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Foundations Should Work With For-Profits, Too

Foundations Should Work With For-Profits, Too

July 17, 2016

Paul Singh, a venture capitalist, visited Missoula earlier this month. He has made a lot of money, first in his own businesses, then by investing in others. He is now traveling to smaller cities around the country in a custom Airstream, both evangelizing and seeking tech investments.

“Why should you care about tech companies?” he asked a crowd of us gathered over local brews at the Hellgate Venture Network. A big PowerPoint slide soon provided the answer: Because tech companies are changing the world.

I kind of gagged at the time, thinking, pompous hyperbole, cult-of-tech, etc.

So imagine my surprise to find myself making nearly the same claim less than a week later.

I was talking to my friend Tim Crosby, who runs the Thread Fund at Seattle Foundation and Cascadia Food Financing Project, a regional impact investing collaboration sponsored by Philanthropy Northwest. We were discussing the costs of impact investing, the difficulty of structuring funds — all the issues that can make business investing a logistical nightmare for foundations. We tied these issues to the fact that  most foundations are staffed and “cultured" for grantmaking.

Tim was trying to state the case for foundations to embrace this new work. If foundations are built to make grants to nonprofits, per our very own IRS rules, why should we torture that model with business investing?

That’s when Paul Singh’s words came right out of my mouth: We have to work with business because business is changing the world.

Getting Stuff Done

I’ve been reflecting on how I ever came to believe those words, and why I think that foundations should be working in the for-profit business sector.

In my early years of activist work, I saw businesses harming the world. Working for nonprofit agriculture and community development organizations, I constantly banged my head against the mess that companies were making — of habitats, of people’s livelihoods, of our communities.

But later on, as a community development lender, I began to see the positive changes businesses can make in the world. I kind of fell in love with business owners, their big ideas and their ability to jump over obstacles, just so they could run their own shows. Or, just to feed their families. I became aware of business as a human creativity machine that gets stuff done.

In this feeding of families, this getting stuff done, this messing up (or not) of habitats — I saw business activities that change the world every day, in every community.

If foundations want to influence this change, we have to work with businesses. It's that simple. The tool for this is investing. If we don’t do this, our foundation efforts are limited to the capacity of the nonprofit sector to steer the course, or clean up the mess.

Here are all the caveats and disclaimers: I don’t embrace tech-as-cult, nor investment-as-religion. I don’t think business is an inherently wonderful or efficient form of human endeavor. I know that our tools for investing as foundations are not perfect, and aren’t currently useful in many foundation business models.

Given all these, I still believe the mission case for foundations to embrace investing in private for-profit businesses is crystal clear: Businesses are changing the world. And that is foundation business.

Rosalie Sheehy Cates is a Philanthropy Northwest Catalyst Fellow, focused on impact investing, and a senior advisor to The Giving Practice, our national consulting team. She will be leading a session on "What's New in Impact Investing" at our Under One Sky conference in MIssoula, September 13 to 15, 2016.