Release Date 10/8/15 Episode Length 30:39
Brought to you byJotengine
How to Embed Giving Back into Your Company
with Ken Davenport of Mission Edge
Rocketship: Ken, welcome. Thank you so much for coming on.
Ken: Thanks for having me.
Rocketship: Tell us a bit about Mission Edge.
Ken: Mission Edge is based in San Diego. It’s a 501c3 technically, but we really have very much a business mentality here. Our budget is primarily Fee-For-Service derived. In other words, we make probably 95% of our operating budget on the fees that we charge. We actually serve other nonprofits. The concept really came about as I was a partner with Social Venture Philanthropy Group, and a lot of business folks folks who want to give back to the community. In that time at SVP, I started seeing that there were a lot of really great nonprofits and socially-focused organizations that were long on passion and really skills in terms of understanding what problems they were trying to solve, but we’re getting bugged down in the realities of running a business. Every nonprofit organization is fundamentally a business with employees and financials and all these things that really were getting in the way of them delivering their product, which is their service to the community. We started this nonprofit to provide support and back up the support really in the areas of accounting and HR and some IT to try to help these organizations operate more effectively as businesses. Joelle: Why did you form as a nonprofit yourself?
Ken: Good question, the primary reason was that we knew that the cost was never going to be fully covered. At least our initial theory was that the cost was never going to be fully covered by our fees, and that we were always going to need some subsidy from the community to be able to serve a lot of these organizations that simply can’t afford even on an outsource space can’t afford to hire a consultant or a firm. As it turns out, I think that is partially true. I think by getting really efficient at delivering service, we’ve been able to essentially break even every year, but we wanted to be available to the community to do programmatic and other kinds of activities that would be charitable in nature, which really differentiated us from a for-profit business. The other thing I just want to mention real quickly, and this is part of the challenge of being a private sector person coming into the nonprofit area, and realizing that nonprofit’s really … There’s a distrust and a divide between the for-profit and nonprofit world. Nonprofits tend not to really want to work with for-profits. As I got into this, it became clear that we were going to have a tough time getting inside these organizations if they saw us as capitalists who are trying to profit at some level from the work we were doing. It’s an artificial conception, but unfortunately, it’s very true.
Rocketship: You guys are based in San Diego.
Rocketship: San Diego has a very vibrant nonprofit or philanthropic community. Why do you think there is a great hub there for it?
Ken: There is a great hub here for it. It’s interesting. I think that San Diego is a great place to live. People tend to come here very much with lifestyle in mind, and there is a real desire to do good and to give back. There’s a proliferation of nonprofit organizations here. I think the last count that I saw was over 10,000 nonprofit organizations at work at some level in the community. That’s great. The challenge is that it leads to a very cluttered marketplace. Although San Diego is a community that has a lot of money here, there is not a huge corporate community here. I think if you compare the levels of giving in San Diego to Orange County, or Los Angeles, or certainly the Silicon Valley, the amount of money here is per capita I think lower than other places. You end up having a lot of folks who want to do good and want to give back. They start a nonprofit, and then they struggle to raise the necessary funds in order to operate it, but there is no shortage of people here who want to give back, and want to volunteer, and want to do things. It’s a good community from that standpoint. I just think it’s a challenging community with which to start something, and then to find the funding to support it.
Rocketship: Before the call, we were talking a bit about millennials and how you’re working more and more with them, and their unique view on things. Tell us a bit more about that.
Ken: It’s been very interesting. There is really a generational divide that’s developing in the sector. I think millennials tend to look at philanthropy fundamentally different than their parents or grandparents. I haven’t met a lot of 20 somethings or early 30 somethings who think their idea of giving back is just writing a check, and taking a tax deduction. They really want to get their hands dirty. They want to participate. We’ve seen really a plethora of both volunteer organizations cropping up that want to put millennials putting themselves to work either at the board level or fundamentally inside the organization at some capacity. We’ve tried to help facilitate that. One of the programs we’re working on in conjunction with Qualcomm is a skilled corporate volunteer program, where groups of employees will get together and go into a nonprofit on a project basis, and provide whether it’s a marketing plan or a technology roadmap, or a strategic plan. They’ll actually spend two to eight weeks inside the nonprofit providing substantive output that will help the organization. Then a lot of what we’ve seen so far is that a lot of these volunteers end up staying on as volunteers inside the organization, or they’ll join the board. It’s definitely a different mentality from the old school, “Nonprofit is a charity, and I’m going to write a check. I’m going to take a tax deduction.”
Rocketship: Why do you think that is?
