A Look Back at Our First Year of Grantmaking
Dear Friends and Colleagues,
As we move into the second half of 2019, the New Coast Foundation (NCF) team has taken some time to reflect on our first round of grantmaking. Highlights include:
Engaging over thirty donors and raising over $1M so that we could launch our “investment readiness” analysis to identify and commit multi-year funding to these first two grantees.
Working with our grantees to create three-year growth plans, engage their boards and leadership teams in strategic planning, prioritization, and strengthening infrastructure, and increase their impact and self-sufficiency through our funding and partnership.
Building a diverse board of directors and advisory council to guide NCF’s growth and impact in Chicago.
Employing an innovative funding model wherein our seed funders and board of directors cover our operating expenses so that 100% of dollars invested in our Chicago Impact Fund are granted back into our community.
As we prepare for our next round of grantmaking (more on our goals for Fund 2 coming soon!), we are committed to bringing even more resources and innovation to bear to attack the root of causes of poverty in Chicago strategically. We continuously fight for this mission by identifying, partnering with, investing in, and whole-heartedly supporting social entrepreneurs who have developed promising, scalable solutions to address our city’s most significant challenges. We focus our energy on identifying these emerging nonprofits, supporting them with multi-year general operating support to help catapult them to greater scale, increase their self-sufficiency, and decrease their reliance on donor dollars. We believe that all nonprofits should be on a path towards self-sufficiency to support their growing business models, thus reducing their long-term dependence on private philanthropy.
In order to savor this moment and before we kick-off our capital raise for our second Chicago Impact Fund, we wanted to share three critical themes that have emerged for us over the past 18 months:
1) Chicagoans are incredibly generous and want guidance on how to “give” as strategically as they invest.
NCF was created to take the guessing game out of philanthropy and to bring private sector diligence, analysis, and reporting to one of our city’s most intractable challenges - poverty. To that end, we challenge ourselves to identify the organizations that have evidence of, or the potential to, generate the most significant impact on the root causes of poverty in our city. Then we invest growth capital and intense partnership support to help them maximize their services and serve as many Chicagoans as possible.
Even as someone who has spent her last 15 years in the nonprofit sector, I can have a hard time telling one organization from another. Many nonprofits have similar names, similar sounding programs, and similar missions. The crazy thing is that there are over 60,277 registered nonprofits in Illinois and over a third of them work in the poverty alleviation space, according to Independent Sector, a national membership organization for nonprofits, foundations, and corporations. While many of these nonprofits are doing good work, some are much more effective than others. Moreover, with a marketplace this crowded, it’s neither sustainable nor effective for all of them to compete for finite philanthropic resources and donor attention.
So, how are you supposed to know which organizations are the most effective at serving their clients or which organizations warrant your hard-earned donation dollars to help grow their missions?
You’re not. That’s what NCF does for you. You can read about the four dimensions of our “investment readiness” assessment on our website. In brief, we identify which nonprofits are most effective at fighting poverty in our city by completing in-depth diligence along four dimensions - high-impact program model, organizational health and effectiveness, financial sustainability, and potential to scale.
For context, last year, we reviewed over 100 emerging nonprofits working in our five areas of focus. We conducted an in-depth review of about 20 of these nonprofits and ultimately invited two (only two!!) organizations - VOCEL and Working Credit - into our eight-week due diligence and investment readiness assessment. Due to the generosity of our donors, we were thrilled to be able to grant $300,000 over three years to both of these organizations from our Chicago Impact Fund. We then work very closely with these nonprofits to become best-in-class nonprofits. We work together to build the nonprofits’ self-sufficiency, strengthen their infrastructure, scale their programs to serve thousands more Chicagoans, and diversify their revenue to reduce their dependence on philanthropy. Through this process, we are empowering nonprofits to fight poverty head-on, make significant increases in their outcomes, and turn the nonprofit funding cycle on its head. And, we are encouraging our investors to demand real impact from their investments.
2) Poverty doesn’t happen in silos; neither should our approach to investing in poverty-fighting nonprofits.
For any intervention aimed at alleviating poverty to be successful—whether for a single family or an entire community—a bottoms-up holistic approach is necessary to address its root causes. Poverty is the result of many complex and interrelated factors, which include economic, racial, and cultural inequalities in neighborhoods, institutions, and policies. Its impact on an individual’s life is multidimensional, profound, and often intergenerational.
