While all founders of social startups believe their organizations do important work, some startups thrive while others flounder and eventually disappear. What distinguishes the runaway successes from the enterprises that never move beyond survival mode? In her new book, Social Startup Success: How the Best Nonprofits Launch, Scale Up, and Make a Difference, Kathleen Kelly Janus argues that the difference involves more than luck or chance.
As a social entrepreneur herself and a lecturer in the Program on Social Entrepreneurship at Stanford University, Janus long recognized that "the struggle to scale is the most pressing challenge for the social entrepreneurship community." Over time, she writes, she "became obsessed with understanding how nonprofits can get off the treadmill and attain organizational sustainability," which she defines as being able to consistently raise $2 million in annual revenue. Faced with a lack of data, Janus and her team created "the most comprehensive survey of seed stage social entrepreneurs ever conducted," surveying scores of founders, donors, and experts, and packaging the results into a book organized into five sections that explore the elements of social startup success: Testing Ideas, Measuring Impact, Funding Experimentation, Leading Collaboratively, and Telling Compelling Stories. In the process, she came to understand that social startups that manage to get off the treadmill excel in all these areas.
In taking a data-driven approach to nonprofit success, Janus examines a number of assumptions about the sector — for example, that admitting failure is something nonprofits are reluctant to do. That's a problem, she writes, because it means too many organizations end up putting resources into programs that don't work rather than programs that do. But for Janus, those kinds of data-driven shifts are absolutely essential, in that they can serve as a "catalyst to an organization really hitting its stride and creating a distinctive identity and mission." While it can be difficult for nonprofit leaders to be open with stakeholders and donors about failure, such "radical transparency" ultimately will inspire trust on the part of funders, who respect (or should respect) "thoughtful, open communication about how organizations test and monitor various approaches to maximize impact."
Ah, impact. We know it when we see it, but how does one actually measure it? First, writes Janus, we need to drop our fixation on "outputs" and start defining and tracking desired "outcomes." Lots of organizations measure outputs (e.g., how many individuals participated in a program, how many meals were served), but according to Janus, such metrics provide little or no indication of whether a program has changed someone's life for the better. After highlighting the outputs-outcomes distinction, she then walks the reader through the process of creating a theory of change, a (sometimes controversial) "tool showing the causal links between an organization's vision and its programmatic activities, detailing the intermediate outcomes and assumptions that must occur to achieve success."
Developing a theory of change forces an organization or entrepreneur to home in on the hoped-for impact of their program or intervention, enumerate the preconditions for success, and link both in a logical, measurable series of steps to the proposed intervention or program. Data collected along the way can be used to demonstrate causal relationships between actions and outcomes and course correct, if needed. Similarly, if not enough time has passed for a new program or intervention to generate the sought-after impact, one can outline "proxy indicators of impact." Janus provides an example of the latter: Aimée Eubanks Davis, founder and CEO of the organization Braven, researched literature in the field to shore up her theory of change and analyzed the intermediate outcomes of Braven's efforts to teach "soft" and networking skills to low-income college students as a way to help them secure well-paying jobs after graduation. As a result, she was able to make the case that because her program doubled participants' chances of landing an internship, it would also give them a leg up in securing a good job after graduation — on the strength of which the Peery Foundation awarded the organization a $50,000 grant well before its first cohort of students had graduated.
Like the Peery Foundation, more and more funders are coming to recognize the power of impact measurement that goes beyond the de facto "vanity metrics" of program outputs. And, according to Janus, it's critically important they do so — and that they encourage their grantees to focus more on impact than on "boosting" their existing metrics.
Janus also addresses the idea popular among some funders that over time a greater and greater fraction of a nonprofit's revenue should come from earned income. While earned income comprises a significant share of organizations' budgets in some sectors (health, arts), it's unrealistic, in her view, to expect that all nonprofits can become self-sustaining (or even sustainable) through earned income. Writes Janus:
"The argument that nonprofits should function more like businesses…has often been pushed to the extreme....Social entrepreneurs are, by definition, working to solve problems resulting from market and government deficiencies....If bringing clean water to the 800 million people who don't have access to it, or selling mosquito nets to the 200 million suffering annually from the scourge of malaria, were profitable ventures, private companies would be doing it. Expecting social entrepreneurs to figure out how to devise profit-making solutions to such problems, when even the behemoths of modern-day capitalism can't do so, is misguided wishful thinking...."
That doesn't mean a nonprofit leader or social entrepreneur shouldn't think big when it comes to raising funds or honing their vision. For example, Laura Weidman Powers co-founded Code2040 with the goal of creating a more diverse and equitable tech industry. Powers told Janus that, even before she secured major partners like Google, she began to suspect that Code2040 was "a huge organization living in the body of a small organization." In Janus's view, that kind of attitude is exactly what a founder (and her stakeholders) needs to have if she hopes to make headway on the problem she's trying to address.
Social Startup Success won't tell founders or social entrepreneurs where to find that attitude, but it will embolden them to start thinking about how they can create smart and meaningful goals, meaningfully engage their funders and beneficiaries as partners, and make brave, strategic decisions that drive an organization's growth from the start and with the expectation that the venture will eventually scale and make a difference in the lives of many more people than it might have otherwise.
Mirielle Clifford is program officer for online resources at the New York Foundation for the Arts.