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Deploying Funding for Scale: Four Lessons from Funders

Date: November 14, 2023

Alice Metcalf

Managing Consultant, Spring Impact

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Earlier this fall, Spring Impact, in collaboration with Impact for Breakfast, hosted an event, ‘Deploying Funding for Scale: Lessons from Investors,’ alongside British International Investment and Epic Foundation.

The conversation was focused on how investors and funders can adopt practices and mindsets that truly drive and enable impactful solutions to scale. In this blog, we distill four key takeaways from this thought-provoking event.

1. Addressing problems at scale requires a tandem approach: scaling up solutions and changing the system.

A foundational concept that emerged during the event was a shared definition of scale, one that revolves around closing the gap between social or environmental problems and the existing solutions to address them. Achieving scale can be approached from two angles: changing the system to reduce the size of the problem or scaling up solutions to better match the magnitude of the problem. It was widely acknowledged that, in most cases, both strategies must work in tandem to effectively address complex challenges. Nick Grono, CEO of the Freedom Fund recently shared their experience of bringing both approaches together on this blog.

The room resonated with the consensus that solutions to tackle the world’s problems already exist; the real challenge lies in figuring out how to scale them effectively.

2. Donors and investors must create a safe space for vulnerability.

Whilst there is an interesting and well-documented debate about how successful and equitable co-creation between donors and grantees can be achieved within a truly trust-based relationship (as shared by Charityvest and Headwaters Foundation), it was agreed that trust-based funding is a delicate balancing act that requires a harmonious blend of trust and collaboration.

What came out loud and clear from this event is that it is the responsibility of donors to create a safe space for grantees to be vulnerable, then up to grantees to decide whether to engage with donors in a co-creation process.

This breaks down the fear barrier that grantees may have about disclosing vulnerabilities for fear of losing vital grants and fosters a supportive environment in which grantees can thrive. Co-creation can be beneficial to organizations to achieve impact at scale, however it should not be imposed on grantees.

3. Collaboration between funders is crucial, but we must find ways to break down the barriers.

Whilst competition might be an advantage for impact investors, within the philanthropic world, collaboration is key. Most funders seem to know and acknowledge this. But too little is understood about the barriers to achieving effective collaboration.

Participants shared ideas on what is creating barriers: pressure for attribution of impact, funders needing to see their distinct contribution; funders having specific sectoral focuses based on their own mission, therefore not having the impetus to collaborate with funders working in an adjacent space.

One way that breaking down barriers in collaboration can be achieved is by redefining how impact is measured and attributed. Instead of fixating on individual credit to build a funder’s brand or to report achievements to their board, funders can collect and scrutinise data to make inevitably imperfect assessments of their contribution towards their grantees’ impact. Stanford Social Innovation Review and Spring Impact have shared some other ways that funders can collaborate for impact at scale.

4. Bilateral or multilateral aid, and government funding, may be the only long-term funding models available to sustain non-profitable solutions at scale.

Market-based funding is widely seen as the truly sustainable option for funding solutions at scale, with customers or clients paying for the solution. However, participants highlighted that some solutions for stubborn problems affecting the environment or the most disadvantaged communities may never find a private sector funding stream. Stubborn problems will also take a long time to address. This means these solutions may be more challenging for impact investors, who tend to look for solutions which can be sustainable in the longer term without reliance on public sector subsidy or support. But recognising the inherent value of these solutions is essential to drive positive change in society.

So, what are the routes available for these kinds of solutions to be sustained, and funded, at scale, without private funding? It was agreed in the room that in the short-medium term, unrestricted philanthropic funding holds immense power. It empowers nonprofits to focus on their mission and provides them with the flexibility they need to address immediate challenges, seize opportunities, and scale their solutions. But of course, there is not unlimited philanthropic money available for nonprofits; indeed, the market is incredibly competitive.

In the longer-term, it seems there are only two possible sustainable funding options for solutions that may never turn a profit: bilateral or multilateral aid, or government adoption. This question of ‘payers at scale’ for nonprofits is one that Mulago Foundation has been exploring for a while, and one we at Spring Impact are committed to answering. Over the coming months we hope to learn from organizations that are addressing problems at scale, to better understand their funding models, so that nonprofits navigating their scaling journeys can make more informed decisions about who their payer(s) at scale should be and how they can acquire them.

Next Up: Commitments, Collaboration, Continued Conversation

Whilst the room was teeming with ideas on what good funding practices for scale look like (trust-based, unrestricted funding and collaboration between funders), we soon realised that almost everyone in the room already shared this vision — were we all preaching to the converted? Funders want to see action — a commitment to better understanding the barriers that are preventing these seemingly obvious practices from happening in reality and to overcoming these barriers.

We’re grateful to our partners at Impact for Breakfast, Epic Foundation and British International Investment and all participants for an inspiring conversation, and to The Conduit for hosting us. We hope you will join us for future conversations about implementing impactful solutions at scale.

Alice Metcalf is managing consultant at Spring Impact. Find her on LinkedIn and learn more about Spring Impact here.

Editor’s Note: CEP publishes a range of perspectives. The views expressed here are those of the authors, not necessarily those of CEP.

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