To live in poverty is much more than subsisting below a fixed income level (which, by the way, is defined as a family of four surviving on $25,750 in Chicago). It’s a dissolution of choice that has a devastating multiplier effect over the course of a person’s life. For example, a job loss for an already financially struggling mother can result in eviction, which in turn can affect her ability to move from her unstable neighborhood into a community with more resources. Her physical and mental health can be affected, further impacting her ability to secure employment and a sustainable income. Moreover, her children’s health, well-being, and school performance can be negatively impacted as well, continuing the cycle.
NCF’s grantmaking focuses on five interconnected impact areas where poverty is most visible and where interventions can have a profound impact on one’s ability to achieve economic mobility: Housing, Economic Development, Education, Wellness, and Community Mobilization. We are steadfast in our focus on emerging nonprofits, working in these areas and in restricting our funding to the Chicagoland area. But, given our private equity approach and our commitment to being nimble and effective philanthropists, we are proactively and opportunistically searching for these solutions and for the social entrepreneurs bringing these solutions to life in Chicago.
Our goal is to build a comprehensive portfolio of grantees providing a continuum of services from “cradle to grave.” We were thrilled to bring on VOCEL as our first grantee and invest in its innovative early childhood development curriculum and programming. Next, we were delighted to invest in Working Credit, which helps working adults to strengthen their financial literacy and self-sufficiency by arming them with the knowledge and tools to build strong credit scores and make their hard-earned dollars go further. As we develop our portfolio, we will engage the most-effective poverty-fighting nonprofits in our city that bring the interventions, the vision, and the hustle to scale up and serve more Chicagoans to reduce all of our dependencies on these services.
As nonprofits, we should all be in the business of putting ourselves out of business because we have eradicated the issues we were created to fight against. And, as funders, we need to invest more of our limited resources in solutions with the greatest return, and we need to do so with more urgency. Poverty isn’t waiting for us.
3) “Big bets” in philanthropy help organizations ready themselves for rapid scaling and can play a critical role in propelling major social advances.
A recent report from The Bridgespan Group shares that the vast majority of major gifts still go to universities, medical research, or cultural institutions. While these gifts strengthen important pillars of a vibrant, educated society and advance scientific frontiers, too few of these institutional gifts are focused on poverty, justice or other social change goals - causes that major donors say are dominant motivation for their philanthropy.
For NCF, a “big bet” is a sizable, time-bound, general operating grant to an emerging nonprofit. Our investments to date have been $300,000 deployed over three years to support each nonprofit’s growth. We do not direct how the funds should be spent because we believe that project-specific funding limits overhead and doesn’t entrust the leaders with investing in their organization, mission, and impact as they deem fit. NCF invests patient, philanthropic capital because we do our diligence upfront. We entrust our grantees to determine the best use of their resources.
As the Nonprofit Quarterly shares, "Unrestricted funding also kindles the freedom to learn, adapt, and take risks. It is critical in supporting an organization’s sustainability and effectiveness."
We are eager to see capital flowing to the most promising strategies, but also recognize that growth can’t happen overnight. Even the most talented leaders and highest-performing organizations face challenges that prevent them from reaching their full potential. We believe that with the right support, it’s possible for leaders to overcome these obstacles. However, they can’t achieve this with piecemeal funding.
As Andrew Youn of One Acre Fund says, “When philanthropists and social change leaders team up to think bigger, they create the potential for transformative change… This “big-bets” thinking requires a bolder, less “traditional” approach. But it creates far greater potential for transformative change.”
NCF, along with our donors and grantees, is bringing this transformational change to Chicago.
Whew! That was a lot. If you’re still reading, thank you for caring enough about Chicago and about how we can all be a part of the solution to create more equality and opportunity for ALL of our community members. If you want to be part of this solution, please join us!
Drop me a line and let me know what excites you about investing in the possibilities for our city.
Join us by donating and/or spreading the word about our upcoming second fund. Every dollar - from $10 to $10 million - makes a difference!!
Help us identify emerging nonprofits, particularly those run by social entrepreneurs of color bringing solutions to their communities. Recommend an emerging nonprofit here.
Just as earlier investments in equities grow faster due to compounding interest, earlier investments in poverty reduction can reduce more suffering over time. We don’t have time to waste. We can’t just do this someday. We need to do this now.
- Julie Hoffmann, CEO