Building Bigger Bets with Philanthropy
Nancy Roob shares how the Edna McConnell Clark Foundation is aggregating funds to scale what works.
In 2005, Nancy Roob became president of the Edna McConnell Clark Foundation (EMCF). She has since played a major role in developing and implementing a grantmaking strategy of large, long-term investment in the capacity and proof points of nonprofits that have the potential to improve the lives of America’s most disadvantaged youth. She pioneered a coordinated form of funding that to date has engaged 45 co-investors, pledging nearly $279 million to help 16 grantees.
Katie Smith Milway: What are the philanthropic aims of the Edna McConnell Clark Foundation?
Nancy Roob: For the past 13 years, we have concentrated on trying to help economically disadvantaged youth in the United States become successful adults. We do this by investing in and trying to expand the pool of organizations with evidence-based programs that help these vulnerable kids get an education, get a job, and stay out of trouble.
Our grants are somewhat unusual, in that they are pretty big bets—generally ranging from $5 to $15 million over 3 years—and they are not restricted to delivering services. That is to say, a grantee can use the money to build organizational capacity or infrastructure, undertake a rigorous evaluation—anything the grantee is confident will help it grow, improve the quality of its programs, and sustain them on a larger scale. While our funds are unrestricted, payout is tied to performance metrics that grantees set in collaboration with us.
EMCF has been a pioneer in aggregating huge sums of funding to address a given issue. What led you to this strategy?
Gradually we began to feel frustrated with the slow progress grantees were able to make toward realizing their full potential, even though they offered our nation a solution to pressing social challenges—they were serving more kids, but they did not have enough capital on hand to reach more than a small percentage of those who could benefit from their programs. We invested heavily in Youth Villages, for example. Our $6 million grant helped it expand its innovative approach to serving troubled youth and strengthening families across the state of Tennessee, achieving a long-term success rate twice that of conventional programs, and at one-third of the cost. But still it was benefiting kids mainly in Tennessee.
As big as our bets seemed at the time, they weren’t big enough to propel even the highest-performing nonprofits to scale. To do that, we realized, would take more resources than we, or any single funder, could possibly muster.
So in 2007 we launched what we called the Growth Capital Aggregation Pilot (GCAP) and helped raise, with 19 other funders, $120 million—$39 million of this from EMCF—to support Youth Villages and two other outstanding grantees: Citizen Schools and Nurse-Family Partnership.
What were the results?
From 2007 to 2012, Youth Villages, which got $40.6 million of the $120 million, nearly doubled the number of youth it served, from 11,000 to more than 20,000, and expanded from six to 11 states. And Tennessee and Youth Villages recently committed to extending transitional living services to every foster child turning 18 and aging out of foster care. This will make Tennessee the first state to provide comprehensive services to every youngster transitioning out of foster care. If successful, we think it demonstrates a scalable, cost-effective solution to a national problem.
Youth Villages’ experience isn’t unique. Last year we commissioned an assessment by researchers Bill Ryan and Barbara Taylor of the GCAP that concluded:
All three grantees made impressive progress toward the goals they set at the start of GCAP, increasing dramatically the numbers of youth they serve and improving the sustainability of their revenue structures. And they accomplished all of this in the midst of the worst economic downturn the United States has seen since the Great Depression.
What challenges have you encountered, and have they caused you to adjust your approach?
We soon discovered that managing the investments of many funding partners in individual grantees strained a small foundation like ours almost to the limit. We added and continue to add staff, but we also wondered whether aggregating capital for a whole portfolio of grantees rather than negotiating and managing a separate agreement for each grantee might be more efficient.
With that in mind, we developed the True North Fund to support 12 grantees that we selected in our role as an intermediary of the federal Social Innovation Fund. Fourteen co-investors have committed $56 million to help these grantees meet their federal match requirements, and implement their growth and evaluation plans. So far, the True North Fund has helped grantees serve nearly 89,000 more young people across the country and undertake evaluations that are enabling them to demonstrate and improve the effectiveness of their programs.
Video: Nancy Roob explains how EMCF decided to move from GCAP to the True North Fund.
Has growth capital aggregation changed the way you operate as a foundation?
Definitely! Aggregating growth capital makes us accountable to our funding partners, who have invested their trust in us as well as their money. Being accountable to others has made us demand more of ourselves. Our standards for performance have always been high, but this has raised the bar even higher. Accountability has also forced us to be more transparent than most foundations are accustomed to being. And, finally, I think it has made us more sensitive to the needs and the challenges our grantees have to contend with, because now we are holding ourselves as accountable for our performance as we hold our grantees accountable for theirs.
We are eager to hear what other funders have experienced when they have worked to build broader support for strong grantees.