Ken: I think there’s a blurring particularly in the millennial generation between what you do on your day job and your aspirations for your life. I think a lot of millennials want to do well and do good at the same time, and don’t see it necessarily their need for this bifurcation between how they make a living and what they do to give back. One of the trends that we’re seeing a lot of now is this social enterprise movement, where you have for-profit businesses that are very focused on social change. They will provide a service or a product to make money, but their whole orientation really is around using the proceeds for that to do something in the community, or their service or product that they’re selling has a social benefit in and of itself. I think that’s the new wave of philanthropy. At least I hope it is, because as we’ve seen with a lot of nonprofits, that lurched from grant to grant, and payroll to payroll. We’re hoping to see more sustainable models in the sector, and millennials are leading that charge.
Rocketship: You’re talking about the Tom’s Model, right?
Ken: Exactly, the Tom’s Model. Social enterprise is hard to define because there are many different forms of it. Mission Edge is a nonprofit technically, but we consider ourselves a social enterprise because we derive most of our budget through revenue and through earned income. There are lots of different ways of becoming a social enterprise, whether you’re like Tom’s. You’re selling things, and then you’re giving for every pair you sell, you give a pair away, or whether you’re taking some of your earned income and you’re putting it back into the community, or whether you are fully structured around the social goal, and you just found a way to support yourself through adding value to the community, and having people pay you for it.
Rocketship: Tell us a bit about how it works for Mission Edge with the profit model, and how do you allocate that income.
Ken: There really isn’t much difference between a for-profit and nonprofit other than what you do with the proceeds. As long as income is not unrelated to the activity or charitable activity, nonprofits can and should be profitable at the end of the year. The question is what do you with that money. We plow every dollar that we make obviously back into the organization. We are starting to work now on the idea of our own philanthropy to the community. When we do run a surplus, one of the things that my staff has been talking about is what do you do with that surplus. Since we know that there are organizations, very good organizations, very good innovators and entrepreneurs in the community who need help but can’t afford to pay for it, our plan is ultimately to set aside some funding, I don’t want to use the word charity, but as funding that we could use proactively in the community to help those organizations that don’t have the budget to pay for our services.
Rocketship: Very interesting. You’re able to balance that with … It’s basically like free services that you’re doing.
Ken: It would be free services. One of the programs that we have here is we have a startup incubator. It’s technically called physical sponsorship. One of the things that we’re really interested in is seeding innovations. Startup, nonprofits, and entrepreneurs who have an idea can join Mission Edge, use our 501c3, so we basically provide the sponsorship for them. They can take tax deductible donations under our EIN and our 501c3. They can do their activities before they become an organization themselves. In that program, we often bring in organizations that are very, very early. We help them get started. We provide all the infrastructure and support. We provide some mentoring, but we also allow them to test the market to decide, “Do I need to be a nonprofit? Should I be a benefit corp? Should I be a C Corp and simply give proceeds back?” That’s a chance to delay the decision to become another nonprofit until they really understand what their business model is.
Rocketship: Recently, we saw Kickstarter announced that they’re now a public benefit corporation. What’s the significance of that? I don’t particularly know what’s the difference between a public benefit and maybe a strict nonprofit.
Ken: There’s a little bit of marketing involved here in the sense that there isn’t really much difference between a for-profit and a benefit corporation other than the fact that you’re signaling to the community that you are going to give some of your proceeds, and I think they have some criteria around it, back to the community. Again, it speaks a little bit to what I said earlier around the difficulty of for-profits working with nonprofits. I think that there are a lot of organizations that should be for-profits, could very well do the activities for the community that they’re doing as a C corp, but want to signal to the public that they’re very mindful of the community. They have a social purpose. By becoming a benefit corporation, it’s like saying, “Hey, we’re not a nonprofit, but we’re not not a pure for-profit. We are really focused on giving back and doing good.”
Rocketship: Isn’t there pressure? In the C corp, there is pressure from the board that you have a fiduciary duty to generate profit for the board. Does the B Corp relieve you of that?
Ken: That’s a good question. The board obviously would have to be fully in line with this dual mission. It’s a tough line to hoe. I do understand why for-profit corporations struggle with providing too many benefits and services to the community, because it is contrary to the fiduciary responsibility the board has to the shareholders and of course the whole reason why the organization exists in the first place. It takes a particular kind of board and kind of culture. Patagonia I think is a B Corp. Those are organizations that have a deep cultural orientation towards giving back in some way. I think your board would have to join that fully knowing that that is part of the culture and the mission of the organization.
Rocketship: What are some trends or evolutions in the nonprofit space that you’re really excited about?
