The Larger Trend? Charities and Capitalism
The line in the New York Times article denotes that charities in a larger trend, are changing their spots and making use of some of capitalism's virtues. The process as it is reported, is being pushed through by a new breed of social entrepreneurs who are administering increasing doses of bottom-line thinking to traditional philanthropy in order to make charity effective.
Why this trend?
Because charities and philanthropists have discovered that for-profit status and financing can be useful tools. Running a charity like a business now makes sense. More and more of wealthy business-minded donors are treating their contributions like venture capital investments according to the New York Times. These donors are seeking programs that can make broad, sweeping change in health, education and the environment. These donors measure performance and results. These donors encourage charities to become self-sustaining. Muhammad Yunus (whom I have mentioned before), calls the next step in social business is to create ventures that more than pay for themselves. Social business entrepreneurs, according to Yunus, make the market work for social goals as efficiently as it does for personal goals.
Take for example In2books, a charity that an ex-AOL executive and his wife started to help inner-city students read and write online, sharing their ideas about books with pen pals and learning skills that have helped these students score higher on standardized tests. The couple according to the article had put in $10 million into the charity, however, the charity wasn't sustainable. In 2006, the AOL executive attracted what he called angel investors and they bought ePals, Inc. a for-profit company. They have used the for-profit company to expand the mission of the original foundation, In2Books. The ePals company has grown exponentionally and now offers online literacy tools and Web-based collaborative projects on a variety of topics to students in classrooms worldwide. Because of the success of the company, National Geographic is now investing in ePals.
The article further cites a study conducted by the Bridgespan Group, a nonprofit consulting firm, which states that it is rare for a nonprofit to cross over to become for profit. But with the rising influence of social entrepreneurs, the pressure to become more sustainable does exist for the nonprofits; most of which are constantly looking for ways to increase the bottom line. The study goes on to say that becoming for-profit does make sense, when the business is aligned with the social entrepreneurs' mission and vision. In this for-profit state, the vision can be realized at a quicker pace. It is still true that the failure rate of entrepreneurs is high, but the ePal backers are betting that this new venture is worth the risk. It is an opportunity according to one of the investors to do well and do good at the same time. And in business, I would say that this is something that doesn't come around that often.
Why this trend?
Because charities and philanthropists have discovered that for-profit status and financing can be useful tools. Running a charity like a business now makes sense. More and more of wealthy business-minded donors are treating their contributions like venture capital investments according to the New York Times. These donors are seeking programs that can make broad, sweeping change in health, education and the environment. These donors measure performance and results. These donors encourage charities to become self-sustaining. Muhammad Yunus (whom I have mentioned before), calls the next step in social business is to create ventures that more than pay for themselves. Social business entrepreneurs, according to Yunus, make the market work for social goals as efficiently as it does for personal goals.
Take for example In2books, a charity that an ex-AOL executive and his wife started to help inner-city students read and write online, sharing their ideas about books with pen pals and learning skills that have helped these students score higher on standardized tests. The couple according to the article had put in $10 million into the charity, however, the charity wasn't sustainable. In 2006, the AOL executive attracted what he called angel investors and they bought ePals, Inc. a for-profit company. They have used the for-profit company to expand the mission of the original foundation, In2Books. The ePals company has grown exponentionally and now offers online literacy tools and Web-based collaborative projects on a variety of topics to students in classrooms worldwide. Because of the success of the company, National Geographic is now investing in ePals.
The article further cites a study conducted by the Bridgespan Group, a nonprofit consulting firm, which states that it is rare for a nonprofit to cross over to become for profit. But with the rising influence of social entrepreneurs, the pressure to become more sustainable does exist for the nonprofits; most of which are constantly looking for ways to increase the bottom line. The study goes on to say that becoming for-profit does make sense, when the business is aligned with the social entrepreneurs' mission and vision. In this for-profit state, the vision can be realized at a quicker pace. It is still true that the failure rate of entrepreneurs is high, but the ePal backers are betting that this new venture is worth the risk. It is an opportunity according to one of the investors to do well and do good at the same time. And in business, I would say that this is something that doesn't come around that often.
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