow are creating scale and profitability. They understand how to manage risk and lever capital. Acquisitions, mergers and sales are commonplace. Collaboration and partnerships are encouraged to manage efficiently, effectively, and strive for unique differentiators. This culture must bleed over into philanthropy for our sector to be sustainable and scale its impact.
You may be asking, what can I do to lead forward? Learn more about Impact Investing and become an advocate for this fast-growing field. In board rooms, advocate for innovative forms of capital as a supplement to contributed income. Finally, as the author John Hagel suggests, we must become a catalyst for change towards hope, excitement and inspiration. If we stay frozen in uncertainty and fear, we will become irrelevant over time. Let’s adopt opportunity-based narrative as our call for action. Your suggestions are welcome!