socially marketing

You are not a bona fide non-profit in this country until the IRS says so with 501(c)3 certification… and we just got ours!  Previously we were partnered with a fiscal sponsor (our old friends at GivingNet) but that was a stop-gap measure until obtaining non-profit status on our own.

There are several advantages to being a non-profit, some more obvious than others.  The most well-known advantage is the ability to accept tax-deductable donations.  In a similar vein, there are discounts made available to non-profits to help lower their operational expenses.  While we are happy to be able to take advantage of such benefits, non-profit status means much more to socialmarkets.

We are serious advocates for increased transparency in the entire social sector, within which non-profits are an ideal place to start.  Leading by example is a great way to demonstrate this advocacy.  Aside from mandatory transparency measures such as the Form 990 the government requires each year, socialmarkets itself is a useful platform for increasing both transparency and accountability.

If we are going to walk our talk, then socialmarkets needs to be listed on socialmarkets.  Like any other non-profit claiming to be worthy of funding, socialmarkets should present its mission, programs, and expected outcomes… as well as the social returns (SROI) related to those outcomes.

Our hope is that our own work, along with the collective input of the socialmarkets community, will ultimately reveal tremendous social return on investment in the socialmarkets enterprise itself.  But no matter what the outcome is, we know that defining and measuring that return is a tremendously valuable exercise.

The social capital driving socialmarkets and similar agencies is only as real as you make it. It is not hard to sell the idea of value in educating our youth, housing our homeless or cleaning up our environment, but it is not easy to translate that value into concrete terms.

The concepts and even the vocabulary we use to describe social capital is largely borrowed from “real” capital markets, which makes the translation easier. This suggests an accounting system that mirrors, but is separate from the ledgers that define the bottom line at all but the most avant-garde organizations.

I don’t know if we will ever see (or even need to see) this separation disappear entirely, but I do know that less of it is more better - and that the winds of change are blowing in that direction. Carla Dearing (disclosure note: she is CEO of our fiscal sponsor GivingNet) talks about this on PhilanthroMedia.org, which in turn references this recent Fortune article on how the carbon trading market is helping farmers literally turn manure into money.

Carbon trading is perhaps my favourite example of the ‘new accounting’, where the scope of the bottom line is growing. Not long ago it would have been downright silly to include greenhouse gas emissions in your business plan, let alone on your balance sheet. Now, an increasingly viable carbon trading market has turned silly into savvy, and is drawing in participants from the public, private and nonprofit sectors.

This leap from social to “real” capital is just the tip of the iceberg, and arguably an arbitrary tip at that. Increasing alarm about global warming combined with an increasingly desperate search for new energy sources and myriad other factors to make carbon trading a reality.

But every social ill and issue has its own unique DNA, and is potentially just waiting for the perfect storm of political, social and economic trends to take them off the back burner. I can’t wait to see what market response is induced from a perceived crisis of illiteracy, homelessness or similarly sticky social problem.

Sometimes we get so caught up in sweating the details of bringing socialmarkets to life, we forget about the bigger picture. We know our work is an important step towards advancing the social capital model, but once in a while it’s encouraging to see that socialmarkets is just one piece of the puzzle, and that we are by no means alone in this effort. Last week we had the opportunity to get a glimpse of that bigger picture, and we liked what we saw.

Allan and I were invited to a discussion group on The Social Capital Marketplace (SCM) here in NYC. It was a small gathering - just a dozen or so people hosted by GivingNet, powerful proponents of SCM (as well as our fiscal sponsors.) While the group was small, it included a good cross-section of the market, from the supply side (e.g. donor advisors) to the demand side (e.g. nonprofit advocates) and the spaces between them (e.g. socialmarkets.) Everyone brought something special to the table, and the discussions which took place around it were animated, unscripted and best of all, highly educational. I may go into details in a later post, but for now I’ll focus on just one general idea: how social capital markets are gearing up for growth right now.

There are more wealthy people than ever pouring more money than ever into the nonprofit sector. This statistic is a mixed bag, since this new wealth is hardly democratic. As the rich are getting richer, the wealth divide is getting larger. However, as the invisible hand of the capital market moves us further into economic inequality, the social capital market offers a counter-balance. The inclination of the wealthy to “give back”, and in particular the “giving while living” trend offers new inputs to SCM. Gates and Buffett are setting good examples, but they’re really just the tip of the iceberg. Also, it’s not just the quantity of new philanthropists, it’s the quality: many if not most of them come from the quant-based worlds of finance and technology, so are receptive to the market approach of SCM. Here are a few of the creative ways that receptivity is being exercised:

• Knowledge is power

Several efforts (including ours) attempt to bring transparency and accountability to the market by doing more due diligence on nonprofits. There is very little information available for most nonprofits beyond IRS Form 990, which offers no insight on function and impact. Ultimately these efforts can produce complete ratings and analysis functions, offering potential social capital investors the chance to make more informed decisions. The functionality is like Moody’s, but the Web 2.0 model makes it more like a cross between Kiva and TripAdvisor.

• Behind the buzzwords

Terms like Social Entrepreneurship and Venture Philanthropy are so over-used that we forget the powerful ideas behind them. There are many current projects which recognize that social vs. economic capital is not a black and white issue. Inside the gray area between, there is plenty of room for deriving economic profits from social services. A little flexibility on the size and time frames for those profits can go a long way towards directing real money into social markets.

• Bottomless bottom lines

Once you broaden your definition of ‘profit’ to include non-economic criteria, the sky’s the limit. Double bottom line accounting, which adds social returns into the equation, allows for a more complete picture of what defines a successful business. This is where other often abused buzzwords like Socially Responsible Investing and Corporate Social Responsibility show their true power. When your only bottom line is economic, you’re shut out of several alternative (and arguably larger) economies, including the human, social, environmental and spiritual. At some point we should probably stop counting (triple and quadruple bottom lines are common, and I even found a quintuplet here) but the bottom line is that there is more than just one bottom line.

This is just a taste of what is happening in the SCM space, and it was all the more tasty because we got to meet the people behind the projects. We try to keep up with the literature, but you can get so much more out of face-to-face interactions with the people who share your goals- especially if those people are smart, committed and open to sharing. I think we all left that conference room a little wiser, and a little more energized. Socialmarkets is a web-based operation, so we spend a lot of our time in virtual spaces. Once in a while it’s awfully nice to check in with the real world.

I’m proud to tell you all that our fiscal sponsor is GivingNet , formerly known as the Community Foundations of America. We were able to transform a chance meeting with a GivingNet manager, Doug Yeager, over at the Salesforce.com Nonprofit Roadmap Summit into our fiscal sponsorship. Carla Dearing, the President and CEO, and Caroline Heine, Chief Operating Officer, has been instrumental in helping us get socialmarkets off the ground because they’re not just our fiscal sponsor but they’re handling our back-end operations as well. What is amazing isn’t that GivingNet is our fiscal sponsor, but that socialmarkets so clearly fits into their strategy . Sometimes, I’m in awe of the kismet of it all.

And even more good news, Tate Hausman of the Integration Proclamation, is now our landlord. As of September 1st, we’ll be in our new office over at 18 West 27th Street in the Flatiron district of Manhattan. Yup, we’re getting less and less virtual as time goes on. We’ve got ledgers, desks and what not going on. And it means that I won’t to have to be in what passes for my computer office here at my home. Who knew that the prospect of air conditioning could be so sweet?