Ken: I’m excited about this thing called impact investing, which is, again, a newer investment model where investors who normally would probably put their money into for-profit ventures or investment vehicles are now looking at this double bottom line investing idea that you can make money but also give back. Maybe they’re willing to make some compromises on the rate of return for the fact that you are providing some social good. It’s different than off straight tax out the whole nation. It’s an investment that will have a return, but the return may be lower. We’re seeing more and more of that certainly in the big investment environments like New York and San Francisco in particular. There’s been some initiatives. It’s an interesting trend, and I think it’s the trend that will open up investing and capital to a lot of different kinds of organizations. It will also help to speed this social entrepreneurship movement, because those impact investing vehicles are suited for B Corps or for-profit organizations that are also giving back.
Rocketship: Is there any stipulation that you need? Do you have to be, I don’t know, a registered investor or anything like that to be able to participate in something like that?
Ken: I don’t think so. It’s a very new field. It’s a little bit like an angel investor who obviously doesn’t have to be licensed to put money into a for-profit startup. There’s no reason why an angel investor can’t be a impact investor also. It just really depends on having the target companies to invest in. I think that that’s why this B Corp or Benefit Corp concept is going to be interesting, because that’s a natural target for an impact investing vehicle.
Rocketship: What are some ways that for-profit companies can, who are just starting out, embed this into their culture if they want to? What’s a good way for them to get started?
Ken: It’s a good question. Of course San Diego is a market with a lot of small to mid-size companies, a lot of startup companies. This is not a Fortune 50 hub here. We’ve been having conversations with young, smaller organizations, mid-small to mid market organizations about how to empower their employees and how to do community-giving. Whereas a company like Qualcomm or Sanford Energy has a pretty robust community service organization inside their company, and they give away money, and a lot of times at employees behest on an annual basis. A lot of smaller companies don’t have that. That’s one of the reasons why this mission match our skilled corporate volunteer program came about, which is a way for employers to start engaging their employees in community service, getting them out to understand what the needs of the community are as a first step. Then creating their own vehicle for giving back, whether that’s time or talent or treasure. I think that there is a real trend here. This is one of the things that’s been interesting for us to see is that studies have shown that it’s more than just charity for companies to get their employees, particularly their younger employees involved in the community. Studies have shown now that job satisfaction and retention rates have climbed in organizations that have active community-facing programs, where their employees can get out of the office, and give back to the community at the same time that they have a decent paying job.
Rocketship: What ways are you seeing? Let’s take San Diego. What ways are companies giving back even at a small scale?
Ken: San Diego’s been great for volunteer days. Partly it’s because the weather here is good. You see a lot of cleanup days, a lot of activities in the inner city here, where companies are getting their employees together and going up, and cleaning things up, and providing access to better healthcare and other activities depending on what the company does on a day to day basis. That’s been really interesting to see. Mission Edge actually sponsors in our incubation program an organization called HandsOn San Diego, which helps to facilitate those volunteer days. We’re excited about some of the other things that are happening more on the mentoring, and give back side where organizations are putting their people to work in more substantive ways. Not just picking trash, but actually taking some of their talent and helping solve problems in the community.
Rocketship: At a city level or at education level?
Ken: Education is a big one. Again, one of the other organizations that we’ve helped to launch is called the Education Synergy Alliance. It really is around this concept of link learning. One of the tasks that they’ve had is to bring in corporate community experts in education, and actually link them to schools in San Diego in specific topic areas. You see a lot of that in education. We’re seeing more of it in health and wellness, and other activities where they’re able to teach people to get themselves out of the situation that they’re in as opposed to simply just writing a check. Joelle: Are there any other organizations that you know of where you can be matched with whatever your professional skill set is with an organization that could use your time and your help?
Ken: There are a couple of national organizations. One is called the Taproot Foundation. Another is called Catchafire. Catchafire is based in New York. These are similar programs to what we’re doing here in San Diego on a larger scale. If you have a talent for marketing, and you want to give back, and you have a specific passion for animals, you can potentially be matched with a skilled volunteer opportunity to do a marketing plan or whatever remotely for an organization in an area that you’re really passionate about. These are businesses that popped up that I think are starting to help this demand for people to get more engaged. What we’re doing here is a little bit different, because one of the challenges is particularly for smaller nonprofits lots of times they don’t know what to do with the volunteer. A volunteer will show up, and they’re not really sure how to put that volunteer to work with maximum effectiveness. What we’re trying to do given our client base here is actually help make the match, but also help facilitate the work that’s actually being done so that it’s work that is gratifying to the volunteer, but also has value to the nonprofit organization. Joelle: That’s really interesting. Can you tell everyone where they can keep up with you and Mission Edge online?
Ken: Our website is missionedge.org. You can find out everything you need to know about us there. I’d love to hear feedback from anybody if they have ideas that might of interest. We’re always looking for new kernels of opportunity to give back to the sector. Joelle: Thank you so much for joining us today Ken. This was really great.
Ken: Thank you very much for having me. I appreciate it.