Impacting investing: trends, issues and capabilities
When the State Gives: a Three-Sector “Mid-Atlantic” Model for Supporting the Voluntary Sector
by Noah Isserman
The complexity and urgency of our social challenges demand careful examination of emerging institutional and financing models that aim to meet them. For more than half a decade, I have been conducting a research program attempting such examination.
Funded by the (Bill and Melinda) Gates Cambridge Trust, one just-finished element of my research has revealed a Scottish venture philanthropy model to be highly effective in marshalling resources from all three sectors of economic and social life and applying them to social issues in a targeted and efficient manner.
This article shares some insights about this novel way of funding and supporting charities that provide social services. It briefly describes a “Mid-Atlantic” model of venture philanthropy that borrows inspiration from both British and American traditions, recruiting all three sectors in tackling national-level social impact targets. The article then shares some impact data about this effective model, and concludes by discussing some broader implications.
Although this article is intentionally light on data, it is a companion piece a full report (http://bit.ly/VPreport), which includes the empirical foundations for the assertions shared here. This piece of the research agenda is based on five years of interaction, more than 200,000 words of transcribed interviews, 15,000 survey data-points, hundreds of hours of desk research, more than a month of in-person contact, and 100 hours of input from the CEOs of 62 organisations supported by Inspiring Scotland, there are some lessons to be shared. (This research has the rare advantage of being completely independent of the funder it examines.)
The object of this piece of research is a five year-old foundation called Inspiring Scotland. Founded by a banker-turned-foundation head and a seconded civil servant, it is a pioneer and has grown to become one of the largest venture philanthropy organisations in the world, having distributed approximately £50M since its founding – and most of that money has been public money. Inspiring Scotland is notable for several reasons, foremost because its government-supported work is unique in degree and design.
Inspiring Scotland’s core concept is to provide better social services to Scotland by strengthening and expanding the charities that provide those services.
To support charities, Inspiring Scotland works in a manner analogous to a venture capital firm. The foundation pools funding from multiple sources to try to hit a national social impact target. It builds a portfolio of voluntary sector organisations whose work can collectively – via different approaches and in different areas – create the desired social impact. After exercising great care in selecting this portfolio, Inspiring Scotland then provides a suite of business support services, networks, and access alongside the funding.
These support services are extensive and highly valued by the charities that receive them. Across multiple ventures and funds, the average venture supported by Inspiring Scotland receives nine different types of support service. Ventures report that the most commonly received services are application support (88% of all ventures), support to develop an evaluation framework (82%), advice for programme implementation (72%), business strategy (58%), CEO mentoring/support (57%), and governance support (55%).
Ventures place significant value on the services that they receive through Inspiring Scotland: 59% of services provided were rated very valuable, 31% as valuable,
9% slightly valuable, and 1% no value or negative. Anyone who has worked in capacity-building will find these numbers strikingly positive.
The central concept is that by helping the organisations in the portfolio become larger and more effective, Inspiring Scotland will achieve the national-level social impact goal set by its funders.
Some evidence and why it matters
Although I would suggest looking at the recently-released impact report for details, the findings are consistent with the idea that Inspiring Scotland creates significant value for the charities it supports. Those charities become stronger organisations: most of the 59 organisations surveyed reporting improvements in delivery, management, governance, impact measurement, and ability to identify and secure resources.
Overall, Inspiring Scotland’s value is due to:
1. Its deliberate construction of a portfolio of meaningfully-related organisations around a social issue
2. Its recruitment and provision of highly-skilled Performance Advisors, full-time staff devoted to supporting 5-8 charities each
3. Its cultivation and sharing of a national network of pro bono and paid support services for ventures
4. Its intentional creation of links and connections between organisations and sectors
5. The ability to offer those assets to ventures in a manner that ventures find to be open, honest, and powerful in supporting the social services they provide.
Implications: networking and leveraging
By keeping some of the hybrid and communitarian elements of British economic and social life – in particular close collaboration between the business, voluntary, and public sectors – and combining them with the initially-American, highly managerial venture philanthropy model, Inspiring Scotland’s “mid-Atlantic” model offers an intuitively compelling middle road. It offers continued provision of coordinated, locally-embedded social services even in a time of reduced public sector spending and ever-deteriorating trust in most public institutions.
Inspiring Scotland also forges new and valuable connections across Scottish society. Its work builds and supports denser networks between and among all three sectors: community-embedded organisations, local and national government, and businesses of many kinds. This can accelerate the creation and dissemination of useful thinking and collaboration. Voluntary sector experts working in supported organisations can inform policy and rapidly share the results of new programs that the state might employ at scale. Public servants can access new human, financial, and relational resources in the service of the public good. Businesses can link with organisations and causes, employing their expertise and people in targeted ways that benefit their broader communities – with associated retention, recruitment, tax, and morale benefits.
Despite my and many others’ reservations about the robustness of some claims of leveraging brought on by voluntary and philanthropic activity, this model does seem to bring in resourcing in larger amounts and with stronger coordination than seems unlikely to occur otherwise.
On the input side it attracts financing, staff, and volunteer human capital that would be unlikely to be directed to such social issues in the absence of the inspiring Scotland organization.
In terms of financing, voluntary sector funders have long appreciated the outsized benefits that can be gained from thoughtful and dedicated cooperative work. This mid-Atlantic model, due to the empirically rigorous process by which it targets social issues by demographic and geographical guidelines, seems to offer coordination benefits to foundations, private donors, and even units of the public sector that care about a given social issue.
Inspiring Scotland’s model encourages stronger networks and collaboration among groups working on the same social issue. While inspiring Scotland is essentially issue-agnostic – by which I mean its core competencies are in organizational supports, development, and impact measurement rather than the several social issues its six funds address – the composition of its portfolios create very beneficial spillovers in terms of knowledge sharing, best practice sharing, and in the broadening and thickening of the networks of voluntary sector organizations.
These trends and advantages are not going away. Governments are increasingly providing risk and growth capital to high-potential organisations – in fact, more than a third of all European venture capital investment now comes from public funds. Austerity is forcing actors in the public and third sectors to look to unusual partnerships in search of resourcing.
This brief introduction will, I hope, bring even more people into the broader conversation about the shifting and increasingly overlapping roles of the public, private, and voluntary sectors. While issues are covered here in only a very cursory way, an imminent series of white papers will explore several fascinating and pressing issues around collaborations like government-supported venture philanthropy, social impact bonds, social venture capital, and other hybrid models.
The global growth in voluntary action, in measuring social impact, and in collaboration across sectors of economic and social life has opened up spaces for new and hybrid institutional arrangements such as this mid-Atlantic model. The potential of such arrangements is great – as is the need to understand and harness that potential.
You can download the report from the Inspiring Scotland website:
and from the European Venture Philanthropy Association Knowledge Centre: