(Social) startups feel the pinch or philanthropy to the rescue?

by Nathaniel Whittemore · 2008-10-20 07:12:00 UTC
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An important conversation at SoCap08 was whether those of us interested in this emerging space between business and nonprofits should consider traditional, grant-based, no-return philanthropy as a part of the investment spectrum.

I think one of the most compelling reasons to include philanthropic giving in the social enterprise and entrepreneurship discussion is the fact that it doesn't have to deal with "risk" the same way a traditional investor (or even a new social investor) does. Foundations (and for that matter, communities of individuals) can invest in new ideas with unproven business models. And while a lot of little experiments with organizations that may not be able to sustain themselves in the long run might be messy and might not satisfy needs for scale, in some ways creating a new marketplace is about throwing a lot of new ideas at the wall and seeing what sticks. Philanthropic organizations are often in a better position to do that than investors who need a return (even if that return is over a longer period of time and at a lower rate than the market might normally demand). It might not be a surprise, then, that the first big wave of funding for social entrepreneurship has come from foundations like Skoll and Echoing Green.

One of the things this blog will be keeping its eyes on is how the economic downturn is impacting funding for social startups and entrepreneurial nonprofits in general. Some smart things to consider include: Lucy Bernholz's feeling that philanthropy is headed for a bit of a downturn, with possible impacts for social entrepreneurs, the GiveWell blog's discussion about whether individuals donate based on their brains or their guts and whether that's changing (important because presumably, if people were just giving "smart", high impact social startups might have a funding advantage).

What do you think, is the economic downturn going to impact funding for social entrepreneurship startups? Why or why not? (Ben, Danny, and the other Change.org leaders who are responsible for passing out the dough, what do you think?)

Nathaniel Whittemore is the founder of Assetmap. Previously he was the founding director of the Northwestern University Center for Global Engagement.
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