Non-Profits Have Turned a Corner; Philanthropy Should Follow

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Written by Manjula Dissanayake, Guest Contributor

Non-profits as we have known them for the past few decades are soon becoming obsolete. With the emergence of social entrepreneurship and technological advancements such as crowdfunding, the field of non-profits has become a viable career option for young entrepreneurs to tackle global social issues by using innovative and non-traditional operating models. Likewise, philanthropy, their main source of funding, also must adapt to the times. The traditional methods embraced by philanthropists and foundations that are often marred with bureaucracy no longer serve the demands of the 21st century non-profits. They need to shift from conventional program-oriented and aid-based funding to capacity-building investments and grants, enabling non-profits to innovate and achieve sustainability.

Millennials Leading the Way

Over the past few years, we have witnessed the emergence of an increasing number of non-profit start-ups founded by Millennials focused on addressing some of the world’s pressing problems. Many of these Millennials have given-up their lucrative careers in the corporate world to commit to causes in which they strongly believe. Per the 2014 Millennial Impact Survey, 94 percent of the Millennial workers surveyed wanted their skills to benefit a cause and 47 percent had volunteered for a non-profit during the preceding month. These stats reveal a drastically different approach and attitude from the previous generations, for whom doing good, volunteerism, and philanthropy were options when they retired from their corporate jobs with enough personal wealth accumulated to give away. But today, Millennials are taking a much greater risk and putting their future on the line by making these commitments in their twenties and thirties, driven by their dedication to make the world a more equitable and just place. However, there is a serious mismatch between the needs of these social entrepreneurs and the resources available for them to make their ventures a success.

Lack of Resources and Shift in Priorities

As a founder of a non-profit, I could personally attest to the challenge of finding adequate start-up capital for non-profit social entrepreneurs. While there are myriad of incubators and investors readily accessible for traditional start-ups, there’s only a handful that are available for non-profits. Even the most renowned ones such as Ashoka and Echoing Green are limited in their capacity to meet the staggering demand in a premature market. It is often disheartening to see millions of dollars are readily available for the next photo or video-sharing app, while raising a couple of hundred thousand dollars for a non-profit that would enhance access to education or healthcare for the marginalized has become extremely challenging. This is where philanthropic foundations and large donors should step in. Rather than mainly funding programs of large non-profits that at times are associated with inefficiencies and mismanagement, they should also be proactive in building capacity of the next generation of non-profits that could multiply the impact and return of such investments through their own operating models and alternative revenue strategies.

Non-Profits Redefined

One of the heated debates in the non-profit space has been the concept of “administrative cost” and how donors and public perceive it. As Dan Pallotta addressed in his famous TED Talk, charities should not be judged purely by their expenditure. Instead, non-profits should be encouraged to spend on prudent business practices such as due diligence, monitoring and evaluation, improved technology as well as on building adequate infrastructure and human capital to foster a culture of increased productivity and efficiency. Similarly, non-profit founders and teams should not be asked to sacrifice a comfortable life and a comparable income for choosing a career to do good. The opportunity cost of dedicating their lives to such causes is already substantial. Most new non-profits have also adopted alternative organizational structures and use of technology in delivering their impact. Rather than traditional layers of bureaucracy, they emphasize on “lean” operating models with an unyielding focus on organic growth and impact.

However, while these new trends in contemporary non-profits are encouraging, foundations and philanthropic investors should continue to hold non-profits accountable for the quality of their impact and transparency in delivery. With the advancement in technology and social media, it has become too easy to copy and customize existing models hoping to address issues without properly evaluating the substance of their impact. Technological solutions by themselves cannot solve deep-rooted social issues without engaging and being accountable for the communities you serve. Too often we see just “giving” without a long-term commitment to the constituents as a method of solving a social issue when in reality it could actually have an adverse impact.

The Time is Now

The scarcity of resources, especially funding for non-profit start-ups have led founders to think outside the box. New sustainable strategies such as earned income, crowdfunding, cause-marketing, and merchandising have made significant strides within this new generation of non-profits. What these social entrepreneurs need is unwavering backing and access to resources that will allow them to take risks to innovate without the fear of failure. Paul Graham showed the way in the Silicon Valley by opening Y-Combinator for non-profits. It is high time that leaders in philanthropy followed suit before young leaders with genuine passion and drive to tackle the world’s hardest social problems will lose their hope. In the end, wouldn’t we rather see one in five start-ups succeeding in becoming the next Teach for All or Khan Academy than another photo-sharing app?

Manjula Dissanayake is the founder of Educate Lanka, a non-profit social enterprise that enables access to education and employment for the marginalized. He holds a bachelor’s in finance from University of Maryland and a master’s in international development and social entrepreneurship from the Fletcher School at Tufts University. Manjula was named in Diplomatic Courier’s list of 99 Under 33 Global Foreign Policy Leaders.

Photo courtesy of Educate Lanka.

This article was originally published in the Diplomatic Courier’s September/October 2014 print edition.