Data-Driven Solutions

Can venture philanthropy fuel reform and curb violence in New York?

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The Windy City has a problem. During a single weekend in Chicago this April, there were 36 shootings in 36 hours. There were a total of 2,589 killed in shootings in 2014. In addition to the crime problem, the city paid out about $40 million in legal judgements and settlements for police-related incidents. 

In an effort to deal with these ongoing issues, the city launched Get IN Chicago with hefty political, commercial and public relations backing in 2013. Mayor Rahm Emanuel heralded the success of the all-privately raised $50 million fund to combat the problems of youth violence. 

Local business heavyweights like Allstate came aboard as donors and board members, Michelle Obama lent her voice to the campaign and, in early May this year, Get IN Chicago awarded its first grants to 11 recipients to “administer community-driven programs that research indicates are most effective in preventing youth violence.”

This research and metrics-centric approach is key to Get IN Chicago’s philanthropy model. In the words of public relations titan Richard Edelman, who is another partner on the project, “It has all the aspects of a venture capital fund.”

Built on “venture philanthropy," a concept first floated in the 1990s as a cure for foundations and nonprofits struggling to reach their goals, Get IN Chicago says it is fighting to make Chicago safer.

Philanthropists are not venture capitalists - but should they be more like them? Could it mean more money for charity, more efficient use of that money and greater improvement in the community? 

Get IN Chicago certainly thinks it does. And if it works in Chicago, perhaps it could work in New York.

By incorporating methods commonly used by venture capitalists, the fund hopes to invest in only those nonprofits who are doing the best work.

“You know, so much money has gone into this issue and we still know so little about what works, where are the impacts taking place, how should one fund in order to get back return on investment. And that’s really our strategy,” says Dr. Toni Irving, executive director of Get IN Chicago.

The MacArthur Foundation granted money to Chapin Hall at the University of Chicago to conduct evaluations on nonprofits interested in receiving a slice of the $50 million that Get IN Chicago is offering. With the results from that independent research, Get IN can make decisions on which nonprofits will win the grant money.

“The ROI [return on investment] is critical,” Irving says. “Both in terms of making the most of a company’s money as well as having the most impact in the community space.”

With all this money, corporate backing and political firepower, the organization has drummed up a lot of excitement about the possibility of future success, but Bruce Sievers at Stanford’s Center on Philanthropy and Civil Society is less sanguine. 

A longtime critic of venture philanthropy, Sievers cautions that such projects “come out of a narrow business mentality.”

Sievers stresses that while there is much to admire about initiatives like Get IN Chicago—including their focus on rigorous research, data collection and the infusion of much-needed funding—other aspects of the model can be problematic, wasteful or even damaging to existing nonprofit efforts in a community.

These problems, of course, are exactly the kind that Get IN Chicago seeks to eliminate. 

By giving major donors a seat on the board of the philanthropy, setting clear metrics for success, conducting research and making data-driven decisions, Get IN Chicago and other venture philanthropies aim to remove the guesswork from philanthropic giving. 

Many nonprofit community organizations, the argument goes, are notoriously bad at demonstrating their success in scientific metrics. 

“There are some people that don’t even really know why they do what they do,” Irving says. “What’s the relationship between what you do and reducing violence? They can’t tell you. What are the outcomes of a person going through this program? They can’t tell you.”

And that’s a big problem when cash-strapped state and local governments are starting to clamor for proof of success before handing over funding, Irving argues. Especially because the bulk of the funding for community-based initiatives comes from government funds.

“Organizations are getting defunded left and right. And so we’re saying to them, ‘This is the new reality. This is the new normal. You’ve been getting away with it for a long time by saying, ‘We know this works, because Joey is really better now.’ That kind of anecdotal or qualitative evidence just doesn’t cut it anymore,” Irving says. “Waste in the nonprofit sector has been a longstanding problem and organizations that receive funding should be held accountable.”

To meet that challenge, Get IN Chicago is getting more intimately involved with their grantees by providing them the kind of technical, operational and infrastructural support they need to improve their data-gathering ability as well as their ability to scale up their operations as needed. 

But there are problems with this approach, Sievers warns. 

“It’s the problem of central powers directing things,” he says. “They want to find these very objective numerical results that will tell them whether they’re being successful or not and I think that’s—I wouldn’t say a fool’s errand—but it’s a misguided attempt to impose rigor and clarity where the nature of social problems doesn’t really allow it.”

He compares the approaches of industrialist magnates Andrew Carnegie and John D. Rockefeller to illustrate his thinking. “Rockefeller was more scientifically focused” on attacking measurable problems like “finding a disease and attacking it,” while “Carnegie was more interested in investing in lasting institutions” like hospitals and libraries, Sievers explains. “Part of what I’m encouraging is more of a Carnegie-esque approach.”

Sievers particularly warns against using any metrics as a “proxy for profit.” For instance, in Chicago, a foundation might look at a crime statistic as a measure of success. “If we were a profit-making organization,” Sievers offers, “our bottom line would be the murder rate. But I think that just takes you in the wrong direction.”

“My bottom line is getting away from bottom line thinking,” Sievers said.

Foundations need to allow for more flexibility, he argues, and philanthropies should be careful to have an evolving definition of success, not a predetermined one. But this “runs against the basic business instinct,” Sievers says, “which is, ‘Geez, you can’t change your goal midstream.’ But in society you can.”

Toni Irving, however, is confident in Get IN Chicago’s success and she’s ready to export the model to other major American cities.

“We started this with the idea of it replicating across the country,” Irving says. But they are still doing the research they need to sell other communities on their strategy. “Even though I am 100% positive that this is the way to go…in another year when I have a lot of data, then that’s when I’m going to say, ‘Dude, you guys should do this.’”

Sievers and Irving agree that the best philanthropy effectively channels funding to the most effective community-based nonprofits. The question, it seems, is how exactly how a foundation should measure that success.

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